Growth fuelled by margin expansion; maintaining a Buy ......9 May 2019 Atul – Growth fuelled by...

Anand Rathi Share and Stock Brokers Limited (hereinafter “ARSSBL”) is a full-service brokerage and equities-research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient. Disclosures and analyst certifications are present in the Appendix. Anand Rathi Research India Equities

India I Equities

Nav BhardwajResearch Analyst

Bhawana Israni Research Associate

Specialty Chemicals

Company Update

Key financials (YE Mar) FY17 FY18 FY19 FY20e FY21e

Sales (` m) 28,339 32,958 40,378 46,823 53,919

Net profit (` m) 3,230 2,812 4,360 5,069 5,465

EPS (`) 108.8 94.8 146.9 170.8 184.1

PE (x) 32.8 37.7 24.3 20.9 19.4

EV / EBITDA (x) 21.1 20.9 13.6 12.2 10.9

PBV (x) 5.4 4.7 3.9 3.4 2.9

RoE (%) 16.4 12.5 16.1 16.1 15.1

RoCE (%) 15.9 12.3 16.4 16.1 15.1

Dividend yield (%) 0.3 0.3 0.4 0.5 0.5

Net debt / equity (x) 0.1 - - - -

Source: Company, Anand Rathi Research

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Rating: Buy Target Price: `4,000 Share Price:`3,574

Key data ATLP IN / ATLP.BO52-week high / low `3,659 / 2,600Sensex / Nifty 37559 / 113023-m average volume $0.7mMarket cap `106bn / $1516mShares outstanding 30m

Shareholding pattern (%) Mar’19 Dec’18 Sep’18

Promoters 44.7 44.7 44.7 - of which, Pledged 5.7 6.6 6.4 Free float 55.3 55.3 55.3 - Foreign institutions 6.6 6.2 5.6 - Domestic institutions 22.7 22.9 23.3 - Public 26.0 26.2 26.4

9 May 2019

Atul

Growth fuelled by margin expansion; maintaining a Buy

Driven by the strong performance of each division, Atul exited FY19 at a high, with 22.5% revenue and 55% PAT growth to `40.3bn and `4.4bn. Further, the EBITDA margin came at a higher ~19%,chiefly due to strong price growth resulting from short supply on the strict implementation of environmental norms in China. With the greater utilisations through capitalising on latent revenue potential, we estimate that Atul would achieve sales of ~`50bn by FY21. We maintain our Buy rating, and our price target of `4,000.

Stellar Q4performance. Atul ended Q4 with `10bn revenue (up 15.5% y/y), driven by strong divisional performances. Revenue from the specialty chemicals and life-science chemicals divisions grew respectively 15.8% and 15.3% y/y. The good performance and lower raw material costs pumped up the EBIDTA margin 249bps y/y to 19.3%. For the year, the company’s pharmaceuticals/bulk chemicals/aromatics businesses grew respectively 49.6%/42.3%/33.8% due to better realisations.

Outlook. The company has de-bottlenecking and expansion plans and expects to incur `4bn capex. Further,`1.7bn would be spent toward environmental-friendly practices such as zero-liquid-discharge units. At full utilisation,it would generate ~`10bn revenue. Mounting demand atend-user industries and greater acceptance of brand-named products would drive growth in its polymer and bulk chemicals businesses. We believe all these factors will help it clock 16% and 12% revenue and profit CAGRsrespectively over FY19-21.

Valuation. We maintain our target price of`4,000.At this price, the stock is valued at a PE multiple of 23.4x FY20e and 21.7x FY21e. On an EV/EBITDA multiple comparison, it is valued at 13.7x FY20e and 12.2x FY21e.Risks: Delay in further capacity utilisation and in debottlenecking; increase in prices of crude and crude derivatives.

Change in EstimatesTargetReco

Relative price performance

Source: Bloomberg

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Estimates revision (%) FY20e FY21e

Sales 4.9 8.4

EBITDA 14.1 14.7

EPS 14.7 11.3

9 May 2019 Atul – Growth fuelled by margin expansion; maintaining a Buy

Anand Rathi Research 2

Quick Glance – Financials and ValuationsFig 1 – Income statement (`m) Year-end: Mar FY17 FY18 FY19 FY20e FY21e

Net revenues 28,339 32,958 40,378 46,823 53,919 Growth (%) 9.2 16.3 22.5 16.0 15.2

Direct costs 14,355 18,035 21,061 24,114 28,038

SG&A 8,890 9,871 11,650 14,047 16,176 EBITDA 5,095 5,052 7,668 8,662 9,705 EBITDA margins (%) 18.0 15.3 19.0 18.5 18.0 - Depreciation 954 1,104 1,189 1,484 2,004 Other income 526 259 349 468 539 Interest expenses 252 127 74 42 42 PBT 4,414 4,080 6,753 7,604 8,198 Effective tax rate (%) 27.8 32.1 36.2 34.0 34.0 + Associates/(Minorities) 43 42 50 50 54 Net income 3,230 2,812 4,360 5,069 5,465 Adjusted income 3,230 2,812 4,360 5,069 5,465 WANS 30 30 30 30 30 FDEPS (`/sh) 108.8 94.8 146.9 170.8 184.1 FDEPS growth 17.8 -12.9 55.0 16.3 7.8 Gross margins (%) 49.3 45.3 47.8 48.5 48.0 Source: Company, Anand Rathi Research

Fig 3 – Cash-flow statement (`m) Year-end: Mar FY17 FY18 FY19 FY20e FY21e

PBT adj. OI and interest 4,140 3,948 6,479 7,178 7,701 + Non-cash items 954 1,104 1,189 1,484 2,004 Oper. prof.before WC 5,095 5,052 7,668 8,662 9,705 - Incr./(decr.) in WC 305 520 767 2,788 1,575 Others incl. taxes 871 1,082 2,443 2,585 2,787 Operating cash-flow 3,918 3,450 4,458 3,289 5,343 - Capex (tang.+ intang.) 2,598 1,505 2,715 5,000 5,000 Free cash-flow 1,320 1,946 1,743 -1,711 343 Acquisitions -Div.(incl. buyback, tax) 357 429 536 641 697 + Equity raised - - - - - + Debt raised -1,481 -1,518 366 - - - Fin Investments 502 409 2,822 -2,000 - -Misc. items (CFI+CFF) -1,084 -621 -1,301 -476 -551 Net cash-flow 63 211 51 124 197 Source: Company, Anand Rathi Research

Fig 5 – Price movement

Source: Bloomberg

Fig 2 – Balance sheet (`m) Year-end: Mar FY17 FY18 FY19 FY20e FY21e

Share capital 297 297 297 297 297 Net worth 19,659 22,439 27,057 31,485 36,253 Debt 1,677 159 525 525 525 Minority interest 153 200 238 238 238 DTL/(Assets) 1,014 1,245 1,390 1,390 1,390 Capital employed 22,503 24,044 29,209 33,637 38,405 Net tangible assets 10,201 10,230 10,713 12,332 16,447 Net intangible assets 0 0 196 196 196 Goodwill 238 238 323 323 323 CWIP (tang. &intang.) 590 962 1,723 3,620 2,500 Investments (strategic) 4,292 4,674 5,464 5,464 5,464 Investments (financial) 29 57 2,088 88 88 Current asset (excash) 11,611 13,432 14,382 18,153 20,904 Cash 283 494 545 669 866 Current liabilities 4,741 6,042 6,225 7,208 8,384 Working capital 6,870 7,390 8,157 10,945 12,520 Capital deployed 22,503 24,044 29,209 33,637 38,405 Contingent Liabilities 1,122 1,160 - - -Source: Company, Anand Rathi Research

Fig 4 – Ratio analysis Year-end: Mar FY17 FY18 FY19 FY20e FY21e

P/E (x) 32.8 37.7 24.3 20.9 19.4 EV / EBITDA (x) 21.1 20.9 13.6 12.2 10.9 EV / Sales (x) 3.8 3.2 2.6 2.3 2.0 P/B (x) 5.4 4.7 3.9 3.4 2.9 RoE (%) 16.4 12.5 16.1 16.1 15.1 RoCE (%) - after tax 15.9 12.3 16.4 16.1 15.1 RoIC 16.0 12.5 16.7 16.4 15.4 DPS (` / sh) 10.0 12.0 15.0 17.9 19.5 Dividend yield (%) 0.3 0.3 0.4 0.5 0.5 Dividend payout (%) - incl. DDT 9.2 12.7 10.2 10.5 10.6 Net debt / equity (x) 0.1 0 0 0 0 Receivables (days) 66 79 62 72 72 Inventory (days) 105 82 87 87 87 Payables (days) 85 92 65 69 69 CFO : PAT % 121.3 122.7 102.2 64.9 97.8 Source: Company, Anand Rathi Research

Fig 6 – Projects unrealised and being implemented

Source: Company

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Result Update

Key takeaways of analyst meet Aromatics

Major products: Cresol, p-Cd, p-AA, p-AAI

Unrealized sales potential in the segment:`1bn

Projects being implemented: `2.4bn

In the next 2-3years, aromatics would add `5bn-6bn to overall revenue.

The largest revenue contributing product in this segment is Additives.

Ahead, to concentrate on fragrance and personal-care categories as well

Industries served: chemical additives, fragrances, personal care and pharmaceuticals.

Bulk Chemicals and Intermediates

Industries served: cosmetics, chemicals, dyestuff and tyres.

Major products: resorcinol(Atul being the only manufacturer in India), RF resins.

Emerging markets automobile industry to register a 3.6% CAGR over 2018-24 vs. 1% for mature markets for resorcinol and RF resins.

Unrealized sales potential from the segment:`1.4bn.

Projectsbeing implemented:`2.1bn; intermediates `400m.

Colors

Half the sales of the segment constitute exports

Product groups: VAT dyes, sulphur black, pigments

Industries served: paper, textiles, paints&coatings

Unrealized sales potential:`980m.

Projectsbeing implemented:

Textile dyes: `2.5bn.

Intermediates: `450m.

Crop protection

Major products: 2,4-D (16% global market share) and

Indoxacarb (7% global market share)

Unrealized sales potential:`590m

Projectsbeing implemented:`290m.

Pharmaceuticals

Key product: Dapsone (a 50% domestic market share).

Generics are capturing a greater marketshare, globally.

Unrealized sales potential: `1.5bn (spread overtwo years)

Establishing the Ambernath production site.



Polymers

Product groups: epoxy resins, curing agents, diluents,rubber- and polyurethane-based adhesives, sulfones.

Focus on specialty resins, multi-functional resins, bis phenol-based resins, epoxy phenol novolac (EPN) (also manufactured by Aditya Birla Chemicals).

B to C brand-named productsbring 15-20% to revenue

To incur `600m-700m toward expansion projects, and `500m toward environmental measures.

Additional `1.5bn capex to be incurred, not yet approved by the Board.

Details of revenue potential stated and achieved

Strong growth momentum continued in Q4FY19 also

Atul’s Q4FY19 revenue grew a strong 15.5% y/y to `10.2bn, driven by robust, 15.8% and 15.3% y/y revenue growth in life sciences and specialty chemicals, respectively. The gross margin improved 296bps y/y to 48.8% due to lower input costs. Absolute EBITDA grew 32.6% y/y to`1.9bn. The EBITDA margin expanded 249bps y/y to 19.3% mainly due to the higher gross margin (up 296bps), lower other expenses (down 12bps) partially offset by higher employee expenses (up 60bps). Falling interest costs (down 53% y/y) and the better operating performance led to `1.1bn profit (up 8.6% y/y) despite other income declining 84.7% y/y and higher tax expenses.

Fig 7 – Details of revenue potential stated and achieved (` m)

Particulars

Revenue potential

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Achieved in FY18 % Achieved

Revenue potential

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Achieved in FY19 % Achieved

Revenue potential

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FY19 segment revenue

% growth Y/Y

Colors 300 480 160 1,450 960 66 3,930 5,480 21.2

Polymers 1,750 1,030 59 580 1,900 328 2,900 10,600 21.8

Bulk chemicals 530 370 70 930 740 80 3,890 2,490 42.3

Aromatics 900 190 21 1,840 2,850 155 3,350 11,270 33.8

Pharma 840 1,270 151 840 630 75 1,500 1,900 49.6

Crop protection 980 270 273 276 301 12.2 8.8 1,048 1,120Source: Company, Anand Rathi Research



Financial highlights

Fig 9 – Quarterly trend, as percent of sales Standalone Consolidated

Particulars Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Y/Y / bps Q/Q / bps FY18 FY19 Y/Y / bps FY18 FY19 Y/Y/bps

Gross margins 45.8 46.2 47.2 47.4 48.8 296 137 45.5 47.5 194 45.3 47.8 256

Employee costs 5.5 5.5 5.3 5.4 6.1 60 73 5.8 5.6 (25) 6.5 6.4 (4)

Other expenses 23.5 24.8 23.1 21.3 23.4 (12) 212 24.5 23.1 (140) 23.5 22.4 (106)

EBITDA margins 16.8 16.0 18.9 20.7 19.3 249 (148) 15.2 18.8 360 15.3 19.0 366

Depreciation 3.1 3.0 2.7 2.7 3.0 (9) 29 3.4 2.9 (51) 3.3 2.9 (40)

Interest 0.2 0.1 0.1 0.1 0.1 (12) 0 0.3 0.1 (19) 0.4 0.2 (20)

Other income 3.0 1.5 1.9 (0.5) 0.4 (257) 85 1.2 0.8 (44) 0.8 0.9 8

PBT margins 16.4 14.3 17.9 17.5 16.6 13 (92) 12.8 16.6 386 12.4 16.7 435

Effective tax rate 29.9 33.9 34.0 34.5 34.5 469 9 31.9 34.2 232 32.1 36.2 408

PAT margins 11.5 9.5 11.8 11.5 10.8 (69) (62) 8.7 10.9 224 8.4 10.7 227

Source: Company

Fig 8 – Financial trend Standalone Consolidated

(`m) Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 % Y/Y % Q/Q FY18 FY19 % Y/Y FY18 FY19 % Y/Y

Income 8,666 8,881 10,074 10,195 10,008 15.5 (1.8) 31,075 39,158 26.0 32,958 40,378 22.5

RM costs 4,695 4,773 5,317 5,361 5,126 9.2 (4.4) 16,932 20,577 21.5 18,035 21,061 16.8

Employee expenses 479 488 534 550 613 28.0 11.5 1,813 2,186 20.5 2,134 2,598 21.8

Other expenses 2,038 2,199 2,324 2,169 2,341 14.9 7.9 7,605 9,033 18.8 7,737 9,051 17.0

EBITDA 1,454 1,420 1,900 2,114 1,928 32.6 (8.8) 4,725 7,362 55.8 5,052 7,668 51.8

Depreciation 268 270 273 276 301 12.2 8.8 1,048 1,120 6.9 1,104 1,189 7.7

Interest 18 9 11 8 8 (53.1) 1.2 89 37 (58.9) 127 74 (41.8)

Other income 257 133 188 (47) 39 (84.7) (184.5) 385 314 (18.5) 259 349 34.5

PBT 1,425 1,274 1,804 1,783 1,658 16.4 (7.0) 3,973 6,519 64.1 4,080 6,753 65.5

Tax 425 432 614 614 573 34.7 (6.8) 1,268 2,233 76.0 1,310 2,443 86.5

PAT 999 842 1,190 1,169 1,085 8.6 (7.1) 2,704 4,286 58.5 2,770 4,310 55.6MI* and profit from associates - - - - - - - - - - 42 50 18.7

Consolidated PAT 999 842 1,190 1,169 1,085 8.6 (7.1) 2,704 4,286 58.5 2,812 4,360 55.0

EPS (`) 33.7 28.4 40.1 39.4 36.6 8.6 (7.1) 91.2 144.5 58.5 94.8 146.9 55.0

Source: Company, Anand Rathi Research *MI - minority Interest

Fig 10 – Revenue grew 15.5% y/y


Fig 11 – Segment-wise revenue break-up


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Life Science Chemicals Speciality Chemicals



Segment-wiseperformance Life-science chemicals

Revenue of the life-science-chemicals division increased 15.8% y/y,thoug it declined 2.9% sequentially. Absolute EBIT shot upa robust89.4% y/y, 31.9% q/q,to `693m with a 21.4% EBIT margin (up 830bps y/y).The RoCE of the life-science-chemicals division was 11.5% (7% a year ago). The segment’s capital employed increased 13% y/y to `6bn.

Specialty chemicals

Q4 FY19 revenue of the specialty chemicals division was up 15.3% y/y,down 1.3% q/q, to `6.7bn. The EBIT margin was 15.5%, down 31bps y/y,540bps q/q.Absolute EBIT was `1bn, up 13.1% y/y. The RoCE was 8.7% (8.2% a year ago). Investment in the business increased 6.4%y/y to `12bn.

Fig 12 – EBITDA margin improved 249bps y/y to 19.3%


Fig 13 – PAT growth


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Fig 14 – Life-science chemicals: revenue and growth trends


Fig 15 – Life-science chemicals: EBIT and margin trends


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EBIT EBIT Margin



Fig 18– Quarterly segment-wisetrends - standalone Particulars Q4FY19 Q4FY18 % Y/Y Q3FY19 % Q/Q FY18 FY19 % Y/Y

Revenue (`m)

Life science chemicals 3,245 2,802 15.8 3,341 (2.9) 10,623 13,178 24.0

Specialty chemicals 7,194 6,411 12.2 7,584 (5.1) 22,791 28,252 24.0

Gross sales 10,439 9,214 13.3 10,925 (4.4) 33,414 41,430 24.0

Inter-segment 431 548 (21.4) 730 (41.0) 1,938 2,272 17.2

Net sales 10,008 8,666 15.5 10,195 (1.8) 31,476 39,158 24.4

EBIT (`m)

Life science chemical 693 366 89.4 526 31.9 1,200 2,170 80.8

Specialty chemicals 1,045 924 13.1 1,429 (26.9) 2,806 4,533 61.6

Total 1,738 1,290 34.7 1,955 (11.1) 4,006 6,703 67.3

EBIT margins (%)

Life science chemical 21.4 13.1 830 15.7 562 11.3 16.5 517

Specialty chemicals 14.5 14.4 12 18.8 (431) 12.3 16.0 374

Source: Company, Anan Rathi Research

Balance sheet highlights The cash-conversion cycle lengthened by 15 days to 85. Overall

inventory days were 87 (up five days); debtor days came at 62 (down 17 days)and creditor days were 65, vs 92 in FY18.

During the year, the company incurred capexof `2.7bn.

CWIP at end-FY19 was `1.7bn.

The company’s current investment was `2bn (`57m a year ago). It invested a further`791m as non-current investment.

The company has raised debt by`366m.

Key highlights of the year Investment in a wholly-owned subsidiary

In Jan’19, the company acquired a further ~4.55m equity shares of Atul Bioscience(a wholly-owned subsidiary), investing `100m. The transaction was done at an arm’s-length price and shares were valued at `22 each (incl.a `12 premium). The reason for the investment was to meet the funding requiredfor Atul Bioscience’s future capex projects.

Fig 16 – Specialty chemicals –revenue and growth trends


Fig 17– Specialty chemicals - EBIT and margin trends


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Y18

Q4F

Y18

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

(` m) (%)

EBIT EBIT Margin



Termination of anti-dumping investigation concerning imports of “certain epoxy resins"

Atul filed an application to initiate anti-dumping investigation and imposition of anti-dumping duties concerning imports of epoxy resinsoriginating in or exported from China, the EU, Korea, Taiwan and Thailand, alleging dumping of goods from those countries and consequent injury to the domestic industry.

All the proceedingshave been completed and the Authority notes that the investigation has reached its final stage. However, in Feb’18, Atul filed a request for withdrawal of the application citing “there has been a change in the market situation recently, and considers that it will be able to compete with imports to a reasonable extent”; thus, in Jan’19, the Authority terminated the present anti-dumping investigation.

Withdrawal of anti-dumping duty on sulphur black in Jul’19

To protect domestic producers hurt by a surge in below-cost sulphur-black imports from China, the Indian government in 2008 imposed for the first time an anti-dumping duty on sulphur black. This has been revised from time to time.

Sulphur black is used in Atul’s colour business and contributes ~15% to revenue. The present anti-dumping duties are applicable till Jul’19. If such anti-dumping duties are suspended in Jul’19, this would trim margins, but not significantly.



Valuation Change in estimates

Based on management guidance and changes in the industry, we raise our FY20e and FY21e revenue 4.9% and 8.4%, EBITDA 14.1% and 14.7% and PAT 14.7% and 11.3%, respectively.

Fig 18 – Change in estimates Particulars Old estimates New estimates % change

(` m) FY20e FY21e FY20e FY21e FY20e FY21e

Revenue 44,642 49,756 46,823 53,919 4.9 8.4

EBITDA 7,589 8,458 8,662 9,705 14.1 14.7

PAT 4,418 4,909 5,069 5,465 14.7 11.3


To arrive at the value of Atul, we use the DCF method. The 15% WACC used has been arrived at as follows:

Fig 20–WACC Equity (FY19) (` m) 27,057

Cost of equity (%) 15.0

Debt (FY19) (` m) 525

Cost of debt (%) 8.0

Weighted average cost of capital (%) 15.0

Source: Anand Rathi Research

To arrive at future cash flows, a 5%terminal growth rate has been assumed.

DCF-based valuation

Fig 22–Target price (` m) Present value 21,648

Terminal value 97,063

Debt (525)

Cash 545

Total value 118,732

No. of shares (m) 30

Target price (`) 4,000


We maintain our target price of`4,000.At this price, the stock is valued at a PE multiple of 23.4x FY20e and 21.7x FY21e. On an EV/EBITDA multiple comparison, it is valued at 13.7x FY20e and 12.2x FY21e.

Fig 21 –Present value of FCFF FY19 FY20e FY21e FY22e FY23e FY24e FY25e FY26e FY27e FY28e FY29e FY30e

EBIT 6,827 7,646 8,240 9,105 10,062 11,118 12,285 13,375 15,001 16,576 18,316 20,240

EBIT (1-t) 4,347 5,047 5,439 6,010 6,641 7,338 8,108 8,960 9,901 10,940 12,089 13,358

Depreciation 1,189 1.484 2,004 2,105 2,210 2,320 2,436 2,558 2,686 2,820 2,961 3,109

WC changes (767) (2,844) (1,573) (1,651) (1,734) (1,820) (1,911) (2,006) (2,105) (2,210) (2,320) (2,436)

Capex (2715) (5,000) (5,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000)

FCFF 2,065 (1,313) 870 5,463 6,117 6,838 7,634 8,512 9,481 10,550 11,730 33,271

PV of FCFF 1,797 (995) 574 3,138 3,059 2,977 2,893 2,809 2,723 2,638 2,554 6,306




Risks

Delay in capex implementation.

Global slowdown, leading to a deceleration in key consumer sectors such as agro-chemicals, pharmaceuticals and dyes & pigments.

Fig 23–Mean EV/EBITDA and Standard deviation


Mean

+1 std

-1 std

2

4

6

8

10

12

14

16

May

-14

Aug-

14N

ov-1

4Fe

b-15

May

-15

Aug-

15N

ov-1

5Fe

b-16

May

-16

Aug-

16N

ov-1

6Fe

b-17

May

-17

Aug-

17N

ov-1

7Fe

b-18

May

-18

Aug-

18N

ov-1

8Fe

b-19

May

-19

Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. Important Disclosures on subject companies Rating and Target Price History (as of 9 May 2019)

1

2,400

2,600

2,800

3,000

3,200

3,400

3,600

3,800

Feb-

18

Mar

-18

Apr-1

8

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr-1

9

May

-19

Date Rating TP (`)

Share Price (`)

1 02-Nov-18 Buy 4,000 3,325

Anand Rathi Ratings Definitions

Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:

Ratings Guide (12 months) Buy Hold Sell Large Caps (>US$1bn) >15% 5-15% <5% Mid/Small Caps (<US$1bn) >25% 5-25% <5% Research Disclaimer and Disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014

Anand Rathi Share and Stock Brokers Ltd. (hereinafter refer as ARSSBL) (Research Entity) is a subsidiary of Anand Rathi Financial Services Ltd. ARSSBL is a corporate trading and clearing member of Bombay Stock Exchange Ltd, National Stock Exchange of India Ltd. (NSEIL), Multi Stock Exchange of India Ltd (MCX-SX) and also depository participant with National Securities Depository Ltd (NSDL) and Central Depository Services Ltd. ARSSBL is engaged in the business of Stock Broking, Depository Participant and Mutual Fund distributor.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

General Disclaimer: This Research Report (hereinafter called “Report”) is meant solely for use by the recipient and is not for circulation. This Report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security through ARSSBL nor any solicitation or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security (ies) referred to herein. These information / opinions / views are not meant to serve as a professional investment guide for the readers. No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or making any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by ARSSBL to be reliable. ARSSBL or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of the directors, employees, affiliates or representatives of ARSSBL shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way whatsoever from the information / opinions / views contained in this Report. The price and value of the investments referred to in this Report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. ARSSBL does not provide tax advice to its clients, and all investors are strongly advised to consult with their tax advisers regarding taxation aspects of any potential investment.

Opinions expressed are our current opinions as of the date appearing on this Research only. We do not undertake to advise you as to any change of our views expressed in this Report. Research Report may differ between ARSSBL’s RAs and/ or ARSSBL’s associate companies on account of differences in research methodology, personal judgment and difference in time horizons for which recommendations are made. User should keep this risk in mind and not hold ARSSBL, its employees and associates responsible for any losses, damages of any type whatsoever.

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Statements on ownership and material conflicts of interest, compensation - ARSSBL and Associates

Answers to the Best of the knowledge and belief of ARSSBL/ its Associates/ Research Analyst who is preparing this report

Research analyst or research entity or his associate or his relative has any financial interest in the subject company and the nature of such financial interest. No

ARSSBL/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report?

No

ARSSBL/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject company No

ARSSBL/its Associates/ Research Analyst/ his Relative have any other material conflict of interest at the time of publication of the research report? No

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation from the subject company in the past twelve months No

ARSSBL/its Associates/ Research Analyst/ his Relative have managed or co-managed public offering of securities for the subject company in the past twelve months

No

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months

No

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months

No

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation or other benefits from the subject company or third party in connection with the research report

No

ARSSBL/its Associates/ Research Analyst/ his Relative have served as an officer, director or employee of the subject company. No

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This research report is a product of ARSSBL, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

This report is intended for distribution by ARSSBL only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.

In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business withMajor Institutional Investors, ARSSBL has entered into an agreement with a U.S. registered broker-dealer, Cabrera Capital Markets. ("Cabrera"). Transactions in securities discussed in this research report should be effected through Cabrera or another U.S. registered broker dealer.

1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.

2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.

3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.

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