INSTITUTIONAL EQUITY RESEARCH Reliance Industries Ltd (RIL...

INSTITUTIONAL EQUITY RESEARCH

Reliance Industries Ltd (RIL IN) Jio "Primed" for growth

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

INDIA | CONGLOMERATE| Company Update

5 April 2017

RIL’s share price has risen over 25% since its CMD's announcement about Jio's monetisation effective April 2017. The launch of its Rs 303 monthly subscriber plan eased fears of margin‐destructive price wars. RIL indicated 72mn subscriber conversions to Jio Prime (versus 100mn under previous free offers) by the end of March and has offered three months of free services on recharges of Rs 303 and above before 15 April, thereby aiming to lock users at a higher tariff bracket. It said it would push for 50% RMS in a Rs 3trn market (in 3‐4 years) along with a strong 50% EBITDA margin. We believe the Indian telecom sector is heading towards major consolidation, and that in the next 5‐10 years, it will be a four‐player market, enhancing pricing power/ARPU, data usage, and incumbents’ earnings. We build a conservative Rs 180 ARPU for Jio in FY18 on a 90mn average subscriber base, but expect it to touch Rs 270+/300mn+ by FY25, implying revenue/EBITDA/margin of Rs 1tn/460bn/45%. While we will wait for execution, competitor action, and ARPU/costing data to reassess our estimates, for now, we value Jio at 8x FY25 EBITDA, discounted to FY18‐end, and raise our target EV to Rs 2.2tn from Rs 1tn based on 0.5x IC. Hence, we raise our target to Rs 1,650 from Rs 1,190 and reiterate Buy. Jio’s launch was a success with 72mn effective users and attractive but disciplined pricing There is little doubt now that Reliance Jio’s launch is a roaring success. It has redefined the Indian telecom landscape, both in terms of technology and product. A 100mn subscriber base with an effective conversion of 72mn to paid services (at the end of March 2017) was ahead of expectations. Jio Prime's plans offer a simplified tariff structure with no hidden charges, which make them attractive, aiding conversion and dependency. The plans also eased fears of margin‐destructive price wars; they exhibit significant discipline towards protecting and improving pricing power. RIL sets steep targets for Jio – aggressive strategy in place Jio is clearly in for the long haul. In a recent analyst meet, it laid out a comprehensive strategy. Its key targets were 50% RMS and 50% EBIDTA margin. Some salient points of its strategy: (1) Reducing the voice market, thereby pushing data usage. (2) given the right pricing, the Indian data market will expand and become around 500‐600 GB per month in the next 3‐4 years. Assuming a pricing of Rs 50/GB, the market size will be around Rs 3‐3.5trn annually. (3) With its strong capacity and investment plan, Jio will target 50% RMS; higher ARPU and scale would result in EBITDA margin of ~50%. Our assumptions are conservative, but Jio will create value Execution and network stability will be key; maintenance of high data speed, voice quality, and attractive offerings can boost usage and subscribers' preference for Jio. For now, we take a more conservative stance – Rs 180 blended ARPU in FY18 on a 90mn average subscriber base. Based on our primary thesis of industry consolidation to a four‐player market, we expect this to touch Rs 270+/300mn+ by FY25, implying revenue/EBITDA/margin of Rs 1tn/460bn/45% for Jio. Although much lower than RIL's targets, our estimates imply an EV of Rs 2.2tn for Jio, which is an equity value of almost Rs 1tn. Maintain Buy with a revised target of Rs 1,650 We value Jio at 8x FY25 EBITDA, discounted to FY18 end, and raise our SOTP‐based target for RIL to Rs 1,650 (from Rs 1,190) with telecom valuation of Rs 2.2tn EV vs. Rs 1tn earlier. While we keep RIL's EBITDA largely unchanged for FY17/18/19, due to lower IndAS‐based depreciation in FY17 and higher other income, we raise our EPS by 4%/14%/38%. Reiterate Buy.

BUY (Maintain) CMP RS 1,375/ TARGET RS 1,650 (+20%) COMPANY DATA O/S SHARES (MN) : 3251MARKET CAP (RSBN) : 4552MARKET CAP (USDBN) : 7052 ‐ WK HI/LO (RS) : 1401 / 926LIQUIDITY 3M (USDMN) : 485.3PAR VALUE (RS) : 10 SHARE HOLDING PATTERN, % Dec 16 Sep 16 Jun 16PROMOTERS : 46.5 46.5 45.1FII / NRI : 22.0 21.5 31.9FI / MF : 12.5 12.7 12.9NON PRO : 7.2 7.3 7.0PUBLIC & OTHERS : 11.8 12.0 15.2

PRICE PERFORMANCE, % 1MTH 3MTH 1YR

ABS 11.2 29.9 36.2REL TO BSE 7.4 17.5 18.3

PRICE VS. SENSEX

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KEY FINANCIALS Rs bn FY17E FY18E FY19ENet Sales 3,047 3,769 4,358EBIDTA 460 573 714Net Profit 295 256 296EPS, Rs 100.0 86.7 100.1PER, x 13.7 15.9 13.7EV/EBIDTA, x 12.5 11.3 9.1P/BV, x 1.5 1.4 1.3ROE, % 11.0 8.8 9.4Debt/Equity (%) 81.7 98.6 90.9

Source: PhillipCapital India Research Est. Sabri Hazarika (+ 9122 6667 9756) [email protected] Naveen Kulkarni, CFA, FRM (+ 9122 6246 4122) [email protected] Manoj Behera (+ 9122 6246 4118) [email protected]

RELIANCE INDUSTRIES COMPANY UPDATE

Reliance Jio launch a big success There is little doubt now that Reliance Jio’s launch of services was a roaring success. It has redefined the Indian telecom landscape from both a technological and product standpoint. Reliance Jio has forced incumbents to adopt a new paradigm – one defined by capacity creation and an ARPU‐based model on ‘value delivered’. Jio's sector redefining steps

Source: Company Its recent announcement of 72mn customers signing up for Jio’s Prime membership plan by 31st March 2017 was clearly ahead of expectations. However, it has further extended the deadline by 15 days coupled with free complimentary services for another three months if customers recharge with Rs 303 and above plans. While this may seem as a mixed response to the monetisation capability, we see it as a push to keep customers hooked to high usage patterns and settle for plans that are above Rs 303. We believe Reliance Jio has locked‐in 4‐5% revenue market share (RMS) presently, which will grow over the next 12 months. Revenue market share outlook of major players

Source: Company, PhillipCapital India Research

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With its launch’s huge success, we believe Jio will be able to end the year at an exit RMS of around 11‐12%. While the bigger question is still whether it has managed to grow the market, we will wait for forthcoming quarter numbers for more visibility on the growth of both usage and monetisation; Q4FY17 results of incumbents will also provide early signs on market growth.



Reliance Jio's game plan Jio is clearly in for the long haul. Its efforts indicate no short cuts. In a recent analyst meet, Jio laid out its comprehensive game plan with a key target being 50% RMS and 50% EBIDTA margin. While achieving such high market share in a highly contested market is a rather arduous challenge, Jio has a definite strategy in place to achieve this. The three key aspects of its strategy are: 1. Reduce the voice market: Jio has one of the best ALL IP network in the world with unparallel 4G capacity. While the Idea‐Vodafone merged entity boasts of higher network capacity, going by the current state of affairs, Jio has significant 4G capacity. With an ALL IP network and no capacity constraints, the strategy is clearly to utilise capacity. Even voice on Jio’s network is completely through packets (circuit switched on 2G and 3G), so from a network perspective there is no distinction between voice and data for Jio. So, technically, it can offer unlimited voice, as bandwidth consumed is not very significant though on termination to other networks there is significant cost involved as most other voice networks are circuit switched with limited capacity. As Jio continues to offer voice free on its network more and more devices become VOLTe compliant, other competitors will be forced to switch to IP networks even for voice. This transition, despite being tricky, is possible considering Jio's aggressive plans. With decline/stagnation of voice revenues of other operators Jio can grow its revenue base as its value proposition will continue to remain superior. 2. Indian data market will grow to Rs 3‐3.5trn: According to Jio, the Indian data market will be around 5‐6bn GB per month, and assuming a pricing of Rs 50/GB, the market size would be around Rs 3‐3.5tn per year by 2021‐22. The industry growth will be rapid because of data explosion. Jio’s expectations are quite contrary to the market, which was anticipated to become more sluggish due to a decline in pricing and hyper competition. Jio believes that the market is supply‐constrained and growth will take place if value is offered at the right price point. Change in Indian telecom sector's pattern

Source: Company The most interesting metric that Jio believes in is – India has 400mn subscribers capable of paying Rs 500 ARPU per month. The existing ARPU is significantly less than Rs 150/month. While the metric is very interesting, the challenge will be to monetise the product offering. Nevertheless, it seems possible as the industry consolidates to a four‐players market.



Data explosion expected as customer's ability to pay is high

Source: Company 3. Jio can supply 50% of the market and achieve EBIDTA margins of 50% Jio contends that it can supply 50% of the projected data market by 2021‐22. It is expected to invest over Rs 500bn over the next three years to augment capacity. The company would have significant capacity on its data network, and as the industry transitions to IP networks from traditional voice, the scope for EBIDTA improvement would increase with a rise in spectrum utilisation and decline in variable costs.

Great start, but execution is crucial in a competitive market Well‐established incumbents have solid experience in fighting price wars and are unlikely to cede their market share easily. Hence, Jio's goal of 50% RMS is challenging. RIL's telecom business outlook improved significantly after CMD Mr Ambani's February announcement primarily due to these three reasons: 1) A subscriber base of 100mn and recent announcement of 72mn – indicating a

strong footing 2) Rs 303 monthly plan (Rs 250+ implied ARPU) allaying fears of margin destructive

price wars 3) A simplified tariff plan with no hidden charges, indicating attractiveness and

healthy conversion to paid services On a 72mn user base, which is quite healthy, Jio's immediate focus is to put these subscribers on a higher tariff plan (Rs 303 and above). As we noted earlier, the extension of Jio Prime’s deadline by 15 days and three months free service for Rs 303 and above recharges could be because its 72mn subscriber base is mostly buying the Rs 149 plan or just making do with the Rs 99 conversion recharge. While this move may seem worrying (after initial monetisation and being ARPU dilutive), if it is successful, it can put Jio on a formidable position. Execution will be a key, and network stability, maintenance of high data speed, voice quality, and attractive offerings can boost usage and subscriber's preference towards Jio, especially in the case of dual sims.



Expect Jio's subscriber base and ARPU to improve as the market expands and consolidates

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Source: Company, PhillipCapital India Research We incorporate our telecom earnings model for RIL, though against RIL's steep targets we still take a conservative stance. We will reassess our assumptions based on execution, experience, and monetisation of Jio in forthcoming quarters. For FY18, we build a blended ARPU of Rs 180, as we await conversion statistics among lower income groups to Prime (these may primarily stick to calls, which Jio is offering for free). We assume an average subscriber base of ~90mn, based on which we estimate revenue close to Rs 200bn in FY18. Our cost estimates imply an EBITDA margin of 10% in FY18, which is commendable in the first year of operation, implying an EBITDA of almost Rs 20bn. Estimate Rs 1tn revenue and Rs 460bn EBITDA in FY25

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Source: Company, PhillipCapital India Research Jio's growth going forward will be strong. We expect its ARPU to rise to Rs 270+ by FY25 as the telecom industry consolidates to four players (Jio, Vodafone‐Idea, Airtel, and BSNL/MTNL), improving pricing power and data usage (300mn+ subscribers for Jio), thereby pushing earnings. Higher ARPU would also aid in EBITDA margin expansion – we estimate these to reach almost 45% by FY25. We expect Jio to save on network sites (aided by the RCOM deal), low SAC, and lower bundled service costs due to bulk offerings. We have assumed 14‐paise inter‐connection charges, which could be reduced to zero, thereby lowering industry cost.



Changing Jio valuation from EV/IC to EV/EBITDA We change our Jio valuation model to EV/EBITDA based on Rs 459bn EBITDA by FY25 (from EV/invested capital). At a target EV/EBITDA multiple of 8x and discounting the same to FY18 end (WACC of 11.3%), we estimate the telecom segment's valuation at Rs 2.2tn vs. Rs 1tn earlier based on 0.5x EV/IC method. Rs bn FY25 EBITDA Estimate 459EV/EBITDA target multiple (x) 8.0 EV 3,675 PV of EV 1,939FCF Adjustment 303EV 2,241

Source: PhillipCapital India Research

Core business capex cycle at last stage RIL's remaining downstream/petchem projects are nearing completion with PX, ROGC, and ethane sourcing expected during Q1FY18 and petcoke gasification initially scheduled in June 2017, though the company has indicated some revision in dates (will announce after Q4FY17 results). Existing business performance continues to be steady – we expect flat FY17 GRM, petchem margins improving by about 15%, and 3‐4% growth in volumes.

Valuation SOTP Valuation Rs.bn (FY19E, Consol) Method Head Multiple EV EV/shRefining EV/EBITDA 348 6.5 2,259 764 Petrochemicals EV/EBITDA 267 6.5 1,734 587 Upstream Oil & Gas DCF‐EV/EBITDA 54 7.5 405 137 Organised Retail EV/Sales 301 0.5 151 51 Others EV/Sales 97 1.0 97 33 Telecom EV/EBITDA ‐ Discounted 8x to FY25 EBITDA 2,241 758 Total 6,887 2,329 Adj. Net Debt (FY18E End) 2,007 679 Equity Value 1,650 Shares O/S (mn) 2,957

Source: PhillipCapital India Research We raise our SOTP‐based target price to Rs 1,650 (from Rs 1,190) primarily due to our revised telecom valuation of Rs 2.2tn EV. We keep RIL's EBITDA largely unchanged for FY17/18/19, though due to lower IndAS‐based depreciation in FY17 and higher other income, we raise our EPS by 4%/14%/38%. Reiterate Buy. Key risks are adverse petroleum/petchem prices in the core business, currency, operational risks, and competitive risks in telecom and other consumer‐facing businesses.



RIL's snapshot Y/E, March 31, Consol. FY14 FY15 FY16 FY17E FY18E FY19ERevenues (Rs.bn) 4,345 3,754 2,765 3,047 3,769 4,358 EBITDA (Rs.bn) 348 374 443 460 573 714 Reported PAT (Rs.bn) 225 236 276 295 256 296 Adjusted PAT (Rs.bn) 225 236 272 295 256 296 Growth 8% 5% 15% 9% ‐13% 16%Reported EPS (Rs.) 76.5 80.1 93.7 100.0 86.7 100.1 Adjusted EPS (Rs.) 76.5 80.1 92.3 100.0 86.7 100.1 Adjusted PE (x) 18.0 17.2 14.9 13.7 15.9 13.7 PB (x) 2.0 1.9 1.7 1.5 1.4 1.3 EV/EBITDA (x) 13.5 13.4 12.1 12.5 11.3 9.1 RoE 11% 11% 11% 11% 9% 9%RoCE 7% 6% 7% 7% 6% 7%Debt:Equity (x) 0.7 0.7 0.7 0.8 1.0 0.9 Book Net Debt (Rs.bn) excl LT Inv. 670 973 1,299 1,703 2,385 2,441 Average GRM ($/bbl) 8.1 8.6 10.8 10.7 10.2 13.4 Petchem Production (mmt) 12.0 12.2 14.4 14.7 18.8 18.8 Petchem EBITDA/mt ($) 147 149 146 166 208 213 Domestic+Shale Gas Output (mmscmd) 20.8 22.5 21.7 21.2 20.9 22.8 Growth ‐17% 8% ‐4% ‐2% ‐1% 9%Telecom EBITDA ‐ ‐ 19 46

Source: Company, PhillipCapital India Research




Financials

Income Statement Y/E Mar, Rs bn FY16 FY17e FY18e FY19eNet sales 2,765 3,047 3,769 4,358Growth, % ‐26 10 24 16Other income 0 0 0 0Total income 2,765 3,047 3,769 4,358Raw material expenses 1,891 2,095 2,474 2,880Employee expenses 77 83 88 95Other Operating expenses 355 409 634 670EBITDA (Core) 443 460 573 714Growth, % 18 4 24 25Margin, % 16.0 15.1 15.2 16.4Depreciation ‐129 ‐113 ‐230 ‐273EBIT 313 347 343 441Growth, % 21 11 ‐1 29Margin, % 11.3 11.4 9.1 10.1Interest paid ‐36 ‐45 ‐96 ‐142Other Non‐Operating Income 78 100 104 106Non‐recurring Items 4 0 0 0Pre‐tax profit 360 401 351 405Tax provided ‐83 ‐106 ‐95 ‐109Profit after tax 277 295 256 296Others (Minorities, Associates) ‐1 0 0 0Net Profit 276 295 256 296Growth, % 17 7 ‐13 16Net Profit (adjusted) 272 295 256 296Wtd avg shares (bn) 3 3 3 3 Balance Sheet Y/E Mar, Rs bn FY16 FY17e FY18e FY19eCash & bank 112 135 156 132Marketable securities at cost 399 359 323 291Debtors 49 54 67 77Inventory 470 517 664 768Loans & advances 355 389 476 550Other current assets 58 64 79 91Total current assets 1,442 1,518 1,765 1,910Investments 370 374 377 381Gross fixed assets 3,205 4,176 5,731 7,350Less: Depreciation 1,454 1,568 1,797 2,071Add: Capital WIP 2,499 2,524 1,515 303Net fixed assets 4,250 5,133 5,448 5,582Non‐current assets 0 0 0 0Total assets 6,062 7,026 7,591 7,873Current liabilities 1,452 1,757 1,420 1,455Provisions 35 40 45 50Total current liabilities 1,487 1,797 1,466 1,505Non‐current liabilities 2,106 2,507 3,187 3,184Total liabilities 3,593 4,304 4,653 4,689Paid‐up capital 62 62 63 63Reserves & surplus 2,407 2,659 2,876 3,122Shareholders’ equity 2,469 2,722 2,938 3,185Total equity & liabilities 6,062 7,026 7,591 7,873

Source: Company, PhillipCapital India Research Estimates, FY16 is IGAAP

Cash Flow Y/E Mar, Rs bn FY16 FY17e FY18e FY19ePre‐tax profit 360 401 351 405Depreciation 129 113 230 273Chg in working capital ‐5 164 ‐600 ‐126Total tax paid ‐86 ‐96 ‐85 ‐99Cash flow from operating activities 398 582 ‐104 453Capital expenditure ‐486 ‐1,000 ‐549 ‐411Chg in investments 65 40 36 32Chg in marketable securities 38 100 104 106Cash flow from investing activities ‐383 ‐861 ‐409 ‐272Free cash flow 15 ‐279 ‐513 181Equity raised/(repaid) 3 0 0 0Debt raised/(repaid) ‐32 302 534 ‐205Cash flow from financing activities ‐28 302 534 ‐205Net chg in cash ‐13 23 20 ‐24 Valuation Ratios

FY16 FY17e FY18e FY19ePer Share data EPS (INR) 92.3 100.0 86.7 100.1Growth, % 15.3 8.4 (13.3) 15.4Book NAV/share (INR) 826.5 910.8 982.5 1,064.2CEPS (INR) 134.7 138.3 164.4 192.3CFPS (INR) 293.4 188.0 (51.3) 113.0Return ratios Return on assets (%) 5.4 4.9 4.3 4.9Return on equity (%) 11.2 11.0 8.8 9.4Return on capital employed (%) 7.4 6.9 5.8 6.4Turnover ratios Asset turnover (x) 0.9 0.8 0.8 0.9Sales/Total assets (x) 0.5 0.5 0.5 0.6Sales/Net FA (x) 0.7 0.6 0.7 0.8Working capital/Sales (x) (0.3) (0.4) (0.2) (0.1)Receivable days 6.5 6.5 6.5 6.5Inventory days 62.0 62.0 64.3 64.3Payable days 96.2 96.2 96.2 96.2Working capital days (125.8) (143.4) (64.1) (43.7)Liquidity ratios Current ratio (x) 0.7 0.7 0.9 0.9Quick ratio (x) 0.5 0.4 0.5 0.5Interest cover (x) 8.7 7.6 3.6 3.1Total debt/Equity (%) 74.3 81.7 98.6 90.9Net debt/Equity (%) 69.7 76.7 93.2 86.7Valuation PER (x) 14.9 13.7 15.9 13.7PEG (x) ‐ y‐o‐y growth 1.0 1.6 (1.2) 0.9Price/Book (x) 1.7 1.5 1.4 1.3EV/Net sales (x) 1.9 1.9 1.7 1.5EV/EBITDA (x) 12.1 12.5 11.3 9.1EV/EBIT (x) 17.1 16.6 18.8 14.8

COMPANY UPDATE RELIANCE INDUSTRIES

Stock Price, Price Target and Rating History

B (TP 1160)

B (TP 1160)

B (TP 1190)B (TP 1190)

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Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL ‐15% > to < +15% Target price is less than +15% but more than ‐15%

SELL <= ‐15% Target price is less than or equal to ‐15%.




Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919 Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101 Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735 Research Automobiles IT Services Pharma & Specialty Chem Dhawal Doshi (9122) 6246 4128 Vibhor Singhal (9122) 6246 4109 Surya Patra (9122) 6246 4121 Nitesh Sharma, CFA (9122) 6246 4126 Shyamal Dhruve (9122) 6246 4110 Mehul Sheth (9122) 6246 4123 Banking, NBFCs Infrastructure Strategy Manish Agarwalla (9122) 6246 4125 Vibhor Singhal (9122) 6246 4109 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Pradeep Agrawal (9122) 6246 4113 Aashima Mutneja, CFA (9122) 6667 9764 Paresh Jain (9122) 6246 4114 Logistics, Transportation & Midcap Telecom Consumer & Retail Vikram Suryavanshi (9122) 6246 4111 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Media Manoj Behera (9122) 6246 4118 Jubil Jain (9122) 6246 4117 Manoj Behera (9122) 6246 4118 Technicals Preeyam Tolia (9122) 6246 4129 Metals Subodh Gupta, CMT (9122) 6246 4136 Cement Dhawal Doshi (9122) 6246 4128 Production Manager Vaibhav Agarwal (9122) 6246 4124 Yash Doshi (9122) 6246 4127 Ganesh Deorukhkar (9122) 6667 9966 Economics Mid-Caps & Database Manager Editor Anjali Verma (9122) 6246 4115 Deepak Agarwal (9122) 6246 4112 Roshan Sony 98199 72726 Shruti Bajpai (9122) 6246 4135 Oil & Gas Sr. Manager – Equities Support Engineering, Capital Goods Sabri Hazarika (9122) 6667 9756 Rosie Ferns (9122) 6667 9971 Jonas Bhutta (9122) 6246 4119 Vikram Rawat (9122) 6246 4120 Sales & Distribution Corporate Communications Ashvin Patil (9122) 6246 4105 Sales Trader Zarine Damania (9122) 6667 9976 Shubhangi Agrawal (9122) 6246 4103 Dilesh Doshi (9122) 6667 9747 Kishor Binwal (9122) 6246 4106 Suniil Pandit (9122) 6667 9745 Bhavin Shah (9122) 6246 4102 Ashka Mehta Gulati (9122) 6246 4108 Execution Archan Vyas (9122) 6246 4107 Mayur Shah (9122) 6667 9945

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Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co‐managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report: Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No4 PCIL or its affiliates have managed or co‐managed in the previous twelve months a private or public offering of securities for the

company(ies) covered in the Research report No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.




Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

Kindly note that past performance is not necessarily a guide to future performance.

For Detailed Disclaimer: Please visit our website www.phillipcapital.in

For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., 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 PhillipCapital (India) Pvt Ltd. 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 the 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 a 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 with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer. If Distribution is to Australian Investors This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827). This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately. PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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