Motherson Sumi Systems (MSSL) Sector: Auto-Ancillaries / Mid Cap

Motherson Sumi Systems (MSSL) Sector: Auto-ancillaries / Mid cap

Initiating Coverage 12 December 2013 Sensex Nifty Price: INR 279 Target Price: INR 311 OUTPERFORMER 21,171 6,308 Background: Established in 1975, Motherson Sumi Systems Limited(MSSL), a JV between Samvardhana Motherson Group (36.1% stake) and Sumitomo Wiring Systems, Japan (25.3% ), is India’s biggest supplier of wiring harness and one of the largest manufacturers of rear view mirrors in the world. With a strong workforce of over 60,000 qualified professionals and 140 manufacturing units spread across 25 countries, MSSL caters to major global OEMs such as Volkswagen group, BMW, Daimler, Renault Nissan, Ford, Volvo, Maruti Suzuki, Tata Motors, Honda, Toyota etc. In FY13, the standalone entity contributed ~17% of its revenues while the Mirror business, (Samvardhana Motherson Reflectec -SMR) and polymer business (Samvardhana Motherson Peguform-SMP) accounted for ~83% of the revenues. 52 Week High/Low INR 298/155 Shifts into higher gear for growth Bloomberg code MSS IN Motherson Sumi Systems, India’s largest auto component supplier, has grown its revenues from a mere INR Reuters code MOSS.BO 0.2bn in 1993 to ~INR 252.25bn in 2013, reflecting a CAGR of 43%, primarily through the inorganic route. Issued Equity Through multitude of JVs with global tier-1 suppliers, inorganic expansion route, foray into newer geographies 588 (shares in mn) and cross selling of products, MSSL has guided for USD 5bn in revenues by FY15. Mkt. Cap in INR mn INR 164,052 Capacity addition and robust order book in Europe signals revenue visibility Mkt. Cap in mn USD $ 2676 MSSL guided at improved demand outlook in Europe and reported healthy order book addition in H1FY14. SMP Avg. Daily Vol. (‘000) 448.4 bagged new orders worth €1.76bn, taking the cumulative orders to €4.4bn while SMR bagged new orders worth Avg. Daily Vol. (mn) INR 125/$ 2.0 €842mn, taking the cumulative orders to €1.4bn in H1FY14. An improving executable order book indicates good revenue visibility.

Shareholding Sep12 Jun13 Sep13 Sep12 Focus on increasing content per car helps MSSL maintain its growth trajectory Promoters(%) 65.60 65.59 65.59 63.35 Since early 90s, MSSL adopted a strategy to increase components supplied per car and further diversify its FII (%) 13.66 15.18 16.13 product9.21 portfolio by entering into JVs with leading global tier-1 suppliers. We have factored in a revenue growth DII (%) 9.96 9.84 8.99 of ~161.34% CAGR for the standalone business in FY13-15 led by increasing market share of premium cars in India, Others (%) 10.78 9.39 9.29 slew26.10 of new car launches, higher content supplied per car and increased sourcing from subsidiaries. Pledge (% of promoter 26.4 17.4 16.8 Margin0.00 improvement in core subsidiaries to enhance profitability holding) EBITDA Margins in SMP improved from 0.4% in 2QFY12 to 6% in 2QFY14 while EBITDA margins in SMR business improved from 1.3% in FY09 to 9.6% in 2QFY14, which is the highest ever reported. The management indicated that margins in the SMP business can scale up to ~8% by FY15. With solid turnaround in core Performance% 1M 3M 12M subsidiaries, higher capacity utilization and increasing sourcing from India, We expect MSSL to augment its MSSL -1.1 34.0 39.8 consolidated EBITDA margins from 6% in FY13 to 9.5% by FY15, reflecting a net profit growth of ~60% CAGR Sensex 3.7 6.3 9.8 during the same period.

Improving cash flows to help MSSL pare down debt

MSSL spent ~ INR 11bn in capex in FY13 and expects to spend INR 7-8bn each in the next 2 years. Going 350 160 forward, the FCF is expected to remain healthy as MSSL has guided for no major acquisitions in the next couple 140 300 of years. On the back of improving cash flows, we estimate MSSL to gradually scale down its Debt to Equity 120 250 from 2.1 in FY13 to 1.1 by FY15. 100 200 80 150 Outlook & Valuation: We initiate coverage on MSSL with an OUTPERFORMER rating given its robust 60 100 order book, continued focus on increasing content supplied per car, margin expansion on complete turnaround 40 in SMR & SMP and managements’ track record in attaining its guidance. At CMP of INR 279, the stock is 50 20 currently trading at 20.1X/14.4X of FY14/15E EPS. We value the stock at 16X FY15 EPS of 19.4, which gives us 0 0

a target price of INR 311. Risks: Prolonged weakness in Europe, rising copper prices and adverse cross

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Aug Nov May Valuation Summary Y/E Mar ( INR mn) FY12 FY13 FY14E FY15E MSS Relative Sensex (RHS) Revenue 147,766 252,253 301,580 335,789 EBITDA 8,943 14,767 24,860 31,995 PAT 2,596 4,445 8,154 11,414

EPS 4.4 7.6 13.9 19.4

EPS growth (%) -33.6 71.2 83.4 40.0 FCF / Share -86.3 4.0 20.1 26.6 P/E 41.7 36.9 20.1 14.4 Rajasekhar R +91-44-30007360 P/ BV 8.8 7.2 5.7 4.5 [email protected] EV / EBITDA 16.7 14.0 8.0 5.9 EV / Sales 1.0 0.8 0.7 0.6 Dividend Yield (%) 0.8 0.7 1.3 1.9 ROCE (%) 13.2 17.5 30.8 38.8 ROE (%) 21.1 22.2 32.0 35.4 Net Debt / Equity 2.2 1.9 1.2 0.6

Company Overview:

Incorporated in 1993, Motherson Sumi Systems Ltd, hereinafter referred to as MSSL, the flagship company of the Samvardhana Motherson Group, is a JV between Samvardhana Motherson Finance Ltd and Sumitomo Wiring Systems Ltd, Japan, which is the second largest manufacturer of wiring harnesses in the world. MSSL is a leading automotive mirror and wiring harness manufacturer for passenger cars and also supplies plastic components and modules to the global automotive industry. With over 60,000 qualified professionals, MSSL has 140 manufacturing units spread across 25 countries compared to 4 locations a decade ago. The company is in the process of establishing new manufacturing facilities in India, Brazil, Mexico, Spain and Thailand. The major customers include the Volkswagen group, BMW, Daimler, Renault Nissan, Ford India Private Limited, Volvo Car Corporation, Maruti Suzuki, Tata Motors, Honda Siel Cars India Limited, Toyota Kirloskar Motor Private Limited and Fiat India Automobiles Limited. The significant milestones attained by MSSL since its inception in 1975 are briefly outlined below.

Source: Company, CSEC Research

MSSL primarily operates in two segments - automotive and non-automotive. In the non-automotive segment, MSSL is one of the largest suppliers of wiring harnesses to manufacturers of material handling equipments and industrial forklifts. MSSL also manufactures and assembles water puriﬁers for Hindustan Unilever Ltd and plastic components for white good manufacturers in India such as LG, Samsung etc. Currently the non-automotive segment constitutes 8% of the standalone revenues and ~2% of the consolidated revenues. Although the non-automotive revenues are miniscule they provide MSSL the benefit to shield itself from any slowdown in global light vehicle production to a certain extent. The acquisition of mirror business from Visiocorp in 2009 (now renamed as Samvardhana Motherson Reflectec) and polymer business Peguform in 2011 (now renamed as Samvardhana Motherson Peguform) has helped MSSL evolve as one of the world’s leading manufacturers of automotive rear view mirrors and a leading manufacturers of instrument panels, bumpers and door trims. The funding for SMP acquisition, which was done through debt, increased the Debt/Equity from 0.8 in FY11 to 2.1 in FY13. On a consolidated basis, MSSL generates ~78% of its sales outside India. The business portfolio of MSSL encompasses a broader product portfolio that include wiring harness, polymer processing, injection molding tools, Elastomer processing, rear view mirrors, modules and systems including dash board modules, door trims, bumpers, lighting systems, air intake manifolds, HVAC systems,

Through its focus on inorganic growth and alliance with an array of global technological leaders, MSSL has rapidly expanded its global footprint, enhanced its product offerings and emerged as one of the largest manufacturers of rearview mirrors for passenger cars with a global market share of ~22% and also established itself as India’s largest manufacturer of automotive wiring harnesses with 65% market share in India. Since inception, MSSL has made 9 acquisitions and forged technology partnerships with 24 JV partners.

Source: Company

MSSL started as a single product (wiring harness) company but has since expanded its product range to include polymer products, machined metal components and automotive mirrors. The standalone entity of MSSL is primarily involved in the manufacture of a range of harness such as automotive harness, material handling earth moving farm equipment harness, consumer electronics harness, medical equipment harness, office automation products harness, electronic equipment harness, lead wires harness, high tension cords harness and battery cables harness. MSSL caters to almost all the major OEMs with Volkswagen group, which include the likes of Seat, Audi, Porsche, Skoda and Volkswagen itself, contributing 47% of the revenues.

Chart 1: Consolidated Sales Mix Chart 2: Client mix

Volvo M&M KIA 2% 2% 2% Domestic Others Tata Motors 18% GM 11% 2% 2% Mercedes- Benz Volkswagen 3% Ford , 4% 47%

Maruti Suzuki Overseas , 6% 82% BMW, 6%

Hyundai, 7%

Source: Company, CSEC Research Source: Company, CSEC Research

In early 1990s, MSSL derived a meagre 16% of its revenues from exports and Maruti Suzuki, its largest client, accounted for ~85% of its sales. Through meaningful acquisitions and product diversification, MSSL strengthened its global presence and currently derives 82% of its revenues from overseas with no single client contributing more than 15% of its sales. The revenue share from different product segments is given below.

Source: Company, CSEC Research

The two significant acquisitions namely Visicorp in 2009 and Peguform in 2011 has added significantly to the top line growth and enhanced the product profile of the company. In FY13, the standalone entity contributed ~17% of its revenues while the Mirror business (SMR) and polymer business (SMP) accounted for 83% of the revenues. The business profile of MSSL is outlined below.

Source: Company, CSEC Research

Samvardhana Motherson Reflectec (SMR)

MSSL acquired Visiocorp, which was later renamed as Samvardhana Motherson Reflectec (SMR), for €26mn in 2009. SMR is one of the leading global tier-1 manufacturers of automotive exterior rear-view mirrors. SMR develops and manufactures a wide range of exterior and interior mirrors for the passenger car, commercial vehicle and heavy trucks market and currently commands 22% global market share for exterior mirrors in the passenger cars and light commercial vehicles segment. When initially acquired by Motherson, SMR primarily catered to customers in Europe, North America, Korea and Australia. By establishing plants in Thailand, Brazil, China and India and targeting opportunities in South Africa, SMR is strongly positioning itself in the emerging markets as well. SMR’s global customer base includes all major car makers in North America, South America, Europe, Asia and Australia. SMR has presence in 14 countries with 20 production facilities and 7,000 full-time employees as on March 31, 2013. Among the product offerings, Exterior mirror is the anchor product segment and constitutes more than 90% of the revenues. In FY13, SMR registered its best performance with a record net sales of INR 69.54bn (Euro 993mn), implying a growth of 22% YoY. In FY13, SMR registered an EBITDA growth of 61% to INR 4.5bn while the PAT grew by 179% to INR 1.07bn. SMR received new orders worth Euro 1.33bn in 2012.

Chart 3: SMR- Net Sales and EBITDA Margin profile

80000 8%

70000 7% 60000 6% 50000 5% 40000 4% 30000 20000 3% 10000 2% FY10 FY11 FY12 FY13 Net Sales (INR mn) EBITDA Margin Source: Company, CSEC Research

Chart 4: SMR - Geography wise Revenue break up Chart 5: SMR – Client Mix

Toyota M&M 2% 2% Fiat Hyundai PSA 3% Others 17% 2% Americas Diamler 4% 22% 4% TATA 5% Europe Volvo VW Group 46% 6% 14%

BMW 7% Renault/ Nissan APAC 9% 32% Kia Motors 7% GM Ford 9% 9%

Source: Company, CSEC Research Source: Company, CSEC Research

Samvardhana Motherson Peguform (SMP)

In 2011, MSSL acquired Peguform for €142mn to form Samvardhana Motherson Peguform (SMP). SMP is an established global tier 1 manufacturer of polymer-based automotive global modules specializing in high quality interior and exterior products for the global automotive industry. SMP is one of the largest manufacturers of bumpers, rocker panels, instrument panels, interior door panels and other related products for the European automotive industry. SMP is the largest subsidiary and contributes ~56% of the total revenues of MSSL. SMP is the market leader for bumper covers in Germany & Spain. Further, it is also the 2nd largest supplier of door panels and 3rd largest supplier of instrument panels in Germany while it is the market leader in cockpit assemblies in Spain. The relatively high exposure to the German OEMs augurs well for MSSL given the presence of several luxury brands such as Volkswagen, Audi, BMW, Daimler, Porcshe, Benz etc in the region. Interiors and Bumpers are the key product offerings, which constitute ~80% of the revenues. SMP is expanding its business in China, Brazil and Mexico to support its customer across the globe.SMP received new orders worth Euro 2.40bn since April 2012.SMP has 25 facilities including 8 module centers and 17 production sites (Germany-7, Spain-4, Portugal-1, Brazil-2, Mexico-1, China-1 and Slovakia-1) and also 7 engineering centers across the globe in 7 countries. In FY13, SMP has attained turnover of Euro 1.8bn with an EBITDA margin of 3.8% and Adjusted PBT of INR 180mn.

Chart 6: SMP- Net Sales and EBITDA Margin profile

40000 6% 6% 35000 5% 30000 5%

25000 4% 4% 20000 3% 15000 3% 2% 10000 2% 5000 1% 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

Net Sales (INR mn) EBITDA Margin Source: Company, CSEC Research

Chart 7: SMP – Geography wise Revenue break up Chart 8: SMP-Client Mix

Brazil Mexico China 6% 4% Others Volkswagon 10% Porsche 4% 15% 26% Daimler Germany 4% 47% BMW 8%

Spain 33% Audi Seat 25% 18%

Source: Company, CSEC Research Source: Company, CSEC Research

MSSL is a JV between the Sehgal group (36.1%) and Sumitomo Wiring Systems, Japan (25.6%). The complex shareholding pattern of MSSL is given below.

Source: Company

Management Profile

Mr. Vivek Chaand Sehgal is the Promoter of Samvardhana Motherson International Limited. Mr. Sehgal established Motherson in 1975 and Motherson Sehgal Cables in 1977. He served as Executive Officer of Sumitomo Wiring Systems Ltd. He was appointed as the Executive Chairman of Motherson in 2011. He is currently the Chairman of the Motherson group and the Vice Chairman and Director of MSSL. He is instrumental in the overall functioning and operation of the Motherson group and holds 36 years of experience in the auto industry.

Laksh Vaaman Sehgal is the son of Mr.Sehgal and designated as the Director of the company. He holds a bachelor's degree in Business Administration from Boston University, Master's degree in Finance at Columbia University and a MBA from Columbia Business School. He also served as the Chief Executive Officer of SMR. Prior to his elevation as CEO of SMR, he was a management trainee at the M&A analysis, finance and legal department of WOCO Industrietechnik GmbH in 2003 and a management trainee in the group finance and production department of SWS from 2004 to 2005. He has over 8 years of experience in the auto industry.

Other Key personnel are Mr. G.N Gauba – CFO and Mr. Pankaj MIttal- COO. The company also has two Nominee Directors from Sumitomo Wiring Systems namely Mr. Toshimi Shirakawa and Mr. Toshihiro Watanabe.

Industry Overview:

The growth of MSSL closely correlates with the performance of both the global and Indian automobile industry. The demand in the automobile sector is derived from both OEM and replacement market. The replacement market entails higher margins while the OEM market is competitive and hence component manufacturers are compelled to cut back on prices in order to bag bulk orders. MSSL is a 100% OEM supplier catering to almost all the leading players in the global auto industry. However, MSSL is armed with greater pricing power on the back its long standing relationship with marquee clients, high quality products and market leader status in key product offerings. In the last couple of years, the demand in the Indian automobile component industry has been subdued on account of higher interest rates, volatile commodity prices, currency depreciation, rising fuel prices and delinquencies in vehicle loans, Further, delayed monsoon and increase in fuel prices adversely impacted the growth of vehicles sales in the domestic market. According to SIAM, the automobile industry lobby group, fuel costs rose 10% while vehicle costs were up 2% in FY13. Indian auto industry grew at a dismal rate of 1.2% in FY13 compared to 13.8% growth in FY12, with 24% decline in M&HCVs and a meager 3% growth in passenger vehicles. In the domestic market, both the passenger vehicles and commercial vehicle sales went into a tailspin after posting robust growth in FY09 & FY10. In FY13, many automakers have announced production cutbacks to reduce inventory on the back of subdued demand with many car buyers deciding to defer purchases. According to ICRA, passenger vehicle volumes are unlikely to stage a meaningful recovery in the next six to 12 months and the rating agency has downgraded its outlook for the automobile sector, for the first time in six years, from “stable” to “stable-negative”.

Chart 9: Domestic Passenger Vehicles Production trend Chart 10: Domestic Commercial Vehicles Production trend

3500 30% 1000 40% 900 30% 3000 25% 800 2500 700 20% 20% 600 2000 10% 15% 500 1500 400 0% 10% 300 1000 -10% 200 -20% 500 5% 100 0 0% 0 -30%

Sales ( '000 units) Growth Sales ('000 units) Growth

Source: SIAM Source: SIAM

While the Indian passenger vehicle segment witnessed an overall volume growth rate of single digit for consecutive two years i.e. ~3% in FY13 and 4.7% in FY12, the sale of Commercial Vehicles declined by 2% after registering impressive growth of ~23% CAGR in the last two years. Weak macro-economic environment, high interest rates and slowdown in infrastructure projects contributed to lower demand for commercial vehicles. MSSL has outpaced the industry growth during 2012-13 both at domestic and global front. The consolidated sales grew by 72% to the record level of INR 252bn while standalone sales registered a strong growth of 20% in FY13. Over the years, MSSL has successfully transformed from a wiring harness manufacturer to include broader product segments to serve the needs of customers. The reliance on wiring harness business, which accounted for bulk of the revenues, i.e 60% in FY09 has gradually declined to ~16% in FY13 post Peguform acquisition in 2011 and Visicorp acquisition in 2009.

According to Automotive Component Manufactures Association (ACMA), the Indian auto component industry’s turnover is reported at USD 40.6bn in 2012-13 and is projected to touch USD 115bn by 2020-21. The industry is estimated to grow at 14% CAGR during 2013-21. As per the industry estimates, the Indian auto component industry derives 60% of its turnover from sales to domestic original equipment manufacturers (OEMs), 25% from sales to the domestic replacement market and around 15% from exports. However, MSSL successfully emerged as India’s largest auto component supplier by focusing more on the overseas market and today the company derives 86% of its revenues from the global OEMs.

Chart 11: Indian Auto Component Industry Turnover Chart 12: Industry product range break-up

45 42.4 40% Others 30.1 39.9 40.6 40 7% 30% 35 26.5 Electrical Parts 30 20% 9% Engine Parts 23 25 31% 10% Equipments 20 10% 15 0% 10 Suspension & -10% Braking Parts Drive 5 12% Transmission 0 -20% & Steering Body & Parts 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Chasis 19% 12% Turnover (USD bn) Growth (%)

Source: SIAM Source: SIAM

Going forward, the growth in the Indian automobile market is expected to remain sluggish in 2013-14 unless concrete policy decisions are undertaken to boost investment sentiments. The major concerns would be poor macro-environment leading to lower demand, high inflation leading to lower discretionary spending and continuous rise in fuel prices. Though the US showed modest recovery by posting a growth of 2.2% in 2012, Europe still continues to reel under pressure on the back of Eurozone financial crisis. Credit availability remained low and the overall customer sentiments were negative.

With the acquisition of Visiocorp, MSSL was able to penetrate into the rear view mirrors market. The automotive rear view mirrors industry is segmented into two main categories - exterior rear view mirrors and interior rear view mirrors. As per the estimates provided by Frost and Sullivan report, the global sales of OE automotive exterior rear view mirrors for light vehicles increased from 133.8mn units in CY08 to 151.9mn units in CY10 at a CAGR of 6.5% while the OE automotive interior rear view mirrors for LV increased from 67.5mn units in 2008 to 74.3mn units in 2010 at a CAGR of 4.9%. The production of OE exterior rear view mirrors is estimated to be 190mn units with revenues of ~ Euro 3.1bn while the OE interior rear view mirror market is estimated to be 93mn units with revenues of approximately Euro 1.1bn in CY12. The global exterior rear view market is primarily dominated by five players- Magna, SMR, Ficosa, Murakami, Ichikoh- who command ~75% of the global market share while the interior rear view market is solely dominated by Magna, which happens to be the market leader commanding ~60% of the market share. The auto dimming interior rear view market is dominated by Gentex, which holds ~88% of the global market share.

Source: Industry

Chart 13: Global Market share-Exterior rear view mirrors Chart 14: Global Market share-Interior rear view mirrors

Magna Others Mirrors Others 25% 24% 28%

Ichikoh Ficosa Magna 6% 3% Mirrors Murakami 60% 6% SMR SMR 22% 9%

Ficosa 17%

Source: Industry Source: Industry

Global passenger vehicle production 2007-2012( in million units) Location 2007 2008 2009 2010 2011 2012

China 7.81 7.95 11.96 15.84 16.33 17.39 European Union 19.02 17.72 15 16.7 17.48 16.05 Germany 5.96 5.78 5.11 5.76 6.31 5.65 France 2.29 2.49 2.02 2.19 2.24 1.97 Spain 2.79 2.47 2.14 2.35 2.3 1.93 United States 10.47 8.45 5.58 7.6 8.4 10.06 Japan 10.87 10.83 7.55 9.09 7.88 9.35 Korea 4.04 3.78 3.45 4.2 4.62 4.53 Mexico 2.01 2.08 1.5 2.25 2.54 2.86 Canada 2.54 2.05 1.48 2.07 2.13 2.45 Subtotal 56.76 52.86 46.52 57.47 59.37 62.69 Other 12.66 13.74 11.55 15.64 16.36 17.37

Global 69.42 66.6 58.07 73.39 75.74 80.06

Source: OICA, World Motor Vehicle Production by Country and Type (passenger cars and LCV)

Although the global economic downturn in 2008-09 contributed to a decline in light vehicle production in most countries, global production increased from 69.4 million units in 2007 to 80.1 million units in 2012, reflecting a CAGR of 15.4%. Light vehicles consist of passenger cars, multi-purpose vehicles (MPVs), sport utility vehicles (SUVs) and sports cars as well as other commercial vehicles such as pick-up trucks, light trucks and vans. The healthy growth in light vehicle segment is attributed to increased Chinese production, which expanded from less than 8 million units in 2007 to more than 17 million units in 2012. Global LV production is primarily concentrated in four key regions – China (22%), European Union (20%), United States (12%) and Japan (12%). These four regions cumulatively accounted for more than 65% of overall LV production in 2012. In 2013, the economic downturn depressed production in the EU and the United States, while the downturn combined with the rising yen has compelled Japanese producers to decrease production in Japan.

Chart 15: Share of global LV production -2007 Chart 16: Share of global LV production -2012

European Other European Others union 25% Union 25% 20% 27%

Canada Korea 3% 6% Korea China 6% 22% China Japan 16% 11% Japan 12% United States United States 15% 12%

Source: OICA Source: OICA

The performance of MSSL is highly dependent on Europe as MSSL’s two main subsidiaries have a significant exposure to Europe. The mirror business segment, SMR derives 46% of its sales from Europe while SMP derives 80% of its sales from mainly two countries in the Europe – Germany (47%) and Spain (33%). While LV production growth in both China and US are on an uptrend during 2010-12, albeit in lower single digits, the production growth trend is European region has been more or less volatile. However, recent macro data points suggest that the slowdown in the European Region has bottomed out. Eurozone business activity grew at its fastest pace for 26 months in August to 51.7 while confidence among consumers in the euro zone rose in August to the highest level in over two years. In order to cut back on it’s over dependence on the European market, SMR is expanding its footprint in China to further strengthen its presence in the APAC market and Michigan, USA to cater to the North American market. Further, SMP is also setting up a new facility in China to cut its exposure in the volatile European region. Despite improving economic data, the European Automobile Manufacturers' Association said registrations of new cars in Western Europe fell 6.6% in the first half of this year, on top of the 8.1% drop to 12.8 million vehicles last year from 2011. A strong recovery in vehicle registrations in Europe would paint a healthy demand picture for MSSL.

Supportive government policies, positive business environment, availability of reasonably priced talented workforce and stable outlook for the industry has made India a global hub for the international manufacturers to set up manufacturing facilities in the country. The main strengths of the Indian auto industry are abundance of skilled manpower at lower cost, established manufacturing base, manufacturing facilities with international quality standards and growing domestic industry while the imminent threats are increased competition from low cost countries such as China, Taiwan, Thailand etc, slowdown in domestic market and rupee appreciation. Several auto component makers have a high technology component in niche segments, which

11 acts as a strong entry barrier. MSSL has specialized in making wiring harness and became a market leader in the domestic market through the technical expertise obtained from Sumitomo Wiring Systems, the world’s second largest manufacturer of wiring harness. As a result most of the auto makers form JVs with global majors and specialize in specific components, which is hard to replicate for a new player. Furthermore, creating a brand recall and building a wide distribution network takes substantial amount of time. The Porter’s 5 forces framework for auto ancillary industry is given below.

Source: CSEC Research

Investment Rationale:

Rapid progression from cable wire manufacturer to a tier-1 auto component global supplier

MSSL witnessed impressive growth (51% CAGR during FY03-13) and its products are gaining acceptance as currently one or more of its products are used by almost all global carmakers. The turnover has grown from INR 3.34bn in FY03 to about INR 225.25bn in 2011-12. Starting with cable and wire manufacturing in 1977, MSSL has come a long way and crossed several hurdles to successfully emerge as a tier-1 auto component global supplier with presence in 25 countries. MSSL is the market leader not only in the wiring harness segment but also a leading player in the plastic components and rear view mirrors. Being one of the market leaders permits MSSL better pricing power, which would translate to better margins. The company's stupendous growth is attributed to the following factors:  Timely capacity expansions to deal with burgeoning demand  Global customer base and strong relationships with major automotive OEMs  Long term partnerships and collaborations with global technology leaders  Inorganic growth through acquisitions

MSSL has in-house design capabilities and has an advantage in terms of vertical backward integration for all critical wiring harness components such as wires, connectors, terminals, fuses, fuse boxes, tube clamps and binders, caps and sleeves etc. This enables the company to supply consistent, just-in-time product supply and high end products. MSSL Sumi Systems spread its wings outside India in the year 1999 in Austria and then moved to Singapore in 2000 where a design branch was set up. Since then, MSSL has penetrated into 25 countries through JVs with global leaders and acquisitions. MSSL caters to almost all top 10 global auto OEM manufactures and has established strong relationships with marquee clients such as Volkswagen Group, BMW, Daimler, Renault Nissan, Ford India, Volvo Car, Maruti Suzuki, Tata Motors, Honda Siel, Toyoto Kirloskar, etc. Today, the company derives ~83% of its sales through exports with Volkswagon group accounting for bulk of its revenues. MSSL is also expanding its footprint in low cost countries such as Brazil, Mexico China and Thailand to cater to the burgeoning demand from key clients.

Source: Company

Focus on increasing content per car helps MSSL maintain its growth trajectory

Since early 90s, MSSL adopted a strategy to increase components supplied per car by entering into JVs with leading tier-1 suppliers. For supply of rubber components, MSSL entered into a JV with WOCO of Germany. MSSL also entered into a JV with Calsonic Kansei for supply of climate control systems and power transmission cooling components. Further, MSSL also forged a JV with Magneti Marelli to attain expertise in the area of lighting and engine control systems. This growth strategy is not only in sync with the company's ambition to become an integrated full system solution provider and but also allows MSSL access to cutting edge technology, expand its clientele and cross-sell to existing clients. MSSL is considered as the preferred supplier among OEMs with its ability to provide end to end solutions and core expertise in all aspects of design, research, engineering and development. MSSL has successfully built long term relationships with global automotive OEMs with some of them having been associated with MSSL for more than 20 years.

Source: Company

The prospect of several new car launches by carmakers in the Indian market provides MSSL ample scope to supply more components and sustain its growth momentum. The market share of luxury cars in the domestic market, which is primarily dominated by BMW, Audi and Benz, is slowly gaining traction as the share of premium cars grew by over 15% CAGR in FY04- 12. The share of premum cars, which remained stagnant at 2.2% in 2011, has increased to 3.5% in 2012 while the share of A1 cars ( Alto, Eon,Spark, Indica) has come down from 7.5% in 2006 to 3.1% in 2012. The data reflects consumer’s preference for higher priced compact cars. It should also be noted that many global automakers are betting big on India and plan on launching smaller cars in the coming years in a bid to enhance market share. A study by Frost & Sulivan confirms the good potential of the Indian luxury car market. The findings of the study reveal that the Indian luxury vehicle market is set to cross 300,000 units a year in sales by 2020, driven by the growing number of HNIs, propensity of people to spend more and car makers' plan to drive down prices through localisation. We have factored in a revenue growth of ~16% CAGR for the standalone business in FY13-15 led by 13% CAGR in domestic passenger car production volumes over FY13-15, increase in market share of premium cars in India, slew of new car launches, higher components supplied per car and increased sourcing from subsidiaries.

Chart 17: Passenger Vehicle Production in India Chart 18: Segmental Share - passenger vehicles production

12000 ('000 20.1 19.9 19.7 16.9 18.2 18.8 19.2 10000 units) 2.2 2.9 2.8 2.3 2.2 2.2 3.5 8000

6000 70.2 70.8 73 77.4 76.6 76.2 74.2 4000

2000 7.5 6.4 4.5 3.4 3 2.8 3.1 0 2006 2007 2008 2009 2010 2011 2012 2008-09 2009-10 2010-11 2011-12 2012-13 2015-16 2020-21 A1 A2+A3 A4+A5+A6 UV/Van

Source: ACMA Source: SIAM

Since early 2000, MSSL has been setting aggressive five-year sales and return on capital employed (RoCE) targets and was fairly consistent in achieving the targets within the stipulated timeframe. Thus far, the management has been consistent in achieving its top line guidance. However, MSSL missed out on the RoCE target in FY10 and achieving its RoCE guidance of 40% for FY15 remains a challenge. For FY15, MSSL plans to achieve sales target of USD 5bn. MSSL has clocked USD 4.6bn in revenues in FY13 and we believe that MSSL will surpass its sales target of USD 5bn in FY14 itself. We estimate overall revenues to reach USD 5.1bn in FY14 and USD 5.8bn in FY15 driven by 18% CAGR growth over FY13-15 in standalone business and sustained traction in overseas subsidiaries, SMP and SMR.

Source: Company, CSEC Research

Revival in European auto market a key catalyst for further growth

Since MSSL is 100% OEM dependent, there exists a direct correlation between the vehicles sold by automakers and the performance of MSSL. The performance of SMR and SMP largely depends on the revival in global automotive market, mainly Europe. MSSL has substantial exposure to Europe as SMP realizes 80% of its sales from Europe while SMR derives ~45% of its sales from Europe. As MSSL is heavily reliant on Europe, a close examination of the new vehicle registrations, a proxy for sales in the European region, serves as a lead indicator to help us better gauge the future prospects of Motherson. European car sales rose 4.6% in October, marking the first consecutive monthly gain in two years since September 2011. Demand was supported by all major European markets, with registrations up 2.3% in Germany, 2.6% in France, 4.0% in the U.K. and 34% in Spain--with the exception of Italy, where registrations slumped 5.6% from a year earlier. The data provides fresh evidence that demand is slowly bottoming out after five years of falling demand in the European market.

Chart 19: New Passenger Car Registrations - Europe

Source: ACEA

Chart 20: Markit Eurozone PMI and GDP Chart 21: Unemployment Rate -Eurozone

14 12 10 8 6 4 2

Q1 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2010 Q4 Source: Markit Source: Eurostat

Chart 22: Household Savings Rate - EU Chart 23: Euro Zone Consumer spending growth (QoQ) 0.3 13.3 0.2 11.9 11.1 11 11.1 11.2 11 10.8 0.1 0 -0.1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 -0.2 -0.3 -0.4 2005 2006 2007 2008 2009 2010 2011 2012 -0.5 Source: Eurostat Source: European Commission

EU Emission Standards Standards Entry into force Emission limits New car types All new cars Petrol NOx Diesel NOx Diesel PM Euro 0 Oct 1991 Oct 1993 1000 mg/km 1600 mg/km (no limit) Euro 1 Jul 1992 Dec 1992 490 mg/km 780 mg/km 140 mg/km Euro 2 Jan 1996 Jan 1997 250 mg/km 730 mg/km 100 mg/km Euro 3 Jan 2000 Jan 2001 150 mg/km 500 mg/km 50 mg/km Euro 4 Jan 2005 Jan 2006 80 mg/km 250 mg/km 25 mg/km Euro 5 Sep 2005 Jan 2011 60 mg/km 180 mg/km 5 mg/km Euro 6 Sep 2014 Sep 2015 60 mg/km 80 mg/km 5 mg/km

Source: European Commission

Although October Eurozone Markit PMI reading of 51.9 was slightly lower than 27-month high of 52.2 in September, the rise in PMI in the last 3 months (July - August) suggests increase in business activity in the region. Furthermore, the Euro consumer spending data has also been encouraging. The Eurozone unemployment rate still continues to remain at elevated levels of ~12%, primarily due to high unemployment rates in Spain (26.7%) and Greece (27.3%). The European Commission forecasts that unemployment would moderate going forward and Eurozone would grow by 1.1% in 2014 and 1.7% in 2015. The data points have ignited hopes that the industry's recovery in the region may gain traction, despite cautious forecasts by most car makers. However, the Eurozone GDP growth rate of 0.1% in Q3CY2013 after 0.3% in the previous quarter indicates a slowdown. Nevertheless, a convincing rebound in Europe, where MSSL has a strong presence can help the company maintain its growth momentum.

When Euro 6 emission standard comes into effect from Sep 2014, emissions from cars and other vehicles will be capped at 80 mg/km (an additional reduction of more than 50 % compared to the Euro 5 standard). Once the new standard is implemented, all countries within Europe must refuse the approval, registration, sale and introduction of vehicles that do not comply with these emission limits. The enforcement of this new standard implies replacement of older cars with Euro-6 complaint newer models and can act as a positive trigger for Motherson. However, the implementation of this standard should not adversely affect the affordability of cars. Europe’s largest carmaker and MSSL's largest customer, Volkswagen remains optimistic on Europe and plans on spending USD 114bn in a bid to become the world's largest manufacturer by 2018. The strategy of Volkswagen provides MSSL ample scope to derive more business from Volkswagen in the foreseeable future. Any revival in the domestic car market post two years of muted growth also augurs well for the company as MSSL derives ~17% from the Indian market.

Continues to reap benefits of strategic acquisitions

Backed by a strong management team, MSSL has made 9 acquisitions since inception. The stupendous revenue growth of 48% CAGR since 1993 is a combination of organic growth and acquisitions. MSSL has always been on the lookout for strategic acquisitions that will help scale up its business, foray into newer geographies, enhance technological capabilities, and expand its product range and client base. MSSL employs a differentiated approach with regard to acquisitions. Rather than starting new manufacturing plants in India to drive down costs and boost margins, MSSL follows a strategy of having manufacturing plants closer to customers. The landmark acquisitions were - UK-based Visiocorp (SMR), one of the world's largest manufacturers of automotive rearview mirrors and Germany-based plastic component maker Peguform (SMP) - that helped MSSL become one of the largest manufacturers of bumpers, dashboards and door trims in Europe with a global presence. Currently SMR and SMP constitute the core subsidiaries of MSSL and account for ~83% of the overall revenues.

Source: Company, CSEC Research

Margin improvement in core subsidiaries to enhance profitability

The acquisition of Peguform and Visicorp not only helped the company expand its presence in the global market but also gave it an opportunity to become the tier-1 supplier to world's largest OEMs. Given its tier-1 status and a diversified client base that includes some of the marquee clients, MSSL commands superior pricing power. In the domestic market, MSSL currently supports 65% of the domestic wiring harness market while it commands 48% market share in the rearview mirror market. Thus MSSL enjoys significant pricing power in the domestic market as well. In the wake of rupee depreciation, the domestic auto makers are pressured to cut their reliance on imported components as they have become more expensive. This gives MSSL an opportunity to strengthen its market share in the domestic market. The cost of raw material, copper continues to remain volatile. The price of copper trading on the LME has come down ~8% since the beginning of FY14 to USD 7000/ton. MSSL has pass-through agreements with OEMs in place, which shall be invoked in the event a steep hike in copper prices occur. This helps the company protect its margins from a sudden rise in copper prices.

MSSL has a good track record for successful turnaround of its subsidiaries. When MSSL acquired Peguform in 2QFY12, most of its plants were unprofitable due to which Peguform was operating at a meager 0.4% EBITDA margin. MSSL identified around 5-6 hotspots (unprofitable plants), initiated series of actions to make them operationally efficient and currently only the Brazil plant is reporting losses. The management is confident of trimming the losses in Brazil plant and expects break-even by end of this year. In 2QFY14, MSSL reported healthy operating margins in all the business segments. Operational efficiencies and higher capacity utilization helped SMP post EBITDA margins of 6%, which is the highest since acquisition. MSSL scaled up margins in SMR business from 1.3% in FY09 to 9.6% in 2QFY14, which is the highest ever reported. The standalone business can enhance its margins from 20.7% in 2QFY14 if copper prices continue to decline from current levels. The management has guided for EBITDA margins of ~8% in SMP by FY15. However, we have factored in a conservative EBITDA margin estimate of 7.2% in FY15 given the uncertain macro environment in Europe. With further revival in core subsidiaries, we expect MSSL to scale up its consolidated EBITDA margins from 6% in FY13 to ~9.5% by FY15, reflecting a net profit growth of ~60% CAGR during the same period.

Capacity addition and robust order book signals revenue visibility

With production facilities spanning across 4 continents, SMR is local to more than 80% of the global automotive industry. MSSL has been proactive in setting up plants closer to the customer, which is in-line with its global strategy so as to serve the clients in an efficient manner. To cut its high dependence on Europe, SMR has deployed a clear-cut strategy to expand manufacturing capacities in growing markets. Two modern plants in Langfang (Beijing) and Yancheng are almost complete and the company is also planning to start a new plant in Chongqing, Central China, which is expected to schedule production in 2014. Management expects SMR to improve its market share in China to ~25% by 2015. SMR is setting up is second plant in USA to address the growing demand from Ford, GM and Chrysler and enhance its market share in North America in the next 3-4 years. In the wake of increased demand, SMP is also setting up two factories in Foshan (South China) and Beijing, which are expected to commence production in 2014. The aggressive ramp-up in capacities and foray into emerging markets helps MSSL gain access to new customers and thereby increase market share. MSSL guided for improved demand outlook in Europe and reported healthy order book addition in 2QFY14. The order pipeline looked robust as SMP bagged new orders worth €1.76bn, taking the cumulative orders to €4.4bn while SMR bagged new orders worth €842mn, taking the cumulative orders to €1.4bn in H1FY14. An improving executable order book indicates good revenue visibility.

Improving cash flows to help MSSL pare down debt

In 2012, MSSL planned to raise funds through preferential allotment of shares to Sumitomo wiring systems and issue of shares to qualified institutional buyers but eventually decided to drop its fund raising plan. In 1QFY13, MSSL withdrew its INR 16.65bn IPO owing to tough market conditions. In current market scenario, we believe that MSSL would not be looking at raising funds through equity dilution to reduce its debt burden as MSSL shall service its debt through its ability to generate strong cash flows in the next couple of years. The total debt as on FY13 is pegged at INR 49bn (Domestic – 7% & Overseas-93%). The majority of debt is euro denominated and cost of debt is ~5% with maturities ranging between 3-5 years. The company spent close to INR 11bn in capital expenditure in FY13 and expects to spend another INR ~7-8bn each in FY14 and FY15 to expand capacities. The free cash flow, which remained negative in the last couple of years, primarily on account of SMP acquisition for Euro 142mn and investments for capacity expansions is expected to remain healthy going forward. For this reason, we believe that the company is not looking at equity dilution or raising debt as internal accruals shall suffice to cover the capital expenditure in the coming years. Going forward, the FCF is expected to remain healthy as the company hinted at no major acquisitions in the next couple of years. On the back of improving cash flows, we estimate MSSL to gradually scale down its Debt to Equity from 2.1 in FY13 to 1.1 by FY15.

Chart 22: Net-Debt to Equity trend

48000 INR mn 2.4

42000 2 36000 30000 1.6 24000 1.2 18000 0.8 12000 6000 0.4 0 0 FY11 FY12 FY13 FY14E FY15E

Cash Net Debt Net Debt/Equity Source: Company, CSEC Research Periodic bonus shares and consistent dividend payout keep shareholders happy

MSSL has a track record of rewarding its shareholders in terms of bonus issues at regular intervals. The latest bonus issue was announced post 2QFY14 results during which MSSL recommended the issue of bonus shares in the ratio of 1:2 subject to the approval of shareholders. Every year for the last 20 years the company has been generous in its dividend policy as it paid out ~32% of its consolidated profits as dividends to shareholders. The periodic bonus shares and consistent dividend payouts despite debt being at elevated levels in the last couple of years continues to delight shareholders.

History of Bonus Share Issue Chart 23: Dividend Payout Ratio Trend

Date Bonus Ratio 45% December 1997 1:2 40% November 2000 1:2 35% 30% February 2005 1:2 25% 20% August 2007 1:2 15% October 2012 1:2 10% 5% November 2013* 1:2 0%

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E *Proposed Source: Company, CSEC Research Source: Company, CSEC Research

Financials and Valuation:

MSSL has largely remained a contrarian play in the Indian auto space as ~83% of its revenues come from overseas and the sustained rupee depreciation has only helped MSSL maintain its growth momentum despite sluggish global environment. The key growth drivers remain intact despite the turmoil in the auto industry both in the domestic and global context. The significant drivers that shall help MSSL maintain its growth trajectory include emphasis on increasing content supplied per car, higher sourcing by subsidiaries from India, margin expansion on the back of complete turnaround in core subsidiaries and revival in demand in the primary market, Europe. In 2QFY14, both SMR and SMP reported highest margins since inception. In its recent commentary, the management indicated demand pick-up in Europe and healthy order book addition. The key trigger for improved profitability for MSSL is margin improvement in its main subsidiary Peguform. In 2QFY14, the EBITDA margins in SMP, which contributes to the bulk of business, came in at record high of 6% and we believe that there is potential to scale it up to ~7.2% by FY15. The standalone wiring harness business also clocked in healthy margins at 20.7% in 2QFY14, primarily on account of softening copper prices and operational efficiencies. A solid turnaround in both its core subsidiaries (SMR & SMP) can help MSSL post 9.5% EBITDA margins by FY15. We expect revenue to grow at 15.4% CAGR in FY13-15 while PAT to grow at ~60% CAGR in the same period. We have factored in overall revenue growth of 15.4% during FY13-15 backed by ~16% CAGR growth in standalone business, sustained traction in core subsidiaries, SMP and SMR. Although the top-line performance has been moderate in 1HFY14, we anticipate MSSL to report USD 5.1bn in revenues in FY14, surpassing its guidance of USD 5bn for FY15.The track record of the company to stick to its guidance and outperform its targets on most occasions gives us the conviction that it will continue the same trend going ahead. We haven’t factored in the issue of bonus shares (1:2), as the record date is yet to be announced.

We initiate coverage on MSSL with an OUTPERFORMER rating given its robust order book, continued focus on increasing contents supplied per car, margin expansion on complete turnaround in SMR & SMP and managements’ track record in attaining its guidance. At CMP of INR 279, the stock is currently trading at 20.1/14.4 FY14/15E EPS. We value the stock at 16x FY15 EPS of 19.4 which gives us a target price of INR 311, implying an upside potential of ~11%.

Key Assumptions: EBITDA Margins FY12 FY13 FY14E FY15E Standalone 14.5% 17.6% 18.0% 18.5% SMR 5.0% 6.4% 8.3% 9.3% SMP 1.3% 3.8% 5.7% 7.2% Consolidated Margins 6.1% 5.9% 8.2% 9.5%

Revenues (INR mn) FY12 FY13 FY14E FY15E SMR (Mirrors) 56611 69469 94732 110604 SMP (Polymers) 56993 142048 159684 170771 Standalone (Wiring) 31284 37651 43863 50882 Rubber/Metal machined & other products 2878 3085 3301 3532 Total 147766 252253 301580 335789 Source: CSEC Research

Risks:

Prolonged weakness in Europe: MSSL derives substantial part of its revenues from Europe. Any slowdown or unexpected fluctuation in demand due to deteriorating macro situation can have an adverse impact on MSSL’s revenues.

Sharp increase in copper prices can impact margins: The key raw material for the company’s wiring harness is copper, which constitutes 60% of the standalone sales. Although MSSL is armed with pass-through agreements with OEMs in place, there is a lag before the increase in price comes to effect. So any sharp increase in copper can impact operating margins in the near-term.

High Client Concentration: MSSL is heavily dependent on Volkswagen group (Seat, Audi, Porsche, Skoda and Volkswagen) as it derives ~47% of its revenues from Volkswagen group. Any slowdown in the sales of Volkswagen group can have a negative impact on MSSL’s top line estimates

Gearing Ratios at elevated levels remain a concern: The debt/equity has increased post acquisition of Peguform and currently stands at 1.8, which we expect to come down to ~1 by FY15, mainly on account of strong cash flows coupled with no major planned capital expenditures. However, any big ticket acquisitions in the next couple of years can stretch the gearing ratios further.

Financials (Consolidated)

Income Statement (Abstract) Per Share Ratios INR(million) Particulars FY12 FY13 FY14E FY15E Particulars FY12 FY13 FY14E FY15E Adjusted EPS (INR) 6.7 7.6 13.9 19.4 Net Revenue 147,766 252,253 301,580 335,789 Cash EPS 10.9 19.7 27.2 33.6 Growth (%) 79.1 70.7 19.6 11.3 BV/Share (INR) 31.8 38.9 48.7 62.0 Operating Expenditure 138,823 238,357 277,759 304,571 FCF/Share(INR) -86.3 4.0 20.1 26.6 EBIDTA 8,943 14,767 24,860 31,995 DPS (INR) 2.25 2 3.5 5.25 Growth (%) 16.4 65.1 68.4 28.7 Depreciation 3,814 7,145 7,843 8,354 Key Ratios Other Income 1,445 3,215 3,016 3,358 Particulars FY12 FY13 FY14E FY15E Interest 1,649 2,495 2,275 2,100 Dividend Payout (%) 39.5 31.0 29.5 31.6 Exceptional Items -809 0 0 0 EBIDTA Margin (%) 6.1 5.9 8.2 9.5 Tax Paid 2,153 3,835 7,636 10,706 PBT Margin (%) 2.8 3.3 5.9 7.4 Reported PAT 2,596 4,445 8,154 11,414 PAT Margin (%) 1.8 1.8 2.7 3.4 Adjusted PAT 2,596 4,445 8,154 11,414 RoCE (%) 28.5 17.5 30.8 38.8 Growth (%) -33.6 71.2 83.4 40.0 RoE (%) 21.1 22.2 32.0 35.4

Current Ratio 1.0 1.0 1.0 1.1 Inventory Days 40 35 34 32

Debtor days 48 43 43 40 Balance Sheet (Abstract) Creditor days 61 49 55 52 INR(million) CCC 27 29 22 20 Particulars FY12 FY13 FY14E FY15E Share Capital 388 588 588 588 Interest Cover Ratio 3.5 4.3 8.8 12.9 Reserves & Surplus 18,325 22,302 28,048 35,850

Networth 18,713 22,890 28,636 36,438 DuPont Analysis Minority Interest 5,027 4,025 6,001 8,788 Particulars FY12 FY13 FY14E FY15E Current Liabilities 62,961 68,693 77,875 79,899 Net Profit Margin (%) 1.8 1.8 2.7 3.4 Non-Current Liab 32,953 31,785 29,686 27,748 Asset Turnover 1.7 2.0 2.2 2.3 Total Liabilities 119,658 127,393 142,198 152,873 Leverage factor 7.0 6.2 5.3 4.6 Net Fixed Assets 54,856 59,724 62,210 61,957 RoE (%) 21.1 22.3 32.0 35.4 Other Non-Current Assets 412 482 506 531 Cash & marketable Valuation Ratios securities 4,557 5,944 10,393 18,339 Other Current Assets 59,833 61,243 69,089 72,045 Particulars FY12 FY13 FY14E FY15E Total Assets 119,658 127,393 142,198 152,873 P/E 41.7 36.9 20.1 14.4 P/BV 8.8 7.2 5.7 4.5 Cash Flow statement (Abstract) EV/Sales 1.0 0.8 0.7 0.6 INR(million) EV/EBITDA 16.7 14.0 8.0 5.9 Particulars FY12 FY13 FY14E FY15E Div Yield (%) 0.8 0.7 1.3 1.9 Cash flow from operations 5887 14860 22231 23811 *CCC – Cash Conversion Cycle Cash flow from investing -20698 -10790 -10384 -8153 Cash flow from financing 13800 -2558 -7395 -7712 Free cash flow -50,765 2,348 11,847 15,658 Net change in cash -1011 1512 4452 7946

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