RESULT UPDATE

TORRENT PHARMACEUTIC ALS Performance soft; debt trajectory encouraging

India Equity Research| Pharmaceuticals

COMPANYNAME Torrent Pharmaceuticals (TRP) reported soft Q2FY20 numbers, in line with EDELWEISS 4D RATINGS estimates. Revenue growth decelerated to 6% YoY as US sales declined YoY Absolute Rating HOLD and remained flat QoQ, as approvals stalled due to warning letter & OAI at Rating Relative to Sector Performer Indrad and Dahej, respectively. Domestic grew 10% was primarily pricing Risk Rating Relative to Sector Medium led, dragged by the overall slowdown in IPM volume growth. This Sector Relative to Market Equalweight notwithstanding, gross margin improved 210bps YoY / 80bps QoQ led by price hike and favourable product mix. Key highlight was the ~INR5.5bn debt repayment, in line with management’s target of achieving pre- MARKET DATA (R: TORP.BO, B: TRP IN) CMP : INR 1,680 Unichem net debt/EBITDA of less than 1x by FY21. We believe, core Target Price : INR 1,625 business growth will become challenging as domestic slows, US stagnates 52-week range (INR) : 1,964 / 1,452 and margin levers from price hikes are limited by price regulation and Share in issue (mn) : 169.2 competition from trade generics. We revise up FY20/21E EPS 13%/8% to M cap (INR bn/USD mn) : 284 / 4,015 factor in tax benefit from reassessment of deferred tax liability (DTL), but Avg. Daily Vol.BSE/NSE(‘000) : 283.5 maintain earlier EBITDA estimate. Maintain ‘HOLD’ with revised TP of

INR1,625 (earlier INR1,500). SHARE HOLDING PATTERN (%)

Current Q1FY20 Q4FY19 Price hike, tax benefit boost earnings; debt reduction on track Promoters * 71.2 71.2 71.2

US remained flat for the third consecutive quarter. Management commented that MF's, FI's & BK’s 11.3 11.3 10.5 observations at its plants are procedural and process validation related, and expects FII's 7.5 7.5 8.6 Indrad warning letter resolution in 12-15 months. Management is confident of submitting Others 10.0 10.0 9.6 15-20 filings in the US in FY20. Domestic growth of 10% was led primarily by 7-8% price * Promoters pledged shares : NIL (% of share in issue) hike. PAT beat due to ~300bps benefit on tax rate from the reassessment of DTL. Debt reduction of ~INR5.5bn in H1FY20 is ahead of previous guidance of INR7.0bn for FY20. PRICE PERFORMANCE (%)

EW Pharma Challenges across markets; FY20 likely to be tough Stock Nifty Index Growth in the domestic business has decelerated YTD, mainly due to: 1) slowdown in the 1 month (4.0) 4.2 (5.1) broader market, where volumes growth has decelerated sharply; and 2) Unichem 3 months 2.3 (1.7) (5.9) portfolio, where the growth is slower than legacy TRP portfolio. Brazil, another branded 12 months 1.0 8.3 (16.6) market and important for TRP’s overall health, has also slowed down in line with its broader economy. The US market, given last year’s high base, is likely to face challenging times this year as TRP reels under USFDA issues at its two major US facilities.

Outlook and valuation: Fairly valued; maintain ‘HOLD’

The slowing economies of India and Brazil, which contribute over 50% to TRP’s revenue, Deepak Malik +91 22 6620 3147 are posing structural challenges. Uncertainty in the US over the status of plants adds to [email protected] challenges. We maintain ‘HOLD/SP’ with target price of INR1,625. Ankit Hatalkar, CFA Financials (Consolidated) (INR mn) +91 22 2286 3097 Year to March Q2FY20 Q2FY19 % change Q1FY20 % change FY19 FY20E FY21E [email protected]

Net revenue 20,050 18,940 5.9 20,220 (0.8) 74,618 79,255 87,006 Aashita Jain EBITDA 5,410 4,730 14.4 5,410 - 19,831 21,275 23,774 [email protected] Adj. diluted EPS 14.4 7.3 97.6 12.8 13.0 44.0 53.9 70.0

P/E (x) 38.3 31.3 24.1

EV/EBITDA (x) 16.2 15.0 13.1 RoAE (%) 15.9 18.1 20.5 October 24, 2019 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL , Thomson First Call, Reuters and Factset. Edelweiss Securities Limited

Pharmaceuticals

Q2FY20 conference call: Key highlights Guidance

 R&D likely to remain at 7-8% of revenue.

 Tax rate for full year: 18%.

o This is due to the new tax ordinance, which led to reassessment of DTL.

 Gross margin stands at 72% and the company has guided for 72-73% margin.

 Other expenses will remain in the INR5.55-5.6bn range for coming quarters.

Domestic

 According to secondary data, volume growth of 3.4%, price growth of 8.4% YoY.

o Management commented that this is sustainable if the competitive scenario permits.

 Trade generics volume growth came at 6-8%, while that in branded generics was in double digits.

o The company is open to evaluate entry into trade generics in the future.

 Current PCPM stands at INR720,000.

 The company has completed rationalisation from the Unichem integration and expects additional revenue synergies.

US

 Sales of about USD52.4mn in Q1FY20. There were no further recalls in losartan.

 The company expects Indrad warning letter’s resolution in 12-15 months.

 Dahej plant will require reinspection.

 The company has 42 ANDAs pending approval.

o Expected launches towards the end of the year include ticagrelor, vilfagliptin and remogliflozin.

 The company expects to return to the losartan market, but cautiously. It continues to source APIs from two partners—Hetero and Zydus.

Debt repayment schedule

 In H1FY20, the company repaid INR5.5bn.

 Management had previously guided for INR7bn debt reduction in FY20.

 Management guided that by FY21, it targets to achieve net debt/EBITDA of less than 1x, which is the pre-Unichem level.

2 Edelweiss Securities Limited Torrent Pharmaceuticals

Table 1: Actual versus Edelweiss estimates (INR mn) Q2FY20 YoY (%) Edel estimates YoY (%) Deviation from Actual (%) Net Revenue 20,050 5.86 20,400 7.7 (1.7) Raw material costs 5,380 (1.8) 5,610 2.4 (4.1) Gross profit 14,670 9.0 14,790 9.9 (0.8) Gross margin (%) 73.2 72.5 Employee costs 3,580 4.4 3,807 11.0 (6.0) Other expenses 5,680 11.2 4,000 1.5 42.0 EBITDA 5,410 14.4 5,633 19.1 (4.0) EBITDA margin (%) 27.0 27.6 Net finance expense (income) 1,160 (7.9) 1,200 (4.8) (3.3) Depreciation 1,630 7.2 1,600 5.3 1.9 Other income 340 240.0 200 100.0 70.0 PBT 2,960 13.6 3,033 16.4 (2.4) Income tax expense 520 100.0 728 179.9 (28.6) Tax rate (%) NA 24.0 Reported net profit 2,440 4.1 2,305 (1.7) 5.9 Adj. PAT 2,440 97.6 2,305 86.6 5.9 Adjusted diluted EPS (INR) 14.4 97.6 13.6 86.6 5.9 Source: Company, Edelweiss research

Table 2: Revenue mix by segment – Consolidated (INR mn) Year to March Q2FY20 Q2FY19 % change Q1FY20 % change India 8,990 8,160 10.2 9,070 (0.9) US 3,800 3,930 (3.3) 3,760 1.1 Brazil 1,560 1,470 6.1 1,740 (10.3) Germany 2,500 2,510 (0.4) 2,620 (4.6) Others 1,970 1,670 18.0 1,790 10.1 Others (Incl. Contract Manufacturing) 1,230 1,200 2.5 1,240 (0.8) Total 20,050 18,940 5.9 20,220 (0.8) Source: Company, Edelweiss research

Chart 1: India sales grew 10% YoY 10,000 100%

8,000 75%

6,000 50%

(INR mn) (INR 4,000 25% Growth (%) Growth

2,000 0%

0 -25%

Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 India YoY growth

Source: Company, Edelweiss research

3 Edelweiss Securities Limited Pharmaceuticals

Chart 2: US sales remained flat QoQ 75 75%

60 45%

45 15%

30 -15%

Growth (%) Growth (USD mn) (USD

15 -45%

0 -75%

Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 US YoY growth

Source: Company, Edelweiss research

4 Edelweiss Securities Limited Torrent Pharmaceuticals

Financial snapshot (INR mn) Year to March Q2FY20 Q2FY19 % change Q1FY20 % change YTD20 FY20E FY21E Net revenues 20,050 18,940 5.9 20,220 (0.8) 40,270 80,703 88,544 Cost of revenue 5,380 5,480 (1.8) 5,590 (3.8) 10,970 21,790 23,907 Gross profit 14,670 13,460 9.0 14,630 0.3 29,300 58,913 64,637 R&D 1,300 1,360 (4.4) 1,360 (4.4) 2,660 5,407 6,198 EBITDA 5,410 4,730 14.4 5,410 0.0 10,820 21,275 23,774 EBITDA margin 27.0 25.0 26.8 53.7 26.4 26.9 Depreciation 1,630 1,520 7.2 1,600 1.9 3,230 6,300 6,200 EBIT 3,780 3,210 17.8 3,810 (0.8) 7,590 14,975 17,574 Interest 1,160 1,260 (7.9) 1,220 (4.9) 2,380 4,625 3,829 Other income 340 100 240.0 200 70.0 540 1,054 1,076 Add: Exceptional items - 555 (100.0) - - - - Profit before tax 2,960 2,605 13.6 2,790 6.1 5,750 11,404 14,821 Provision for taxes 520 260 100.0 630 (17.5) 1,150 2,281 2,964 Minority interest Reported net profit 2,440 2,345 4.1 2,160 13.0 4,600 9,123 11,857 Adjusted Profit 2,440 1,235 97.6 2,160 13.0 4,600 9,123 11,857 Diluted shares (mn) 169 169 169 338 169 169 Adjusted Diluted EPS 14.4 7.3 97.6 12.8 13.0 27.2 53.9 70.0 Cost of revenue 26.8 28.9 27.6 54.5 27.0 27.0 Gross profit 73.2 71.1 72.4 145.5 73.0 73.0 R&D 6.5 7.2 6.7 13.2 6.7 7.0 Total expenses 73.0 75.0 73.2 146.3 73.6 73.1 Operating profit 18.9 16.9 18.8 37.7 18.6 19.8 Reported net profit 12.2 6.5 10.7 22.9 11.3 13.4 Tax rate - 10.0 22.6 22.6 20.0 20.0

5 Edelweiss Securities Limited Pharmaceuticals

Company Description TRP is focused on branded formulations with majority of the business coming from India, US, Brazil and emerging markets. India branded business contributes over 25% to revenue and is largely focused on chronic therapies. Its acquisition of Elder Pharma’s brands strengthens its position. It is among the largest Indian companies in Brazil with consistently strong performance over the years. It entered EU through acquisition of Heumann (Germany) in 2005 and has now started scaling up its US business by launching more products.

Investment Theme TRP continues to focus on branded business mix from India and Brazil, which bodes well for sustainable growth in a challenging global environment for the pharma sector. However, additional costs from the recent Unichem acquisition are likely to offset any synergy benefits arising from the overlap in the portfolio.

Key Risks Slower–than–expected ramp up in Unichem’s sales.

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

Delay in product launches in Brazil, Germany and US could restrict growth in these key geographies

Currency risk.

6 Edelweiss Securities Limited Torrent Pharmaceuticals

Financial Statements Key Assumptions Income statement (INR mn) Year to March FY18 FY19 FY20E FY21E Year to March FY18 FY19 FY20E FY21E Macro Net revenue 58,248 74,618 79,255 87,006 GDP(Y-o-Y %) 6.5 7.1 7.6 7.1 Other Operating Income 1,250 2,110 1,448 1,538 Inflation (Avg) 3.6 4.5 5.0 5.0 Income from operations 59,498 76,728 80,703 88,544 Repo rate (exit rate) 6.0 6.3 6.5 6.5 Materials costs 16,735 22,197 21,790 23,907 USD/INR (Avg) 64.5 70.0 71.0 71.0 Employee costs 11,353 14,038 14,880 16,071 R&D Cost 4,600 5,380 5,407 6,198 Total SG&A expenses 13,319 15,283 17,351 18,594 EBITDA 13,493 19,831 21,275 23,774 EBIT 9,407 13,654 14,975 17,574 Less: Interest Expense 3,085 5,038 4,625 3,829 Add: Other income 2,988.4 570.5 1,054.1 1,075.67 Profit Before Tax 9,310 12,757 11,404 14,821 Less: Provision for Tax 2,529 1,254 2,281 2,964 Less: Minority Interest - - - - Add: Exceptional items - 3,570 - - Profit- Discontinued Ops - 7,140 - - Reported Profit 6,781 11,503 9,123 11,857 Exceptional Items - 4,057 - - Adjusted Profit 6,782 7,446 9,123 11,857 Shares o /s (mn) 169 169 169 169 Adjusted Basic EPS 40.1 44.0 53.9 70.0 Diluted shares o/s (mn) 169 169 169 169 Adjusted Diluted EPS 40.1 44.0 53.9 70.0 Adjusted Cash EPS 64.2 80.5 91.1 106.7 Dividend per share (DPS) 15.6 21.7 16.2 21.0 Dividend Payout Ratio(%) 39.0 84.2 30.0 30.0

Common size metrics Year to March FY18 FY19 FY20E FY21E Materials costs 28.1 28.9 27.0 27.0 Staff costs 19.1 18.3 18.4 18.1 S G & A expenses 22.4 19.9 21.5 21.0 Operating expenses 77.3 74.2 73.6 73.1 R & D cost 7.7 7.0 6.7 7.0 Depreciation 6.9 8.1 7.8 7.0 Interest Expense 5.2 6.6 5.7 4.3 EBITDA margins 22.7 25.8 26.4 26.9 Net Profit margins 11.4 9.7 11.3 13.4

Growth ratios (%) Year to March FY18 FY19 FY20E FY21E Revenues 2.0 28.1 6.2 9.8 EBITDA (2.0) 47.0 7.3 11.7 PBT (14.4) 37.0 (10.6) 30.0 Adjusted Profit (27.4) 9.8 22.5 30.0 EPS (27.4) 9.8 22.5 30.0

7 Edelweiss Securities Limited Pharmaceuticals

Balance sheet (INR mn) Cash flow metrics As on 31st March FY18 FY19 FY20E FY21E Year to March FY18 FY19 FY20E FY21E Share capital 846 850 850 850 Operating cash flow 8,942 17,981 14,764 16,756 Reserves & Surplus 45,376 46,390 52,776 61,076 Financing cash flow 34,615 (8,952) (10,613) (7,443) Shareholders' funds 46,222 47,240 53,626 61,926 Investing cash flow (47,511) (6,605) (5,000) (5,000) Minority Interest 5 - - - Net cash Flow (3,954) 2,424 (849) 4,313 Long term borrowings 41,115 39,130 36,130 31,130 Capex (47,511) (6,605) (5,000) (5,000) Short term borrowings 16,256 9,340 9,340 9,340 Dividend paid (2,648) (2,648) (3,672) (2,737) Total Borrowings 57,371 48,470 45,470 40,470

Long Term Liabilities 3,068 3,110 3,110 3,110 Profitability and efficiency ratios Def. Tax Liability (net) (2,759) (3,630) (3,630) (3,630) Year to March FY18 FY19 FY20E FY21E Sources of funds 103,907 95,190 98,576 101,876 ROAE (%) 15.1 15.9 18.1 20.5 Gross Block 90,510 95,398 100,398 105,398 ROACE (%) 14.6 14.3 16.5 18.6 Depreciation 4,086 6,177 6,300 6,200 Inventory Days 384 321 333 326 Net Block 76,799 75,510 74,210 73,010 Debtors Days 69 66 68 66 Capital work in progress 4,232 4,790 4,790 4,790 Payable Days 414 341 361 353 Total Fixed Assets 85,016 83,650 82,350 81,150 Cash Conversion Cycle 39 46 40 39 Non current investments 1 20 20 20 Current Ratio 1.5 1.2 1.3 1.4 Cash and Equivalents 13,595 11,670 10,821 15,134 Gross Debt/EBITDA 4.3 2.4 2.1 1.7 Inventories 19,663 19,350 20,352 22,330 Gross Debt/Equity 1.2 1.0 0.8 0.7 Sundry Debtors 12,535 14,360 15,104 16,571 Adjusted Debt/Equity 0.3 0.2 0.2 0.2 Loans & Advances 6,831 5,000 9,266 10,166 Net Debt/Equity 0.9 0.8 0.6 0.4 Current Assets (ex cash) 39,029 38,710 44,722 49,067 Interest Coverage Ratio 3.0 2.7 3.2 4.6 Trade payable 20,482 20,980 22,067 24,211

Other Current Liab 15,283 21,340 20,730 22,744 Operating ratios Total Current Liab 35,766 42,320 42,797 46,955 Year to March FY18 FY19 FY20E FY21E Net Curr Assets-ex cash 3,263 (3,610) 1,925 2,112 Total Asset Turnover 0.7 0.7 0.8 0.9 Uses of funds 103,907 95,190 98,576 101,876 Fixed Asset Turnover 1.0 0.9 1.0 1.1 BVPS (INR) 273.0 279.0 316.8 365.8 Equity Turnover 1.3 1.6 1.6 1.5

Free cash flow (INR mn) Valuation parameters Year to March FY18 FY19 FY20E FY21E Year to March FY18 FY19 FY20E FY21E Reported Profit 6,781 11,503 9,123 11,857 Adj. Diluted EPS (INR) 40.1 44.0 53.9 70.0 Add: Depreciation 4,086 6,177 6,300 6,200 Y-o-Y growth (%) (27.4) 9.8 22.5 30.0 Interest (Net of Tax) 2,247 4,543 3,700 3,063 Adjusted Cash EPS (INR) 64.2 80.5 91.1 106.7 Others (8,280) (5,257) (5,019) (5,665) Diluted P/E (x) 41.9 38.2 31.3 24.1 Less: Changes in WC (4,108) (1,015) (659) (1,301) P/B (x) 6.2 6.0 5.3 4.6 Operating cash flow 8,942 17,981 14,764 16,756 EV / Sales (x) 5.6 4.3 4.0 3.6 Less: Capex 47,511 6,605 5,000 5,000 EV / EBITDA (x) 24.3 16.2 15.0 13.1 Free Cash Flow (38,569) 11,376 9,764 11,756 Dividend Yield (%) 0.9 1.3 1.0 1.3

Peer comparison valuation Market cap Diluted P/E (X) EV / EBITDA (X) ROAE (%) Name (USD mn) FY20E FY21E FY20E FY21E FY20E FY21E Torrent Pharmaceuticals 4,015 31.3 24.1 15.0 13.1 18.1 20.5 Cipla 5,171 21.4 19.5 10.5 9.2 10.4 10.5 Divi's Laboratories 6,505 29.4 23.2 19.5 15.6 20.7 22.2 Glenmark Pharmaceuticals 1,192 11.6 11.0 7.0 6.6 12.2 11.6 Ipca Laboratories 1,687 19.6 17.0 13.0 10.8 17.8 17.4 Natco Pharma 1,477 14.5 13.8 9.8 10.1 18.2 16.6 Source: Edelweiss research

8 Edelweiss Securities Limited Torrent Pharmaceuticals

Additional Data Directors Data Samir Mehta Chairman Shailesh Haribhakti Independent Director Haigreve Khaitan Independent Director Chaitanya Dutt Director (Research & Development) Ms. Ameera Shah Independent Director Sudhir Mehta Chairman Emeritus Nayantra Bali Independent Director

Auditors - BSR & Co LLP *as per last annual report

Holding – Top10 Perc. Holding Perc. Holding HDFC Asset Management 2.47 Reliance Capital Trustee 0.89 UTI Asset Management 1.63 Vanguard group 0.81 Mirae Asset Global Investment 1.51 T Rowe Price Group Inc 0.80 HDFC Life 1.26 Pictet 0.79 SBI Funds Management 0.91 Credit Agricole 0.60 *in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

No Data Available

*in last one year

9 Edelweiss Securities Limited RATING & INTERPRETATION

Company Absolute Relative Relative Company Absolute Relative Relative reco reco risk reco reco Risk Aurobindo Pharma HOLD SP H Biocon REDUCE SU H Cadila Healthcare BUY SP M Cipla BUY SO M Divi's Laboratories BUY SO M Dr.Reddys Laboratories BUY SO M Glenmark Pharmaceuticals HOLD SU H Ipca Laboratories HOLD SP H Lupin BUY SP M Natco Pharma BUY SO M Sun Pharmaceuticals Industries REDUCE SU M Torrent Pharmaceuticals HOLD SP M

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return

10 Edelweiss Securities Limited Torrent Pharmaceuticals

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email: [email protected]

Aditya Narain

Head of Research [email protected]

Coverage group(s) of stocks by primary analyst(s): Pharmaceuticals Aurobindo Pharma, Biocon, Cadila Healthcare, Cipla, Divi's Laboratories, Dr.Reddys Laboratories, Glenmark Pharmaceuticals, Ipca Laboratories, Lupin, Natco Pharma, Sun Pharmaceuticals Industries, Torrent Pharmaceuticals

Recent Research

Date Company Title Price (INR) Recos

11 -Oct-19 Cipla Goa observations: Much ado 422 Buy about nothing?; EdelFlash 07-Oct-19 Aurobindo Regulatory concerns escalate; 459 Hold Pharma EdelFlash 07-Oct-19 Pharma. Rising regulatory risks eclipse performance; Result Preview

Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Rating Interpretation

Buy Hold Reduce Total Rating Expected to

Rating Distribution* 161 67 11 240 Buy appreciate more than 15% over a 12-month period * 1stocks under review Hold appreciate up to 15% over a 12-month period > 50bn Between 10bn and 50 bn < 10bn 743 Reduce depreciate more than 5% over a 12-month period Market Cap (INR) 156 62 11 594

One year price chart 446 2,000

(INR) 297 1,880 149 1,760

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11 Edelweiss Securities Limited

Pharmaceuticals

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12 Edelweiss Securities Limited Torrent Pharmaceuticals

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13 Edelweiss Securities Limited Pharmaceuticals

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Disclaimer for Canadian Persons This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.

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Disclaimer for Singapore Persons In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors. Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved

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14 Edelweiss Securities Limited