8th Annual Global Investor Conference
Participating Companies
Company Page Company Page ACC ...... 22 JSW Energy ...... 96 AIA Engineering ...... 180 JSW Steel ...... 98 Ambuja Cements ...... 24 Kotak Mahindra Bank ...... 100 Ashok Leyland ...... 26 Larsen & Toubro ...... 102 Au Financiers ...... 180 LIC Housing Finance ...... 104 Axis Bank ...... 28 Lupin ...... 106 Bajaj Auto ...... 30 Mahindra & Mahindra ...... 108 Bajaj Electricals ...... 181 Mahindra Finance ...... 110 Bajaj Finance ...... 172 Manappuram Finance ...... 176 Bajaj FinSer...... 173 Marico ...... 112 Bharat Petroleum Corporation ...... 32 Maruti Suzuki ...... 114 Bharti Airtel ...... 34 McLeod Russel ...... 116 Cairn India ...... 36 MCX...... 118 CESC ...... 38 Motherson Sumi Systems ...... 120 Container Corporation of India ...... 174 Muthoot Finance...... 177 DB Corp ...... 40 NTPC ...... 122 Dewan Housing Finance ...... 42 Oil India ...... 124 Dish TV ...... 44 ONGC ...... 126 DLF ...... 46 Phoenix Mills ...... 128 Emami ...... 48 Pidilite Industries ...... 130 Fort Point Automotive ...... 181 Power Grid ...... 132 GAIL India ...... 50 Radico Khaitan...... 178 GlaxoSmithKline Pharmaceuticals ...... 52 Raymonds ...... 179 Glenmark Pharmaceuticals ...... 54 Reliance Communications ...... 134 Godrej Consumer Products ...... 56 Reliance Industries ...... 136 Grasim Industries ...... 58 Reliance Infrastructure ...... 138 HDFC ...... 60 Rural Electric Corporation ...... 140 HDFC Bank ...... 62 Shoppers Stop ...... 142 Hero MotorCorp ...... 64 Shriram Transport Finance ...... 144 Hindalco Industries ...... 66 Sidhivinayak Logistics ...... 182 Hindustan Unilever ...... 68 Simplex Infrastructure ...... 146 HPCL ...... 70 State Bank of India ...... 148 HT Media ...... 72 Sun Pharmaceuticals ...... 150 ICICI Bank ...... 74 Tata Consultancy Services ...... 152 ICRA ...... 175 Tata Motors ...... 154 Idea Cellular ...... 76 Tata Steel ...... 156 IDFC...... 78 Titan Industries ...... 158 Indusind Bank ...... 80 Ultratech Cement...... 160 Info Edge (India) ...... 82 Union Bank of India ...... 162 Infosys ...... 84 Unitech Automobile ...... 182 ING Vysya Bank ...... 86 Voltas ...... 164 IPCA Laboratories ...... 88 Wipro...... 166 ITC ...... 90 Yes Bank ...... 168 Jindal Steel & Power ...... 92 Zee Entertainment Enterprises...... 170 JP Associates ...... 94
August 27 - 31, 2012 2 8th Annual Global Investor Conference
Welcome to the Conference!
Dear Guest,
We at Motilal Oswal are pleased to welcome you to the 8th Annual Global Investor Conference from August 27-29, 2012 in Mumbai.
The last 12 months have been eventful ... as always! Even as the world is finding it tough to put growth back on track, India has its own set of challenges. Growth parameters are hitting new lows; RBI has paused monetary easing on fears of inflation, and the much-awaited government policy remains in limbo. All of this took a toll on the rupee, down 20% over the last one year.
Despite these headwinds, Indian equity market is among the top performers of 2012, as foreign investors pumped in another USD11b into equities, CY12 YTD. On corporate earnings, June quarter PAT grew just 11%%, and expectations for full year remain muted (FY13 Sensex EPS to grow 8%). But amidst "going nowhere markets", several stocks are at their life-time highs, indicating the strength of bottom-up investing. Unlevered balance sheets seem to be the flavor of this cycle, thanks to persistently high interest rates. Indian equity valuations are at long- term averages, but resumption of growth cycle will remain a key trigger for a fresh upmove.
Re-shaping India! We believe the theme remains very relevant for this year too, and for quite some time to come! Indian politics is re-shaping – not only are regional parties rising, we now even have civil society entering the fray. Indian business is re-shaping – a no-frills airline is today number one! Indian entertainment is re-shaping (a telly storyteller is scripting box office successes), and so is Indian sports (a mother of two from east India wins an Olympics medal!) And Indian scientists are planning Mission Mars! We dedicate our 2012 Conference to this re-shaping – slowly, silently, but surely, and sometimes dramatically!
Over the next 3 days, 100 leading Indian companies will stand testimony to this re-shaping. Our conference key highlight, CEO Track, will have 10 top-notch CEOs present their success story, their growth opportunities, and their vision. We have several thematic presentations by eminent speakers covering a range of issues — from political colors to grassroot education and even power of nutrition! We have two intriguing panel discussions: (1) Navigating through business cycles, and (2) 25 years of Wealth Creation.
As a special thematic session, we have scheduled 2 women who have had a decade of extraordinary achievements and have done India proud in the last 12 months.
2012 also marks the Silver Jubilee for Motilal Oswal. To celebrate this, and also commemorate 100 years of Indian cinema, we have a set up unique evening on Monday, August 27, featuring a dazzling Bollywood performance by Terence Lewis and his dance troupe.
We hope this Conference leaves you with several incisive insights, winning themes, greater conviction, and the best investment ideas. We welcome you once again, and hope you have a very productive and enjoyable week.
Navin Agarwal Rajat Rajgarhia Director & CEO – Institutional Equities Director – Research
Investors are advised to refer through disclosures made at the end of the Research Report.
August 27 - 31, 2012 1 8th Annual Global Investor Conference
CEO Track (Monday, August 27)
Time Session and Speaker(s) 09:30-09:40 Introduction and Welcome Address Mr Motilal Oswal, CMD, Motilal Oswal Financial Services Mr Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services
09:45-10:25 Thematic Presentation Vision Of The Indian Financial Sector Mr Deepak Parekh, Chairman, HDFC
10:45-11:25 CEO Track: Larsen & Toubro Mr K Venkatramanan, CEO & Managing Director
11:30-12:10 CEO Track: Bharti Airtel Mr Akhil Gupta, Deputy Group CEO & Managing Director
12:15-12:55 CEO Track: ONGC Mr S Vasudeva, Chairman & Managing Director
13:00-13:55 Luncheon Panel Discussion 25 Years of Wealth Creation Mr Akash Prakash, CEO, Amansa Capital Mr Motilal Oswal, CMD, Motilal Oswal Financial Services Mr Raamdeo Agrawal , Joint MD, Motilal Oswal Financial Services
14:00-14:40 Thematic Presentation Financial Health Of India Inc Ms Roopa Kudva, Standard & Poor's, Region Head, South Asia
14:45-15:25 Thematic Presentation Power Of Nutrition: Bring Transformational Changes In Life Ms Pooja Makhija, Nutritionist
15:45-16:25 CEO Track: Idea Cellular Mr Himanshu Kapania, Managing Director
16:30-17:10 Thematic Presentation United Colors Of Indian Politics Mr Prabhu Chawla, Editorial Director, The New Indian Express
17:15 onwards Motilal Oswal Silver Jubilee Celebrations, a unique evening featuring - Celebrating Bollywood: A dazzling dance performance by Terence Lewis & his troupe The Climax: Enter the world of heady cocktails and exquisite global cuisine
August 27 - 31, 2012 2 8th Annual Global Investor Conference
CEO Track (Tuesday, August 28)
Time Session and Speaker(s) 09:45-10:25 CEO Track: State Bank of India Mr Pratip Chaudhuri, Chairman
10:45-11:25 CEO Track: Titan Industries Mr Bhaskar Bhat, Managing Director
11:30-12:10 CEO Track: Infosys Mr S D Shibulal, CEO & Managing Director
12:15-12:55 CEO Track: ICICI Bank Ms Chanda Kochar, CEO & Managing Director
13:00-13:55 Luncheon Panel Discussion Navigating Through Business Cycles Mr Glenn Saldanha, Glenmark Pharma, CMD Mr Sanjiv Bajaj , Bajaj Finserv, MD Mr Vivek Chaand Sehgal, Motherson Sumi Group, Founder Chairman Mr B Nagesh, Shoppers Stop, Vice-Chairman
14:00-14:40 CEO Track: Zee Entertainment Enterprises Mr Punit Goenka, Managing Director & CEO
14:45-15:25 Thematic Presentation Indian Education: Super 30 – Revolutionizing Education at the Grassroots Prof Anand Kumar, Leading Educationist & Social Entrepreneur
15:45-16:25 CEO Track: ACC Mr Kuldip Kaura, CEO & Managing Director
16:30-17:10 Special Presentation Making India A World Champion – Lessons from my journey Ms Mary Kom, World & Olympic Boxing Supermom
17:15-17:55 Special Presentation Re-shaping Entertainment – Whether small screen or big! Ms Ekta Kapoor, Soap Queen & Top Bollywood Producer
17:55-18:00 Vote of Thanks Mr Navin Agarwal, Director & CEO - Institutional Equities, Motilal Oswal Financial Services
August 27 - 31, 2012 3 8th Annual Global Investor Conference
CEO Track
CEO Track Speaker Profiles India's top CEOs and Experts
August 27 - 31, 2012 4 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Mr Deepak Parekh Chairman HDFC Thematic "Vision Of The Indian Financial Sector" Presentation
Date: Monday, August 27 Time: 09:45 - 10:25
Mr Deepak Parekh is the Chairman of HDFC, India's premier housing finance company. Mr Parekh's business acumen and farsightedness has not only made HDFC the leader in Mortgages, but has also transformed it into India's leading financial services conglomerate, with presence in Banking, Asset Management, Insurance, Real Estate Venture Fund and Education Loans.
Besides HDFC Group companies, Mr Parekh is on the board of several leading companies across diverse sectors. Mr Parekh is often dubbed as the government's unofficial crisis consultant. Be it his role as Special Director on the Satyam Board in 2009 to revive the company or the crucial role played by him during the UTI mess in the late '90s, Mr Parekh has shared his ideas and experience to formulate reform policies across sectors. He is an active member of various high- powered Economic Groups, government-appointed Advisory Committees and Task Forces.
Mr Parekh was awarded the Padma Bhushan in 2006. The Republic of France conferred on him the honor, "Knight in the Order of the Legion of Honor" in 2010. In 2010, he became the first international recipient of the Institute of Chartered Accountants in England and Wales' Outstanding Achievement Award.
Mr Krishnamurthi Venkataramanan CEO & Managing Director Larsen & Toubro
Date: Monday, August 27 Time: 10:45 - 11:25 CEO Track
Mr K Venkataramanan is the CEO and Managing Director of L&T. A graduate in Chemical Engineering from IIT, Delhi, he joined L&T in 1969. He was elevated to the Board of Directors in May 1999, and he assumed his current role in April 2012. He is credited with helping in the transformation of L&T from a fabrication-driven EPC contractor to a technology-led player.
Mr Venkataramanan is a Distinguished Alumni Awardee of IIT Delhi in 2005. He is the first Asian to be appointed Chairman of the Board of Directors of the 'Engineering & Construction Risk Institute, Inc.', USA for a two year term ended in May 2010. He is an Honorary Fellow of the Institute of Chemical Engineers (IChemE), UK. He is also a Fellow of the Indian Institute of Chemical Engineers, and currently the Chairman of the Capital Goods Committee of FICCI.
Mr Venkataramanan's accolades include the 'Davidson Frame Award' conferred by IPMA, Switzerland, for strengthening the Project Management Profession - 2002. He was honored with 'Chemtech - Business Leader of the Year' award for Plant & Machinery - 2005, and the 'Lala Shriram Award for Leadership in Chemical Industry' - 2006. He has been conferred an Honorary Doctorate in Project Management by the University of Petroleum & Energy Studies, Dehradun.
August 27 - 31, 2012 5 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Mr Akhil Gupta Deputy Group CEO & Managing Director Bharti Enterprises
Date: Monday, August 27 Time: 11:30 - 12:10 CEO Track
Mr Akhil Gupta is the Deputy Group CEO and Managing Director of Bharti Enterprises and a Director of Bharti Airtel. He has been closely involved from the very beginning in the growth of Bharti in the telecommunication services sector. He has also been responsible for conceptualizing and implementing the separation of passive mobile infrastructure and forming Indus Towers, a JV with Vodafone and Idea, which has become the largest tower company in the world.
Mr Gupta is also the Chairman of Tower and Infrastructure Providers Association (TAIPA). He represents the Indian Telecom Industry and Bharti regularly at various forums. He was awarded 'CEO of the Year' at the National Telecom Awards 2012. He was also honored for 'Outstanding Contribution to the Telecom Sector' by the leading telecom magazine, tele.net.
A Chartered Accountant, Mr Gupta has also completed an "Advanced Management Program" at the Harvard Business School. He has been inducted to the CFO India - 'Hall of Fame' in recognition of his contribution to the world of finance. In 2010, he was awarded the Asia Corporate Dealmaker Award at the Asia-Pacific M&A ATLAS Awards in recognition of his leadership in executing Bharti Airtel's acquisition of Zain Group's mobile operations in Africa.
Mr Sudhir Vasudeva Chairman & Managing Director Oil and Natural Gas Corporation
Date: Monday, August 27 Time: 12:15 - 12:55 CEO Track Mr Sudhir Vasudeva is the Chairman and Managing Director of Oil and Natural Gas Corporation (ONGC), the most valuable Maharatna public sector unit (PSU) of India. He is also the Chairman of ONGC Videsh (OVL), Mangalore Refinery and Petrochemicals (MRPL) and five other ONGC Group Companies - ONGC Petro-additions, ONGC Mangalore Petrochemicals, Mangalore SEZ, ONGC Tripura Power Company and ONGC Mittal Energy.
Mr Vasudeva is a Gold Medalist Chemical Engineer with Advanced Diploma in Management. Under his stewardship, ONGC has registered its highest-ever profit, become the highest-ever dividend paying company in India, and often retains the Numero Uno position in terms of market capitalization. His focus on Investor Relationship has ranked ONGC Number-2 in Institutional Investors' Best IR Companies List of 2012 in the Oil & Gas domain across Asia.
A firm believer in transparency and ethical business practices, Mr Vasudeva is the President of Global Compact Network, India. He also happens to be the first business leader from Indian PSUs to become a Member of the Board of the United Nations Global Compact.
August 27 - 31, 2012 6 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Ms Roopa Kudva Region Head, South Asia Standard & Poor's Thematic "Financial Health Of India Inc" Presentation Date: Monday, August 27 Time: 14:00 - 14:40
Ms Roopa Kudva is the Region Head, South Asia of Standard & Poor's, a global analytical company providing ratings, research, and risk and policy advisory services. She is also the MD and CEO of CRISIL, S&P's Indian subsidiary. During her tenure as CEO, CRISIL's profits have more than doubled, its customer-base has grown from 1,000 to 30,000, and its reach has expanded from 9 Indian cities to 150, while its international operations now cover 30 countries.
Ms Kudva holds a Degree in Statistics, and a Post Graduate Diploma in Management from the Indian Institute of Management, Ahmedabad. She joined CRISIL in 1992, and has more than two decades of credit-related experience across sectors, including a secondment to Standard & Poor's, Paris, as Director, Financial Institutions Ratings. She assumed her current role in 2007.
Ms Kudva regularly features in lists of the most powerful women in Indian business. She is a member of several policy-level committees relating to the Indian financial system, including committees of the Securities and Exchange Board of India and the Reserve Bank of India. She is also a member of the Executive Council of NASSCOM. Ms Kudva has received the Distinguished Alumnus Award from the Indian Institute of Management, Ahmedabad.
Ms Pooja Makhija Nutritionist "Power Of Nutrition: Bring Thematic Transformational Changes In Life" Presentation Date: Monday, August 27 Time: 14:45 - 15:25
Ms Pooja Makhija is one of India's leading experts on nutrition and has counseled over 15,000 clients. She runs her own wellbeing clinic, Nourish, in Mumbai. She teaches her clients how to eat right, keep fit and maintain high energy levels, enabling them to deal with the rigors of life. She believes that understanding the importance of food can bring about huge, transformational changes in people's lives. She is known for her no-nonsense diet plans.
Her prescription for healthy weight loss is: Eat within the first hour of rising. Eat four main meals a day and a small snack every two hours in between. Exercise after a small light snack. Eat main meals after the workout. Hydrate yourself well - one glass of water every hour. Restrict daily oil consumption to 3-4 tablespoons a day. Avoid refined sugar in beverages. Stay away from artificial sweetener, too. Say no fruits juices, smoothies or milkshakes. Eat the fruits instead. Healthy eating is a lifestyle, not a "diet". Imbibe it.
Ms Makhija was the official diet counselor at Ms Sushmita Sen`s beauty pageant, I Am She 2010. Among her celebrity clients are Ms Vidya Balan, Ms Sonam Kapoor and Ms Raveena Tandon. She recently launched her book, 'Eat. Delete. - The Anti Quick Fix Approach'.
August 27 - 31, 2012 7 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Mr Himanshu Kapania Managing Director Idea Cellular
Date: Monday, August 27 Time: 15:45 - 16:25 CEO Track
Mr Himanshu Kapania is the Managing Director of Idea Cellular, a pan-India mobile operator with revenue of USD4b and over 110m subscribers. He is credited with strengthening Idea's dominance in Maharashtra & Goa, Madhya Pradesh & Chattisgarh, and Kerala, and launching Idea services in Mumbai, Karnataka, Tamil Nadu and Chennai while expanding brand presence in Gujarat and Andhra Pradesh. Under his leadership, Idea has grown in South and West India.
Mr Kapania has had two separate stints with Idea Cellular (erstwhile Birla AT&T). In his first stint, he joined the company in 1997 as General Manager, Operations - South Maharashtra and then moved on as COO for Gujarat (1998-2000) and as COO for Delhi (2000-2003). Subsequently, he worked with Reliance Infocomm as CEO - North India. In September 2006, Mr Kapania returned to Idea as COO and in 2008, was promoted as Director - Operations. He was appointed Managing Director in April 2011.
Besides Telecom, Mr Kapania has rich experience in Automobiles, Consumer Durables and Office Automation industries. He is a BE (Electricals & Electronics Engineering) from BIT Mesra (1979-83) and a Post Graduate from the Indian Institute of Management, Bangalore (1988-90).
Mr Prabhu Chawla Editorial Director The New Indian Express Group Thematic "United Colors Of Indian Politics" Presentation Date: Monday, August 27 Time: 16:30 - 17:10
Mr Prabhu Chawla is Editorial Director of The New Indian Express Group and hosts 'Teekhi Baat', a talk show on IBN7. He is one of the most authoritative and credible voices in print as well as the electronic media in India. In his 40 years as Reporter and Editor, he has extensively covered events that have changed India's political course and the people who engineered them.
Mr Chawla began his career as an Economics Lecturer at Delhi University before going on to become one of India's best-known journalists. From 1991 to 1994, he was Editor of Indian Express, post which he was Editor-in-Chief and CEO of Financial Express from 1994 to 1996. Between 1996 and 2011, he was Editor of India Today and Editorial Director of the India Today Group of Publications. During that period, he launched the magazine's regional editions (Hindi, Tamil, Telugu and Malayalam) and hosted the weekly talk show 'Seedhi Baat' on Aaj Tak.
Among the recent awards and accolades he has received are: the Indian Television Academy Award for Best News and Current Affairs Anchor for 2009 for 'Seedhi Baat', the Indian Television Academy Award for Best Talk Show Host for 2008, and the Sansui Television Best TV Anchor Award for 2008. Mr Chawla is a Padma Bhushan recipient.
August 27 - 31, 2012 8 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Mr Pratip Chaudhuri Chairman State Bank of India
Date: Tuesday, August 28 Time: 09:45 - 10:25 CEO Track
Mr Pratip Chaudhuri is the Chairman of State Bank of India, the only Indian bank to feature in the Fortune Global 500 list. In this role, he is not only the Chief Executive of India's largest commercial bank, but also the head of the entire State Bank Group including 5 associate banks and 22 subsidiaries - 8 of which are overseas entities.
Mr Chaudhuri holds a post graduate degree in Business Administration with specialization in Finance. He joined this 205-year old institution as a Probationary Officer in the year 1974. During his tenure of 37 years in State Bank of India, Mr Chaudhuri has held a number of important positions, including those of Chief General Manager (Foreign Offices), Chief General Manager of Chennai Circle and General Manager (Mid Corporate Group).
Mr Chaudhuri assumed Chairmanship of State Bank of India in April 2011. Immediately prior to taking over as Chairman, he was Deputy Managing Director in charge of the International Banking Group of the Bank. He was also the Managing Director of State Bank of Saurashtra, and piloted its merger with State Bank of India.
Mr Bhaskar Bhat Managing Director Titan Industries
Date: Tuesday, August 28 Time: 10:45 - 11:25 CEO Track
Mr Bhaskar Bhat is the Managing Director of Titan Industries. He began his career as a Management Trainee at Godrej & Boyce in 1978. After five years at Godrej, he joined the Tata Watch Project, which is now Titan Industries. He assumed his current role in April 2002.
Mr Bhat is a BTech (Mechanical Engineering) from IIT Madras (1976) and has completed his Post Graduate Diploma in Management from IIM Ahmedabad (1978). Most of his working experience has been in Sales & Marketing. At Titan, he has handled Sales & Marketing, Human Resources, International Business and General Management. He is also a Director in Virgin Mobile India Limited, a joint venture of Tata Teleservices and Virgin Group, UK.
Mr Bhat received the Distinguished Alumnus Award in IIT Madras in 2008. He was conferred the Qimpro Gold Standard Award for Business in February 2010. He won the Most Admired Retail Professional of the Year at the India Retail Forum 2011 and received the Distinguished Alumnus Award in IIM Ahmedabad in November 2011. Mr Bhat was ranked as the 4th CEO in a survey conducted by the Business Today, INSEAD and Harvard Business Review.
August 27 - 31, 2012 9 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Mr SD Shibulal Co-Founder and CEO & Managing Director Infosys
Date: Tuesday, August 28 Time: 11:30 - 12:10 CEO Track
Mr SD Shibulal is the Co-Founder and the CEO and Managing Director of Infosys. Earlier, he has held a number of senior leadership roles in the company. Prior to becoming CEO, he served as COO between June 2007 and August 2011.
He has been instrumental in the development of Infosys' Global Delivery Model, which helped set the stage for its evolution into a leading multinational Business Consulting and IT Services provider. As CEO, Mr Shibulal is focused on strengthening strategic partnerships with clients, increasing client relevance and evolving the business model towards achieving Infosys' aspirations of becoming a next generation Global Consulting and IT Services corporation.
Mr Shibulal holds an MS degree in Computer Science from Boston University and a Master's degree in Physics from the University of Kerala. He is a member of the Board of Trustees, the International Advisory Board and the Metropolitan College Dean's Advisory Board of Boston University. He is also a member of the International Board of Foundation, Globethics.net, the Seoul International Business Advisory Council (SIBAC), and the Global Corporate Governance Forum's Private Sector Advisory Group.
Ms Chanda Kochhar Managing Director & CEO ICICI Bank
Date: Tuesday, August 28 Time: 12:15 - 12:55 CEO Track
Ms Chanda Kochhar is the Managing Director and CEO of ICICI Bank, India's largest private sector bank. She is recognized for her role in shaping Retail Banking in India, for her leadership of the ICICI Group, and for her contributions to various forums in India and globally.
Ms Kochhar began her career with the erstwhile ICICI Limited in 1984 and was instrumental in establishing ICICI Bank during the 1990s. Ms Kochhar has held various responsible positions in the Group. Some of these include: Head of the Infrastructure Finance and Corporate Banking business in ICICI Limited, Head of ICICI Bank's Corporate and International Banking businesses, and Joint Managing Director and CFO of ICICI Bank. She assumed her current role in 2009.
Ms Kochhar is a member of various high-powered Economic Groups, government-appointed Advisory Committees and Task Forces. She was conferred with the Padma Bhushan in 2011. In 2012, she has been named amongst the nine Indian women in the Forbes' inaugural "Asia Power Businesswomen" list, ranked fifth in the list of the "Most Powerful CEOs" in India by The Economic Times and first in the list of "Top Women CEOs" in the country, and conferred with CNBC Asia's India Business Leader of the year award and CSR award.
August 27 - 31, 2012 10 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Mr Punit Goenka Managing Director & CEO Zee Entertainment Enterprises
Date: Tuesday, August 28 Time: 14:00 - 14:40 CEO Track
Mr Punit Goenka is Managing Director and CEO of Zee Entertainment Enterprises (ZEE). His strong work ethics and hands-on approach have helped steer the ZEE Empire to new frontiers of success. Under his leadership, Zee TV has emerged a leader among General Entertainment Channels in India. He is now working towards strengthening ZEE's reach internationally.
Mr Goenka has grown up the ranks, handling various responsibilities across the Essel conglomerate for over 15 years. He began his career with Zee TV in 1995 as Head of the Music division and went on to shoulder additional responsibilities across group companies. In 2004, he took charge as the Business Head of Zee TV. He was promoted to Network Operating Officer in 2005 and was made responsible for the Programming, Operations, Administration and HR functions of all of ZEE's entertainment channels. He assumed his current role in July 2008.
Mr Goenka is a great mentor. He has shared his experiences and knowledge at management education programs such as Young Managers Program at INSEAD, France, and 'Birthing of Giants' by Young Entrepreneurs' Organization and MIT Enterprise Forum, Inc, Boston, USA.
Mr Anand Kumar Leading Educationist & Social Entrepreneur "Super 30: Revolutionizing Education Thematic at the Grassroots" Presentation Date: Tuesday, August 28 Time: 14:45 - 15:25
Mr Anand Kumar is a noted Mathematics Teacher. In the last nine years, a phenomenal 236 students from his 'Super 30' initiative have cleared the Joint Entrance Test of the Indian Institute of Technology (IIT). What is remarkable about this achievement is that most of the successful candidates have been from the most underprivileged sections of society.
Mr Kumar has been fascinated by Mathematics since early childhood. Though he got an opportunity to pursue higher education in Cambridge University, his poor financial health came in the way. To help other financially disadvantaged students, who invariably fade away without getting the right opportunities, he founded 'Super 30'. Under this initiative, he gives underprivileged students free food, free lodging and above all free coaching.
The Discovery Channel has described 'Super 30' as a "revolutionary experiment to bring about social change". In recognition of his achievements, the Bihar government conferred on Mr Kumar the 'Maulana Abdul Kalam Azad Shiksha Puraskar' in November 2010. Various international publications and TV channels have applauded Mr Kumar and his initiative. His remarkable teaching abilities have also found him a place in the Limca Book of World Records.
August 27 - 31, 2012 11 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Mr Kuldip K Kaura CEO & Managing Director ACC
Date: Tuesday, August 28 Time: 15:45 - 16:25 CEO Track
Mr Kuldip K Kaura is CEO and Managing Director of ACC.
He has rich experience and a deep appreciation of the national and international business environment. He has had the benefit of management education from reputed institutions like London Business School and Swedish Institute of Management. He did his BE (Honors) in Mechanical Engineering from Birla Institute of Technology & Science, Pilani in 1968.
Mr Kaura worked with Vedanta Resources Plc for seven years, initially as the Managing Director of Hindustan Zinc and thereafter as Chief Executive Officer of Vedanta Resources until 2008 and played a significant role in the transformation and rapid growth of its group companies. Prior to this, he had an 18-year stint with ABB India, an engineering company. During this period, he grew through various key positions and was Managing Director from 1998 to 2001.
He has served as Member of National Council of the Confederation of Indian Industries and is an office bearer of other such professional bodies.
Ms Mary Kom World & Olympic Boxing Supermom "Making India A World Champion – Thematic Lessons from my journey" Presentation
Date: Tuesday, August 28 Time: 16:30 - 17:10
Ms Mary Kom is a five-time World Boxing champion, and the only woman boxer to have won a medal in each one of the six world championships. She is the only Indian woman boxer to have qualified for the 2012 Summer Olympics, competing in the flyweight (51 kg) category and winning the bronze medal. She is number-4 on the AIBA World Women's Ranking - flyweight category. She has more than three Asian titles and eleven National titles under her belt.
Ms Kom initially tried to hide her interest in boxing from her family, since it was not considered a suitable sport for a woman. However, after her victory in the Manipur state women's boxing championship in 2000, her career became public. After winning the regional championship in West Bengal, she began competing at the international level at the age of 18, only a year after she started boxing. Her international debut was at the first AIBA Women's World Boxing Championship in the United States, where she won a silver medal in the 48 kg weight category.
Ms Kom had the honor of jointly bearing the Queen's Baton with Mr Vijender Singh in the opening ceremony run for the 2010 Commonwealth Games of Delhi. She is a recipient of the Arjuna Award, the Padma Shri Award, and the Rajiv Gandhi Khel Ratna Award.
August 27 - 31, 2012 12 8th Annual Global Investor Conference
CEO Track Speakers (in order of appearance)
Ms Ekta Kapoor Soap Queen & Top Bollywood Producer "Re-shaping Entertainment – Thematic Whether small screen or big!" Presentation Date: Tuesday, August 28 Time: 17:15 - 17:55
Ms Ekta Kapoor is a Television and Film Producer. She is the Joint Managing Director and Creative Director of Balaji Telefilms. She has produced several TV serials, the most popular of which include Hum Paanch, Kyunki Saas Bhi Kabhi Bahu Thi, Kahaani Ghar Ghar Kii, Kasautii Zindagii Kay, Kkusum, Pavitra Rishta, and Bade Achhe Lagte Hain, to name but a few.
Ms Kapoor branched out into Bollywood movie production in 2001, beginning with Kyo Kii Main Jhuth Nahin Bolta. Kyaa Kool Hai Hum, starring her brother Mr Tusshar Kapoor proved to be her breakout hit and became one of the highest earners of 2005. The years 2010 and 2011 proved to be important for her, with critical and commercial successes such as Love Sex Aur Dhokha, Once Upon a Time in Mumbaai, Shor in the City, Ragini MMS and The Dirty Picture.
Among the awards Ms Kapoor received in 2012 are: Indian Telly Awards' Special Award for Best Breakout in Films, Screen Awards' Best Performer of the Year, and Dadasaheb Phalke Academy Awards' Phalke Icon Film & Television Producer. She received wide recognition for The Dirty Picture (Hindi movie), Taryanche Bait (Marathi movie) and Bade Acche Lagte Hain (TV serial).
Panel discussions 1. 25 Years of Wealth Creation 2. Navigating Through Business Cycles
Mr Motilal Oswal Mr Raamdeo Agrawal Mr Glenn Saldanha Mr Sanjiv Bajaj CMD, Motilal Oswal Group Joint MD, Motilal Oswal Group Glenmark Pharma, CMD Bajaj Finserv, MD
Mr Akash Prakash 1987 - 2012 Mr Vivek Chaand Sehgal Mr B Nagesh CEO, Amansa Capital Motherson Sumi Group Shoppers Stop Founder Chairman Vice-Chairman
August 27 - 31, 2012 13 8th Annual Global Investor Conference
India at a glance
From the 7th to the ...
... 8th Annual Global Investor Conference
India At A Glance Macroeconomy, corporate earnings, markets
August 27 - 31, 2012 14 8th Annual Global Investor Conference
India at a glance: Macro
The macro backdrop is challenging with weakening fundamentals confronting risks of twin deficits and policy stasis. The quarterly GDP growth has come down to nine-year low and is further slowing down to 5% level. Inflation though have come down from their peak level, still hovers around 7% level with core inflation somewhat above 5%. It would be difficult to achieve any meaningful fiscal correction in FY13 due to rising oil, food, fertilizer subsidy and on account of shortfall from spectrum sale and disinvestment. RBI pursued tight money in view of still high inflation and fiscal deficit. However, slowing bank credit has eased pressures on liquidity. On the external front, trade and current account deficit were record and unsustainably high in FY12. However, decline in gold imports and higher portfolio flows has stabilized the INR somewhat. Slowing policy making have come in for critical focus with government still touting booming FDI as sign of continued confidence in India. However, by its own reckoning government needs to move forward on critical reform such as DTC, GST, FDI, infrastructure and good governance.
GDP growth - annual (YoY %) GDP growth - quarterly (YoY %)
IIP growth (YoY %) WPI Inflation (YoY %)
August 27 - 31, 2012 15 8th Annual Global Investor Conference
India at a glance: Macro
Fiscal deficit (% of GDP) Oil price and underrecoveries
Banking indicators RBI rates
Liquidity situation Currency and reserves
External balance (% of GDP) FDI (USD b) (Apr- May)
August 27 - 31, 2012 16 8th Annual Global Investor Conference
India at a glance: Corporate earnings
Corporate India is facing slowdown driven by both domestic and global headwinds and weathered it only partially. While its topline growth was protected in FY12 the bottomline was severely dented. In contrast in FY13 while sales growth is expected to nearly halve, PAT growth seem to have plateaued. MOSL Universe Ex RMs has seen a revenue growth of 23% andd 12% PAT growth for FY12. However we estimate the same for FY13 at 12% and 9% respectively. MOSL Universe Mar-12 PAT at INR803bn is at its all time high. However the same moderarted to INR735bn for June-12 quarter. Oil & Gas and Financials contribute 46% to the total earnings (v/s 44% YoY). Metals has seen a drop in contribution from 15% to 12%. Overall the contribution of domestic plays are expected to increase in FY13. FY13 Sensex EPS expected to grow 8% to 1,213 and FY14 EPS to grow 14% to 1,380. As a pointer to the importance of the interest rates for the corporate sector, interest / sales for BSE 500 companies Excl Financials and RMS went upto 3.4% as against ~2.9% registered in past several quarters. Profitability as reflected by PAT margin declined to 7.9% as against 8.8% registered in Mar-12 quarter.
MOSL Universe Ex RMS Sales Growth (%) MOSL Universe Ex RMS PAT Growth (%)
Quarterly PAT (MOSL Universe Ex RMs, INR b)
August 27 - 31, 2012 17 8th Annual Global Investor Conference
India at a glance: Corporate earnings
Sensex EPS (INR)
MOSL Universe contribution to PAT (%) Sector FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13E Domestic Plays 49 48 53 55 59 53 54 56 Banking 18 16 17 21 23 22 24 25 Pvt 44445677 PSU 11 10 10 13 13 12 12 13 NBFC 3 3 3 3 4 5 5 5 Domestic Consumer 10 11 13 14 14 11 9 10 Auto Ex Tata Motors 3 2 3 2 4 3 3 3 Telecom 3 5 7 7 6 3 2 1 Consumer 4 4 4 4 4 4 4 5 Domestic Non - Consumer 21 21 22 21 22 20 21 21 Utilities 14 10 8 9 11 10 11 11 Capital Goods 3 4 3 4 5 5 5 4 Cement 2 4 4 4 4 3 3 3 Real Estate 1 3 6 3 2 2 1 1 Others 1 1 1 1 1 1 1 1 Global Plays 51 52 47 45 41 47 46 44 Cyclical 41 41 38 34 29 36 34 31 Oil & Gas ex RMs 26 22 21 20 19 20 21 18 Metals 14 17 15 15 10 12 9 9 Tata Motors 111-11343 Non-Cyclical 10 11 10 11 11 11 12 14 Technology 7 8 7 8 9 8 9 10 Healthcare 3 3 3 2 3 3 3 4 MOSL Universe ex RMs 100 100 100 100 100 100 100 100 BSE 500 Companies Excluding Financials & RMS
August 27 - 31, 2012 18 8th Annual Global Investor Conference
India at a glance: Indian equities
After a 25% decline in CY11, Sensex has delivered a 15% return in CY12YTD. Over the last 10 years, Sensex delivered a return CAGR of 18%; among the best performing global markets.
FII flows for CY12 YTD has been at USD11.5b after a outflow of USD0.5B in CY11.
Market cap of 30 billion-dollar market cap companies in 2002 was USD82b; the number of billion-dollar market cap companies has ballooned to 163 with market cap of USD947b.
Indian Market Cap to GDP has fallen from 89% in FY11 to 70% in FY12. At current ratio of 62%, the markets are trading in line with long-term averages.
Valuations remain below historical average (rolling 12-month forward PE of 13.8x v/s 10-year average of 14.7x). However, RoEs are also below the averages.
Indian Markets Annual Return
India Vs Global 10 Year CAGR (%)
August 27 - 31, 2012 19 8th Annual Global Investor Conference
India at a glance: Indian equities
Trend in FII Flows (USD b) Companies with over USD1b market cap
Market Cap to GDP (%) Sensex PE (x)
Sensex P/BV (x) Sensex earnings yield v/s bond yield (%)
Indian market volumes India Volatility Index (%)
August 27 - 31, 2012 20 8th Annual Global Investor Conference Participating Companies
ACC JSW Energy AIA Engineering JSW Steel Ambuja Cements Kotak Mahindra Bank Ashok Leyland Larsen & Toubro Au Financiers LIC Housing Finance Axis Bank Lupin Bajaj Auto Mahindra Finance Bajaj Electricals Mahindra & Mahindra Bajaj Finance Manappuram Finance Bajaj FinSer Marico Bharat Petroleum Corporation Maruti Suzuki Bharti Airtel McLeod Russel Cairn India MCX CESC Motherson Sumi Systems Container Corporation of India Muthoot Finance DB Corp NTPC Dewan Housing Finance Oil India Dish TV ONGC DLF Phoenix Mills Emami Pidilite Industries Fort Point Automotive Power Grid GAIL India Radico Khaitan GlaxoSmithKline Pharmaceuticals Raymonds Glenmark Pharmaceuticals Reliance Communications Godrej Consumer Products Reliance Industries Grasim Industries Reliance Infrastructure HDFC Rural Electric Corporation HDFC Bank Shoppers Stop Hero MotorCorp Shriram Transport Finance Hindalco Industries Sidhivinayak Logistics Hindustan Unilever Simplex Infrastructure HPCL State Bank of India HT Media Sun Pharmaceuticals ICICI Bank Tata Consultancy Services ICRA Tata Motors Idea Cellular Tata Steel IDFC Titan Industries Indusind Bank Ultratech Cement Info Edge (India) Union Bank of India Infosys Unitech Automobile ING Vysya Bank Voltas IPCA Laboratories Wipro ITC Yes Bank Jindal Steel & Power Zee Entertainment Enterprises JP Associates
August 27 - 31, 2012 21 8th Annual Global Investor Conference
ACC
Company description ACC has one of the highest dependence on ACC, part of Holcim group, is the third largest cement domestic coal, necessitating shift towards open company in India with total capacity of 30.7m tons, and market/imported coal as availability of domestic pan-India presence with 16 plants. It is the oldest player linkage coal reduces. in the Indian cement industry with ~10% market share. Turning around loss-making RMC (ready-mix concrete) subsidiary (INR25m PBIT loss), which is Key investment positives going to be merged into ACC. ACC is the best proxy on the Indian cement industry. It is a market leader with share of ~10%, and without Key news flows / triggers to watch revenue concentration in any particular region. Cement demand recovery over next 12-18 months, Strong brand equity and focus on trade segment driven by pick-up in infrastructure activity. (~75% of volumes) drives premium pricing. Sustenance of pricing discipline in the key markets Focused on reducing power cost through captive of South and North India. power plants and increasing use of alternate fuels. Outcome of the sector's appeal against CCI order It has equity stake in two coal blocks, viz, 200mt on alleged cartelization. reserve in MP (50% stake) and 685mt reserve in West Bengal (14% stake). The mines, expected to become 2QCY12 highlights operational in 3-4 years, will provide cost-effective Realization improved 8% QoQ (+13% YoY) to and long-term assured supply of energy. INR4,591/ton (v/s est INR4,396), led robust price High sensitivity to cement prices as every INR1/bag uptick across markets. change in cement price changes CY13E EPS by 2.4%. Volumes grew just 2% YoY (-10% QoQ) to 6.05mt With completion of major capex and strong cash flow (v/s est 6.1mt). from operations, we estimate ACC to have net cash Costs were largely in-line with estimates, as higher balance of INR180/share by Dec-12. than freight and other expenses were offset by lower than estimated fuel cost. Key challenges Despite cost push, positive surprise in realizations Very limited scope to increase production through led to INR180/ton QoQ improvement in EBITDA/ton blending as already 85% of cement sold is blended. to INR1,076 (v/s est INR905).
Stock info Quarterly Performance (INR Million) Bloomberg ACC IN Y/E December Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 CY11 CY12E Equity Shares (m) 188 Operating Income 24,030 21,500 25,027 28,602 27,778 94,387 112,721 CMP (INR) 1,328 Change (%) 18.9 31.3 27.8 19.3 15.6 22.3 19.4 Mcap (USD b) 4.5 EBITDA 5,503 2,204 3,893 6,161 6,508 16,992 22,428 52-Wk Range (INR) 1,422 / 982 Change (%) -0.5 29.7 86.4 11.2 18.3 9.3 32.0 1, 6, 12 Rel Perf (%) 2 / 1 / 28 EBITDA Margin (%) 22.9 10.3 15.6 21.5 23.4 18.0 19.9 Reported PAT 3,366 1,676 3,227 1,554 4,179 13,254 11,675 Adjusted PAT 3,366 1,229 1,935 3,859 4,179 11,083 13,981 Shareholding pattern (%) Change (%) -6.2 22.8 39.2 10.1 24.2 9.3 26.1 Jun-12 Mar-12 Jun-11 PAT Margin (%) 14.0 5.7 7.7 13.5 15.0 11.7 12.4 Promoter 50.5 50.5 50.5 Key Operating metrics Dom. Inst. 12.1 11.8 15.2 Volume (mt) 5.93 5.69 5.95 6.72 6.05 23.7 25.5 Foreign 18.9 18.7 15.7 Realizations(INR/t)4,052 3,779 4,206 4,256 4,591 3,978 4,429 Others 18.6 19.1 18.8 EBITDA (INR/t) 928 387 654 917 1,076 716 881 E: MOSL Estimates
22 August 27 - 31, 2012 8th Annual Global Investor Conference
ACC: Financials and valuation
Income Statement (INR Million) Ratios Y/E December CY10 CY11 CY12E CY13E Y/E December CY10 CY11 CY12E CY13E Net Sales 77,173 94,387 112,721 129,592 Basic (INR) Change (%) -3.9 22.3 19.4 15.0 EPS 53.9 59.0 74.4 87.8 EBITDA 15,540 16,992 22,428 25,501 Consolidated EPS 52.4 57.7 72.4 87.8 Change (%) -38.5 9.3 32.0 13.7 Cash EPS 74.8 84.3 103.4 118.4 Margin (%) 20.1 18.0 19.9 19.7 BV/Share 344.3 382.7 409.7 459.6 DPS 30.5 28.0 30.0 32.5 Depreciation -3,927 -4,753 -5,448 -5,736 Payout (%) 59.5 46.0 56.5 43.3 Int. and Fin. Charges -568 -969 -1,216 -750 Other Income - Rec. 2,925 3,518 4,150 4,400 Valuation (x) EO Income/(Expense) 1,465 P/E 23.6 18.8 15.5 PBT After EO Item 15,435 17,685 16,560 23,415 Cash P/E 16.1 13.2 11.5 Tax Rate (%) 27.4 25.1 29.5 29.5 EV/Sales 2.4 2.0 1.7 Adjusted PAT 10,137 11,083 13,981 16,508 EV/EBITDA 13.4 9.9 8.6 Change (%) -38.2 9.3 26.1 18.1 P/BV 3.6 3.3 3.0 Dividend Yield 2.1 2.2 2.4 Balance Sheet (INR Million) EV/ton (USD-Cap) 135 131 129 Y/E December CY10 CY11 CY12E CY13E Share Capital 1,879 1,879 1,879 1,879 Return Ratios (%) Net Worth 64,695 71,923 77,001 86,362 RoE 16.2 16.2 18.8 20.2 Loans 5,238 5,107 3,000 3,000 RoCE 16.3 15.7 20.2 21.9 Deferred Tax Liability 3,615 5,184 5,598 5,949 Capital Employed 73,548 82,214 85,598 95,311 Working Capital Ratios Debtors (Days) 8 10 10 10 Net Fixed Assets 50,824 62,075 65,481 69,745 Inventories (Days) 43 43 43 43 Capital WIP 15,628 4,353 3,000 8,000 Creditors (Days) 84 80 80 80 Investments 17,027 16,250 17,720 18,258 Cash Flow Statement (INR Million) Curr. Assets, Loans&Adv. 27,533 36,179 43,405 49,902 Y/E December CY10 CY11 CY12E CY13E Inventory 9,150 10,997 13,125 15,089 OP/(Loss) before Tax 15,540 16,992 22,428 25,501 Account Receivables 1,783 2,604 3,088 3,550 Interest/Div. Recd. 2,925 3,518 4,150 4,400 Cash and Bank Balance 10,800 16,526 19,301 22,190 Direct Taxes Paid -4,112 -2,863 -4,471 -6,556 Others 5,801 6,053 7,890 9,071 (Inc)/Dec in WC 4,690 -3,741 2,914 2,979 Curr. Liab. and Prov. 37,464 36,644 44,007 50,594 EO Income/(Exp) 1,465 -2,897 3,354 0 Account Payables 17,730 20,687 24,706 28,404 CF from Op. incl EO Exp. 20,507 16,803 21,666 26,324 Other Liabilities 3,209 5,416 5,404 6,213 Provisions 16,525 10,540 13,897 15,977 (inc)/dec in FA -7,234 -4,729 -7,500 -15,000 Net Current Assets -9,931 -464 -602 -692 (Pur)/Sale of Invest. -2,270 777 -1,470 -538 Application of Funds 73,548 82,214 85,598 95,311 CF from Investments -9,504 -3,952 -8,970 -15,538
Key assumptions/operating metrics Issue of Shares 1 69 0 0 CY10 CY11 CY12E CY13E (Inc)/Dec in Debt -431 -131 -2,107 0 Capacity (MT) 30.7 30.7 30.7 30.7 Interest Paid -568 -969 -1,216 -750 Dispatches (MT) 21.3 23.7 25.5 28.0 Dividend Paid -6,668 -6,095 -6,597 -7,147 Growth (%) -1.1 11.5 7.3 10.0 CF from Fin. Activity -7,666 -7,126 -9,920 -7,897 Cap Util (%) 69.4 77.4 83.0 91.3 Net realization (INR/t) 3,625 3,978 4,429 4,629 Inc/Dec of Cash 3,337 5,725 2,776 2,889 Growth (%) -2.8 9.7 11.4 4.5 Add: Beginning Balance 7,464 10,800 16,526 19,301 EBITDA (INR/t) 730 716 881 911 Closing Balance 10,800 16,526 19,301 22,190 EBITDA Margins (%) 20.1 18.0 19.9 19.7
August 27 - 31, 2012 23 8th Annual Global Investor Conference
Ambuja Cements
Company description Key challenges Ambuja Cements, a part of Holcim group, is the fourth Given limited capacity addition, any strong largest cement company in India with total capacity of recovery in sector volume growth would result in 27.5m tons under its control. capacity constraint for Ambuja in CY14. Any downturn in the export market would result in It is one of the lowest cost producers of cement with oversupply in the domestic market, resulting in focus on structurally sound markets of North, West and pressure on prices in Ambuja's key market, Gujarat. East. It is also one of the largest exporters of cement from India. Key news flows / triggers to watch Cement demand recovery over next 12-18 months, Key investment positives driven by pick-up in infrastructure activity. Ambuja Cement is the best cement company in Sustenance of pricing discipline in the key markets India with strong brand equity, favorable market mix of South and North India. (West, North & East), focused segment mix (on Outcome of the appeal against CCI order in the retail/ trade) and well-diversified fuel and transport appellate tribunal on alleged cartelization. mix, translating into one of the highest profitability, capital efficiency and payout. 2QCY12 highlights Ambuja enjoys leadership in key markets (#1 in 1QCY12 realization improved 7% QoQ (10.7% YoY) North and #2 in West). to INR4,556/ton (v/s est INR4,380), driven by strong It has well diversified fuel mix, with only 55-57% price improvement in domestic market and better dependence on domestic coal (of which 33% market/product mix (higher domestic cement linkage), ~30% requirement met by imported coal, contribution). and balance by domestic pet-coke. Volumes grew 6.5% YoY (-9% QoQ) to 5.63mt (v/s Expect softening in imported coal prices to benefit est 5.8mt) incl clinker. Ambuja, given ~30% dependence on imported coal. Costs were largely in-line with estimates, as higher Given its strong cash flow from operations and than freight and other expenses were offset by completion of major capex, we estimate Ambuja to lower than estimated fuel cost have net cash balance of INR22/share by Dec-12. 1QCY12 EBITDA/ton improved by ~INR80 QoQ to INR1,283 (v/s est INR1,138).
Stock info Quarterly Performance (INR Million) Bloomberg ACEM IN Y/E December Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,538 Operating Income 21,764 18,051 23,366 26,333 25,660 85,306 102,540 CMP (INR) 189 Change (%) 6.3 15.4 30.6 19.0 17.9 15.4 38.8 Mcap (USD b) 5.2 EBITDA 5,853 3,115 4,285 7,445 7,223 19,315 27,021 52-Wk Range (INR) 197 / 130 Change (%) -3.0 10.0 36.2 20.7 23.4 5.9 48.2 1, 6, 12 Rel Perf (%) 9 / 13 / 36 EBITDA Margin (%) 26.9 17.3 18.3 28.3 28.2 22.6 26.4 Reported PAT 3,475 1,715 3,099 3,122 4,689 12,289 15,987 Adjusted PAT 3,475 1,854 3,305 5,075 4,689 12,547 17,940 Shareholding pattern (%) Change (%) -11.2 21.9 31.2 24.5 34.9 0.9 43.0 Jun-12 Mar-12 Jun-11 PAT Margin (%) 16.0 10.3 14.1 19.3 18.3 14.7 17.5 Promoter 50.2 50.3 50.4 Key Operating metrics Dom. Inst. 12.4 12.5 14.6 Volume (mt) 5.29 4.81 5.71 6.18 5.63 21.45 23.27 Foreign 29.9 29.5 26.7 Realizations(INR/t)4,114 3,754 4,092 4,260 4,556 3,977 4,406 Others 7.5 7.7 8.3 EBITDA (INR/T) 1,106 648 750 1,204 1,283 901 1,161 E: MOSL Estimates
24 August 27 - 31, 2012 8th Annual Global Investor Conference
Ambuja Cements Financials and valuation
Income Statement (INR Million) Ratios Y/E December 2010 2011 2012E 2013E Y/E December 2010 2011 2012E 2013E Net Sales 73,902 85,306 102,540 117,913 Basic (INR) Change (%) 4.4 15.4 20.2 15.0 EPS 8.1 8.2 11.7 13.3 EBITDA 18,236 19,315 27,021 30,722 Cash EPS 10.7 11.1 14.9 16.8 Change (%) -2.3 5.9 39.9 13.7 BV/Share 47.8 52.4 58.3 66.3 Margin (%) 24.7 22.6 26.4 26.1 DPS 2.6 3.2 3.5 4.0 Depreciation 3,872 4,452 4,995 5,380 Payout (%) 36.7 46.7 44.9 39.7 Interest 487 526 646 600 Other Income - Rec. 2,476 3,050 4,250 4,350 Valuation (x) EO Expense/(Income) -265 358 2,791 0 P/E 24.0 16.8 14.8 PBT after EO Exp. 16,619 17,029 22,839 29,092 Cash P/E 17.7 13.1 11.7 Tax Rate (%) 24.0 27.8 30.0 30.0 P/BV 3.7 3.4 3.0 PAT Adj for EO Items 12,434 12,547 17,940 20,364 EV/Sales 3.2 2.6 2.2 Change (%) 4.7 0.9 43.0 13.5 EV/EBITDA 14.1 9.8 8.4 EV/Ton (Cap) - US$ 180 175 171 Balance Sheet (INR Million) Dividend Yield (%) 1.6 1.8 2.0 Y/E December 2010 2011 2012E 2013E Equity Share Capital 3,060 3,069 3,069 3,069 Return Ratios (%) Net Worth 73,301 80,694 89,704 101,990 RoE 18.1 16.3 21.1 21.3 Deferred Liabilities 5,309 6,436 7,350 8,222 RoCE 24.1 23.2 30.7 30.9 Total Loans 650 494 500 500 Capital Employed 79,260 87,624 97,554 110,713 Working Capital Ratios Asset Turnover (x) 0.9 1.0 1.1 1.1 Net Fixed Assets 56,278 61,865 64,642 69,262 Debtor (Days) 6 10 10 10 Capital WIP 9,307 5,773 5,000 8,000 Inventory (Days) 44.5 39.6 40.0 40.0 Investments 6,260 8,643 13,597 17,057 Creditor (Days) 64 68 52 52
Curr. Assets 31,353 38,283 42,140 48,458 Cash Flow Statement (INR Million) Inventory 9,019 9,250 11,237 12,922 Y/E December 2010 2011 2012E 2013E Account Receivables 1,282 2,409 2,809 3,231 Op. Profit/(Loss) bef. Tax 18,236 19,315 27,021 30,722 Cash and Bank Bal. 17,482 20,712 22,474 25,844 Interest/Dividends Recd. 2,476 3,050 4,250 4,350 Curr. Liability & Prov. 23,942 26,942 27,827 32,067 Direct Taxes Paid -3,983 -4,740 -6,852 -8,728 Account Payables 12,976 15,881 14,483 16,722 (Inc)/Dec in WC 3,617 -699 -1,209 1,291 Provisions 10,966 11,061 13,344 15,345 EO Income 265 -358 -2,791 0 Net Current Assets 7,412 11,341 14,312 16,391 CF from Op. incl EO Exp 20,612 16,568 20,419 27,635
Appl. of Funds 79,260 87,624 97,554 110,713 (inc)/dec in FA -7,870 -6,504 -7,000 -13,000 (Pur)/Sale of Investments 965 -2,384 -4,953 -3,460 Key assumptions/operating metrics CF from Investments -6,905 -8,888 -11,953 -16,460 Parameters CY10 CY11 CY12E CY13E Capacity (MT) 25.0 27.5 27.5 27.5 Issue of Shares 618 846 204 0 Despatches (MT) 20.3 21.4 23.3 25.6 (Inc)/Dec in Debt -534 972 920 873 Growth (%) 8.2 5.4 8.5 10.0 Interest Paid -487 -526 -646 -600 Net Realizations (INR/t) 3,633 3,977 4,406 4,606 Dividend Paid -4,632 -5,741 -7,181 -8,078 Growth (%) -3.5 9.5 10.8 4.5 CF from Fin. Activity -5,035 -4,449 -6,703 -7,806 EBITDA (INR/ton) 896 901 1,161 1,200 EBITDA Margins (%) 24.7 22.6 26.4 26.1 Inc/Dec of Cash 8,673 3,231 1,762 3,370 Add: Beginning Balance 8,809 17,482 20,712 22,474 Closing Balance 17,482 20,712 22,474 25,844
August 27 - 31, 2012 25 8th Annual Global Investor Conference
Ashok Leyland
Company description Key challenges Ashok Leyland (AL), the flagship company of Hinduja Higher capex plans (INR4.5b in FY13) and investment Group, is India's 2nd largest M&HCV player (~25% share) in JVs/subsidiaries (INR3-3.5b) would restrict and largest bus manufacturer. balance sheet improvement. Intensifying competition, particularly from Daimler To expand its product offerings, AL has entered into (Bharat Benz) could materially alter Indian M&HCV 50:50 JV with Nissan for LCVs and John Deere for market's duopoly structure in the long term. construction equipment. Key news flows / triggers to watch Key investment positives Reduction in interest rates & pick-up in economic Despite weakness in M&HCV demand due to macro- activity to boost CV demand. headwinds, AL is expected to report 5% MHCV Launch of new products under AL-Nissan JV. volume growth in FY13 with pick-up in its key Capex & investment plans for FY13. Southern market and new launches in 2HFY13. Launch of LCV Dost by AL-Nissan JV plugs gap in AL's 1QFY13 highlights; guidance for FY13, FY14 product portfolio and marks entry in high growth 1QFY13 realization declined 16% YoY (-10% QoQ) LCV segment. impacted by higher discounts & product mix change While Dost would have adverse impact of 80bp/ in favor of LCV Dost. 120bp on standalone margins in FY13/14, it would EBITDA margin declined 290bp QoQ (-170bp YoY) to contribute 8%/9% to profits. 8% on the back of lower realizations and negative Ramp-up at Pantnagar plant and operating leverage operating leverage. Higher interest cost dragged is expected to offset margin pressure arising from down PAT to INR670m, down 22% YoY (-74% QoQ). higher discounts and increasing Dost contribution. AL earned ~INR150m PAT in 1QFY13 by contract We expect EBITDA margin to decline only 20bp in manufacturing & marketing Dost. However, the JV FY13 to 9.6%. would still be loss-making, and is expected to break To counter the cyclical nature of the M&HCV even at ~50,000 volumes. business, AL is focusing on enhancing contribution AL expects domestic M&HCV sector volumes to from businesses like LCVs, spares, defense kits and remain flat in FY13. It expects its own volumes of power solutions. Also, ramp-up in nascent exports ~132k (incl Dost), with M&HCV growth of 6-7%. It would help offset domestic cyclicality. has also cut Pantnagar's volume guidance to 30,000.
Stock info Quarterly Performance (INR Million) Bloomberg AL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 2,661 Operating Income 25,127 30,946 29,035 43,110 30,074 128,420 142,231 CMP (INR) 22 Change (%) 7.0 14.0 30.4 12.0 19.7 14.9 12.5 Mcap (USD b) 1.1 EBITDA 2,446 3,312 2,104 4,700 2,407 12,561 13,587 52-Wk Range (INR) 33 / 20 Change (%) 3.9 8.6 26.7 (7.5) (1.6) 3.5 28.6 1, 6, 12 Rel Perf (%) -10 / -20 / -10 EBITDA Margin (%) 9.7 10.7 7.2 10.9 8.0 9.8 9.6 Reported PAT 862 1,541 669 2,587 670 5,660 5,697 Adjusted PAT 862 1,541 669 2,574 670 5,647 5,697 Shareholding pattern (%) Change (%) (29.6) (7.8) 54.3 (13.7) (22.3) (10.6) 56.1 Jun-12 Mar-12 Jun-11 PAT Margin (%) 3.4 5.0 2.3 6.0 2.2 4.4 4.0 Promoter 38.7 38.7 38.7 Key Operating metrics Dom. Inst. 14.1 14.7 16.5 Volumes 19,277 23,628 23,218 35,689 27,578 101,812 130,959 Foreign 30.1 30.6 27.9 Avg Realizn (INR m) 1.30 1.31 1.25 1.21 1.09 1.26 1.09 Others 17.1 16.1 16.9 RM Cost (%) 27.9 26.5 26.0 25.6 27.2 25.2 26.3 E: MOSL Estimates
26 August 27 - 31, 2012 8th Annual Global Investor Conference
Ashok Leyland: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 111,771 128,420 142,231 162,996 Basic (INR) Change (%) 54.3 14.9 10.8 14.6 EPS (INR) 2.4 2.1 2.1 2.7 Expenditure 99,634 115,859 128,644 146,994 EPS Growth (%) 49.0 -10.3 0.7 28.0 EBITDA 12,137 12,561 13,587 16,001 Cash EPS (INR) 3.4 3.4 3.6 4.3 EBITDA (%) 10.9 9.8 9.6 9.8 Book Value per Share 14.9 15.8 16.8 18.1 Depreciation 2,674 3,528 3,828 4,266 DPS (INR) 1.0 1.0 1.0 1.2 Interest & Fin. Charges 1,889 2,553 3,162 3,387 Payout (Excl. Div. Tax) % 42.1 47.0 46.7 43.8 Other Income 445 404 350 545 Non-recurring Expense / (Inc) - (16) - - Valuation (x) PBT 8,018 6,900 6,947 8,893 P/E 10.8 10.7 8.4 Effective Rate (%) 21.3 18.0 18.0 18.0 Cash P/E 6.7 6.4 5.3 Adjusted PAT 6,313 5,647 5,697 7,292 EV/EBITDA 7.1 6.8 5.7 Change (%) 48.1 -10.6 0.9 28.0 EV/Sales 0.7 0.7 0.6 Price to Book Value 1.5 1.4 1.3 Balance Sheet (INR Million) Dividend Yield (%) 4.4 4.4 5.2 Y/E March 2011 2012 2013E 2014E Share Capital 1,330 2,661 2,661 2,661 Profitability Ratios (%) Net Worth 39,630 42,082 44,687 48,269 RoE 15.9 13.4 12.7 15.1 Loans 26,733 32,630 37,630 37,630 RoCE 14.8 12.5 12.1 13.7 Deferred Tax Liability 4,439 4,904 5,251 5,696 Foreign curr. translation - 42 42 42 Leverage Ratio Capital Employed 70,802 79,657 87,609 91,636 Debt/Equity (x) 0.7 0.8 0.8 0.8
Net Fixed Assets 46,338 49,135 53,289 52,023 Cash Flow Statement (INR Million) Capital WIP 3,580 5,482 2,500 3,000 Y/E March 2011 2012 2013E 2014E Investments 12,300 15,345 18,845 21,345 OP/(Loss) before Tax 8,018 9,033 9,759 11,735 Interest/Divi. Received 139 404 350 545 Curr.Assets, L & Adv. 43,716 49,195 57,177 66,091 Depr. & Amortisation 2,674 3,528 3,828 4,266 Inventory 22,089 22,306 26,108 29,027 Direct Taxes Paid -1,503 -775 -903 -1,156 Sundry Debtors 11,645 12,302 13,639 15,630 (Inc)/Dec in Wkg. Capital -4,914 -2,580 -2,152 -622 Cash & Bank Balances 1,795 326 1,454 3,125 Other Items 1,638 0 0 0 Current Liab. & Prov. 35,131 39,501 44,202 50,822 CF from Oper. Activity 6,053 9,609 10,882 14,768 Sundry Creditors 23,085 27,725 31,174 35,725 Net Current Assets 8,584 9,695 12,975 15,268 Extra-ordinary Items 0 16 0 0 Application of Funds 70,802 79,657 87,609 91,636 CF after EO Items 6,053 9,625 10,882 14,768
Key assumptions/operating metrics (Inc)/Dec in FA+CWIP -3,501 -5,645 -5,000 -3,500 Y/E March 2011 2012 2013E 2014E (Pur)/Sale of Invest. -5,816 -3,045 -3,500 -2,500 Total Volumes (units) 94,106 101,812 130,959 150,855 CF from Inv. Activity -9,317 -8,690 -8,500 -6,000 Change (%) 47.2 8.2 28.6 15.2 of which Dost (units) 0 7593 32000 42000 Issue of Shares 0 1,330 0 0 Change (%) - - 321 31 Inc/(Dec) in Debt 3,733 5,897 5,000 0 Realisations (INR '000) 1,188 1,261 1,086 1,080 Interest Rec./(Paid) -1,542 -2,553 -3,162 -3,387 Change (%) 4.8 6.2 -13.9 -0.5 Dividends Paid -2,327 -3,092 -3,092 -3,710 CF from Fin. Activity -136 1,582 -1,253 -7,097
Inc/(Dec) in Cash -3,400 2,517 1,128 1,671 Add: Beginning Balance 5,155 1,755 4,272 5,400 Closing Balance 1,755 4,272 5,400 7,072
August 27 - 31, 2012 27 8th Annual Global Investor Conference
Axis Bank
Company description Key challenges Axis Bank (AXSB) is a leading private sector bank in Reliance on bulk deposits is high; in case of tight India, with a balance sheet size of INR2.9t+. liquidity, managing margins may be a challenge. AXSB's Tier-I capital stood at 9.5% (including 1Q Promoted by UTI in 1994, the bank has a countrywide PAT). In our view, it would have to raise capital in presence through 1,681 branches and extension next 3-4 quarters to support its growth momentum. counters in 1,080 locations and 10,300+ ATMs. Maintain tight cost-to-income ratio of 45% is a challenge, considering growing retail business and Over the past 10 years AXSB's assets CAGR is 35% and pressure on core earnings. PAT CAGR 42%. The bank has emerged as one of India's Considering significant macroeconomic stress, and best run banks and third largest private sector bank. AXSB's higher exposure to SME and infrastructure segments, asset quality may come under pressure Key investment positives Key news flows / triggers to watch Margins have come to a normalized level of 3.25- Resolution of key issues in infrastructure, materially 3.5% after a decline of ~40bp to 3.4% over the past altering asset quality and growth outlook two quarters. CASA ratio of ~36% (of which higher Improvement in margins and lower than expected share of granular SA of ~23%) and fall in bulk stress on loan book may provide earnings surprise. deposits rates will cushion margins going forward. Strong corporate relationships, faster branch 1QFY13 highlights; guidance for FY13, FY14 expansion, and high customer acquisitions led to Performance highlights of 1QFY13: Reported loan strong CASA CAGR of 45%+ over FY02-12. We expect growth of 30% (adjusted 21%), 18bp QoQ decline in this trend of healthy growth to continue in SA; NIMs to 3.37%, SA growth of 22% YoY, Fee income however, structural issues in CA deposits growth growth of ~10% YoY, annualized slippage ratio of might lead to overall moderation in CASA growth. 1.4%, additions to restructured loans of INR6.2b, AXSB's strengths in loan syndication, strong liability and outstanding restructured loans at 2.2% of loans. franchise, and SME relationships lead to higher Guidance for FY13: Loan growth of 1.3-1.4x industry contribution of fee income (~1.8%) to RoA. with higher focus on retail loans; NIM of 3.25-3.5%, Led by healthy core income growth and controlled fee income growth in-line with asset growth, stable opex, return ratios remain superior with RoA of 1.5% cost to income ratio of 45%, credit cost of 80-85bp and RoE of 20%. and addition of 200-250 branches every year.
Stock info Quarterly Performance (INR Million) Bloomberg AXSB IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 414 Net Int. Income 17,241 20,073 21,403 21,461 21,799 80,177 95,633 CMP (INR) 1,110 % Change (Y-o-Y) 13.9 24.3 23.5 26.2 26.4 22.2 19.3 Mcap (USD b) 8.2 Other Income 11,679 12,349 14,298 15,876 13,355 54,202 65,224 52-Wk Range (INR) 1309 / 785 Net Income 28,920 32,422 35,701 37,337 35,154 134,380 160,857 1, 6, 12 Rel Perf (%) 5 / -10 / -10 Operating Exp. 13,335 14,665 15,109 16,962 15,517 60,071 71,341 Operating Profit 15,585 17,756 20,592 20,376 19,637 74,309 89,516 Shareholding pattern (%) % Change (Y-o-Y) 7.5 19.5 24.2 11.9 26.0 15.8 20.5 Jun-12 Mar-12 Jun-11 Other Provisions 1,758 4,056 4,223 1,393 2,588 11,430 17,297 Promoter 37.3 37.4 37.2 Net Profit 9,424 9,203 11,023 12,773 11,535 42,422 48,748 Dom. Inst. 13.9 13.4 5.7 % Change (Y-o-Y) 27.0 25.2 23.7 25.2 22.4 25.2 14.9 Foreign 36.1 41.7 45.6 Loan Growth (%) 21.4 26.7 20.4 19.2 29.8 19.2 20.0 Others 12.8 7.5 11.5 NIM (%) 3.3 3.8 3.8 3.6 3.4 3.6 3.6 GNPA (on cust. assets, %) 1.1 1.1 1.1 0.9 1.1 0.9 1.6 E: MOSL Estimates
28 August 27 - 31, 2012 8th Annual Global Investor Conference
Axis Bank: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 151,548 219,946 270,186 311,278 Spreads Analysis (%) Interest Expense 85,918 139,769 174,553 197,753 Avg. Yield-Earning Assets 7.8 9.0 9.4 9.1 Net Interest Income 65,630 80,177 95,633 113,525 Avg. Yield on loans 8.4 9.9 10.3 9.9 Change (%) 31.1 22.2 19.3 18.7 Avg. Yield on Investments 6.9 7.7 7.6 7.6 Non Interest Income 46,321 54,202 65,224 78,891 Avg. Cost-Int. Bear. Liab. 4.6 6.0 6.3 6.0 Net Income 111,951 134,380 160,857 192,417 Avg. Cost of Deposits 4.5 6.0 6.4 6.0 Change (%) 25.1 20.0 19.7 19.6 Interest Spread 3.2 3.1 3.1 3.1 Operating Expenses 47,794 60,071 71,341 85,232 Net Interest Margin 3.4 3.3 3.3 3.3 Pre Provision Profits 64,157 74,309 89,516 107,185 Change (%) 22.4 15.8 20.5 19.7 Profitability Ratios (%) Provisions (excl tax) 12,800 11,430 17,297 24,143 RoE 19.3 20.3 19.6 19.1 PBT 51,357 62,878 72,219 83,041 RoA 1.6 1.6 1.6 1.5 Tax 17,472 20,456 23,471 26,988 Int. Expense/Int.Income 56.7 63.5 64.6 63.5 Tax Rate (%) 34.0 32.5 32.5 32.5 Fee Income/Net Income 26.1 28.2 29.4 29.8 PAT 33,885 42,422 48,748 56,053 Non Int. Inc./Net Income 41.4 40.3 40.5 41.0 Change (%) 34.8 25.2 14.9 15.0 Equity Dividend (Incl tax) 6,704 7,701 8,840 10,165 Efficiency Ratios (%) Core PPP* 57,241 70,662 84,119 100,538 Cost/Income* 42.7 44.7 44.4 44.3 Change (%) 32.2 23.4 19.0 19.5 Empl. Cost/Op. Exps. 33.8 34.6 34.4 34.6 *Core PPP is (NII+Fee income-Opex) Busi. per Empl. (INR m) 120.1 124.0 125.3 130.9 NP per Empl. (INR lac) 1.4 1.5 1.4 1.4 Balance Sheet (INR Million) * ex treasury Y/E March 2011 2012 2013E 2014E Equity Share Capital 4,105 4,132 4,253 4,253 Asset-Liability Profile (%) Reserves & Surplus 185,883 223,953 265,145 312,510 Loans/Deposit Ratio 75.3 77.1 78.4 79.7 Net Worth 189,988 228,085 269,398 316,763 CASA Ratio 41.1 41.5 39.9 38.6 Deposits 1,892,378 2,201,043 2,597,231 3,116,677 Investment/Deposit Ratio 38.0 42.3 39.5 37.8 Change (%) 33.9 16.3 18.0 20.0 G-Sec/Investment Ratio 61.3 62.7 63.3 66.1 of which CASA Dep 777,674 914,220 1,037,433 1,203,178 CAR 12.7 13.7 13.0 12.2 Change (%) 17.8 17.6 13.5 16.0 Tier 1 9.4 9.5 9.4 9.1 Borrowings 262,679 340,717 390,301 445,762 Other Liabilities & Prov. 82,089 86,433 101,586 118,943 Valuation Total Liabilities 2,427,134 2,856,278 3,358,516 3,998,145 Book Value (INR) 463.1 547.4 629.0 740.4 Current Assets 214,087 139,339 192,694 214,539 Change (%) 16.9 18.2 14.9 17.7 Investments 719,916 931,921 1,025,113 1,178,880 Price-BV (x) 2.0 1.8 1.5 Change (%) 28.6 29.4 10.0 15.0 Adjusted BV (INR) 456.6 540.0 612.6 716.8 Loans 1,424,078 1,697,595 2,037,114 2,485,280 Price-ABV (x) 2.1 1.8 1.5 Change (%) 36.5 19.2 20.0 22.0 EPS (INR) 82.5 102.7 114.6 131.8 Fixed Assets 22,731 22,593 22,558 22,202 Change (%) 33.0 24.4 11.6 15.0 Other Assets 46,321 64,829 81,037 97,244 Price-Earnings (x) 10.8 9.7 8.4 Total Assets 2,427,134 2,856,278 3,358,516 3,998,145 Dividend Per Share (INR) 14.0 16.0 17.8 20.4 Dividend Yield (%) 1.4 1.6 1.8 Asset Quality (%) GNPA (INR m) 15,994 18,063 33,244 51,618 NNPA (INR m) 4,104 4,726 10,724 15,406 GNPA Ratio 1.11 1.06 1.61 2.05 NNPA Ratio 0.29 0.28 0.53 0.62 PCR (Excl Tech. write off) 74.2 73.3 67.7 70.2 PCR (Incl Tech. Write off) 80.9 80.9 73.1 73.6 E: MOSL Estimates
August 27 - 31, 2012 29 8th Annual Global Investor Conference
Bajaj Auto
Company description Bajaj Auto (BJAUT), the flagship company of the Bajaj Key challenges group, is India's leading manufacturer of two-wheelers Increasing competitive intensity in the domestic (~88% of sales volume mix) and three-wheelers two-wheeler market could restrict pricing power. (balance 12% of volume mix). Strengthening of commodity prices tends to put pressure on margins. BJAUT is the leader in India's three-wheeler market, and the second largest player in motorcycles, where it Key news flows / triggers to watch Scale-up of recent launches - Pulsar 200NS and enjoys leadership in the premium segment. It is also Discover 125ST would be critical for growth. the largest exporter of two- and three-wheelers Response to Honda's recently launched 110cc Dream (exports account for 36% of its volumes). Yuga (first mass motorcycle) needs to be watched. Key investment positives Recovery in key export markets of SL & Egypt. Weak INR would support margins. While FY13 is Well-diversified product/market mix with both largely hedged with peak realization of INR50/USD, presence in both two- and three-wheelers, and both it would get good rates for FY14 hedges, which domestic and export markets. Its exposure to would support FY14 margins. domestic <125cc segment, where competitive intensity is set to increase, is only ~26%. 1QFY13 highlights; guidance for FY13, FY14 Prime beneficiary of uptrading, over the longer 1QFY13 volumes de-grew 1% YoY (+6% QoQ) to term, with rise in customers' income and aspiration 1.08m. Adverse product/market mix led to levels helped by its leadership in premium sequential decline (-1.4% QoQ) in realizations. motorcycle segment. EBITDA margin declined 190bp QoQ (+10bp YoY) to Exports, which are scaling up rapidly to ~40% in FY13, 17.9% (v/s est 18.7%), impacted by adverse mix of should benefit from alliance with Kawasaki (market product (lower 3W volumes) & market (lower access) and KTM (access to technology & markets). exports), higher staff cost and higher other Renewed strategy with focus on more profitable expenses. Higher other income boosted adj PAT to Pulsar & Discover brands would sustain high margin. INR7.2b (- 1% YoY, -5% QoQ). Significant free cash flow generation coupled with BJAUT expects exports to recover from August 2012, limited capex would help sustain dividend payout resulting in additional three-wheeler sales volume at higher levels (~49% in FY12). of 12-13,000/month.
Stock info Quarterly Performance (INR Million) Bloomberg BJAUT IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 289 Net Op. Income 47,063 51,854 49,859 46,514 48,657 195,290 211,738 CMP (INR) 1,697 Change (%) 21.0 19.4 19.4 12.2 3.4 19.1 8.4 Mcap (USD b) 8.8 EBITDA 8398.4 9754.7 9841.3 9205.5 8,717 37,200 39,323 52-Wk Range (INR) 1839 / 1401 Change (%) 8.1 (9.0) 15.9 14.6 3.8 17.3 5.7 1, 6, 12 Rel Perf (%) 14 / -3 / 12 EBITDA Margin (%) 17.8 18.8 19.7 19.8 17.9 19.0 18.6 Adjusted PAT 7,111 7,898 8,340 7,590 7,184 31,069 31,744 Shareholding pattern (%) Change (%) 20.5 15.8 25.0 12.3 1.0 (9.7) 2.2 Jun-12 Mar-12 Jun-11 Key Operating metrics Promoter 50.0 50.0 50.0 Volumes ('000) 1,093 1,164 1,075 1,017 1,079 4,350 4,685 Dom. Inst. 9.8 8.4 8.1 Realization (INR) 43,066 44,543 46,361 45,729 45,095 44,899 45,196 Foreign 15.3 16.9 16.3 Gross margin (%) 26.4 27.5 28.5 28.8 27.9 27.8 28.2 Others 24.9 24.7 25.6 E: MOSL Estimates
30 August 27 - 31, 2012 8th Annual Global Investor Conference
Bajaj Auto: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 163,981 195,290 211,738 246,132 EPS (INR) 90.4 107.4 109.7 138.1 Change (%) 37.6 19.1 8.4 16.2 EPS growth (%) 43.9 18.8 2.2 25.9 EBITDA 31,711 37,200 39,323 49,315 Cash EPS (INR) 94.6 112.4 114.8 143.4 EBITDA Margins (%) 19.3 19.0 18.6 20.0 Book Value per Share 169.7 208.8 260.0 333.7 Depreciation 1,228 1,456 1,466 1,532 DPS (INR) 40.0 45.0 50.0 55.0 Int. & Fin. Charges 17 222 102 13 Payout (Incl. Div. Tax) % 51.4 48.7 53.3 46.6 Other Income 5,765 6,080 7,271 8,909 Non-recurring Exp. -7,246 1,340 0 0 Valuation (x) PBT 43,476 40,262 45,027 56,680 P/E 18.7 15.8 15.4 12.2 Effective Rate (%) 23.2 25.4 29.5 29.5 Cash P/E 17.9 15.0 14.7 11.8 Adj. PAT 26,150 31,069 31,744 39,959 EV/EBITDA 13.8 11.4 10.4 7.8 Change (%) 43.9 18.8 2.2 25.9 EV/Sales 2.7 2.2 1.9 1.6 Price to Book Value 10.0 8.1 6.5 5.1 Balance Sheet (INR Million) Dividend Yield (%) 2.4 2.7 3.0 3.3 Y/E March 2011 2012 2013E 2014E Share Capital 2,894 2,894 2,894 2,894 Profitability Ratios (%) Net Worth 49,102 60,411 75,226 96,565 RoE 66.7 56.7 46.8 46.5 Deferred Tax 297 484 1,160 2,010 RoCE 76.0 73.0 64.8 64.1 Loans 3,252 975 975 975 Capital Employed 52,651 61,870 77,361 99,550 Leverage Ratio Debt/Equity (x) 0.1 0.0 0.0 0.0 Net Fixed Assets 14,827 14,817 15,268 16,737 Capital WIP 699 417 1,000 1,000 Cash Flow Statement (INR Million) Investments 47,952 48,828 48,828 48,828 Y/E March 2011 2012 2013E 2014E Current Assets 28,726 46,749 65,873 94,345 OP/(Loss) before Tax 32,867 38,829 37,857 47,784 Inventory 5,473 6,785 7,946 9,258 Interest/Div. Received 3,631 3,261 7,271 8,909 Sundry Debtors 3,628 4,228 4,891 5,699 Depreciation & Amort. 1,228 1,456 1,466 1,532 Cash & Bank Balances 5,565 16,538 32,862 56,594 Direct Taxes Paid -9,743 -11,483 -12,607 -15,870 Current Liab. & Prov. 39,553 48,941 53,609 61,360 (Inc)/Dec in Working Capital-8,215 797 1,867 3,011 Sundry Creditors 19,431 20,031 23,231 27,068 CF from Oper. Activity 19,768 32,860 35,854 45,365 Net Current Assets -10,827 -2,192 12,265 32,985 Application of Funds 52,651 61,870 77,361 99,550 (Inc)/Dec in FA+CWIP -1,678 -1,159 -2,500 -3,000 (Pur)/Sale of Invest. -8,184 -6,557 0 0 Key assumptions/operating metrics CF from Inv. Activity -9,863 -7,716 -2,500 -3,000 Y/E March 2011 2012 2013E 2014E Volumes ('000 units) 3,844 4,350 4,685 5,295 Inc. / Dec.in Networth 0 0 0 0 Change (%) 34.2 13.1 7.7 13.0 Inc/(Dec) in Debt -1,866 -2,001 0 0 Realisations (INR) 42,883 44,899 45,196 46,484 Interest Paid -17 -222 -102 -13 Change (%) 2.6 4.7 0.7 2.9 Dividends Paid -6,737 -13,420 -16,928 -18,621 INR/USD 46.5 48.0 50.0 52.0 CF from Fin. Activity -8,620 -15,644 -17,030 -18,634 RM Cost (% of sales) 71.9 72.2 71.8 70.7 Inc/(Dec) in Cash 1,285.4 9,501 16,324 23,731 Add: Beginning Bal. 1,002 5,565 16,538 32,862 Closing Balance 2,287 15,066 32,862 56,594
August 27 - 31, 2012 31 8th Annual Global Investor Conference
Bharat Petroleum Corporation
Company description Key challenges A Fortune 500 company, BPCL has interests in oil refining Ad hoc subsidy sharing, delays in diesel and marketing of petroleum products. It is the third deregulation. largest refining company in India with a capacity of Non-commensurate increase in retail fuel prices as 12mmtpa at its Mumbai refinery and 9.5mmtpa at Kochi. crude price rises leads to under-recoveries for BPCL. BPCL has majority stake (63%) in Numaligarh Refineries, Further, ad-hoc nature of subsidy sharing impacts a 3mmtpa refinery in the north-east. Besides, it has profits, even more so on a quarterly basis. investments in IGL (22.5% stake) and Petronet LNG (12.5% stake). BPCL is a public sector undertaking in Key news flows / triggers to watch which the government of India holds 54.93%. Clarity on certified recoverable reserves from its E&P blocks in Brazil and Mozambique. Key investment positives Capacity utilization and GRM performance at its new Earnings contingent on subsidy sharing: BPCL's 6mmtpa Bina refinery. profitability continues to be determined by Subsidy rationalization by the government and de- quantum of under-recoveries and sharing control of diesel prices. mechanism, rather than fundamentals. Post de- Timelines on (1) cash transfer for PDS kerosene, regulation and subsidy rationalization, BPCL's and (2) limiting of LPG cylinders to households. valuations should benefit due to improvements in (1) earnings quality, (2) RoCE and RoE, (3) cash cycle, 1QFY13 highlights; guidance for FY13, FY14 and (4) debt levels. BPCL's net under-recovery in 1QFY13 stood at INR80b Bina refinery to boost medium-term growth: BPCL due to (1) absence of any budgetary support from has 49% stake in the ~INR114b Bina refinery, which government, and (2) upstream subsidy sharing at will have a capacity of 6mmtpa. Bina is expected to only 32% (v/s 40% in FY12). ramp-up commercial production going forward. BPCL's 1QFY13 reported GRM stood at USD2.6/bbl Expect upside potential in E&P value: BPCL's E&P v/s negative GRM reported by HPCL (USD-2.1/bbl) portfolio is likely to add substantial value as it and IOC (USD-4.8/bbl). completes its appraisal program and gives out the BPCL expects 100% utilization for its JV refinery at certified resource/reserve numbers. Bina, Madhya Pradesh.
Stock info Quarterly Performance (INR Billion) Bloomberg BPCL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 723 Operating Income 461 423 588 646 545 2,119 2,222 CMP (INR) 341 Change (%) 34.7 19.7 60.4 42.9 18.2 39.9 4.9 Mcap (USD b) 4.4 EBITDA -22 -27 37 51 -82 38 42 52-Wk Range (INR) 395 / 230 Change (%) nm nm 406.3 207.6 nm 13 10 1, 6, 12 Rel Perf (%) -13 / 13 / -5 EBITDA Margin (%) -4.7 -6.4 6.3 7.8 -15.0 1.8 1.9 Reported PAT -26 -32 31 40 -88 13 12 Adjusted PAT -26 -32 31 40 -88 13 12 Shareholding pattern (%) Change (%) nm nm 1575.5 323.8 nm -15.2 -10.3 Jun-12 Mar-12 Jun-11 PAT Margin (%) nm nm 5.3 6.1 nm 0.6 0.5 Promoter 55.8 55.8 55.8 Key operating Metrics Dome. Inst. 18.1 18.8 20.2 GRM (USD/bbl) 3.0 1.7 3.5 4.2 2.6 3.2 4.7 Foreign 9.0 8.0 6.8 Gross under recovery 103 49 76 98 116 326 353 Others 17.0 17.5 17.2 Upstream sharing 34 16 36 43 37 130 140 Oil Bonds 35 0 70 92 0 197 213 Net Under/(Over) reco.34 32 -29 -36 80 00 As a % of Gross 32.6 nm nm nm 68.5 0.0 0.0 E: MOSL Estimates; nm - Not Meaningful
32 August 27 - 31, 2012 8th Annual Global Investor Conference
Bharat Petroleum Corporation: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 1,536,450 2,119,639 2,392,999 2,280,411 Basic (INR) Change (%) 24.1 38.0 12.9 -4.7 EPS 22.6 10.8 20.9 21.9 Finished Gds Purchase 701,497 918,786 1,066,497 986,722 Cash EPS 48.8 44.1 56.4 59.7 RM & Other exp 692,475 1,030,487 1,173,849 1,167,766 Book Value 212.3 216.7 231.7 248.9 Other operating Exp. 99,865 123,996 94,279 68,340 Dividend 7.0 5.5 5.0 4.0 EBITDA 42,612 46,370 58,375 57,583 Payout (incl. Div. Tax.) 39.4 59.6 28.0 21.3 % of Net Sales 2.8 2.2 2.4 2.5 Depreciation 18,914 24,108 25,715 27,300 Interest 12,468 22,591 20,582 15,776 Valuation (x) Other Income 17,252 16,324 11,517 9,391 P/E 15.1 31.6 16.3 15.6 PBT 28,483 15,995 23,594 23,898 Cash P/E 7.0 7.7 6.0 5.7 Tax 11,062 7,482 7,489 7,038 EV / EBITDA 11.8 10.3 7.9 7.8 Rate (%) 38.8 46.8 31.7 29.5 EV / Sales 0.3 0.2 0.2 0.2 Minority Interest 1,071 705 1,005 1,005 Price / Book Value 1.6 1.6 1.5 1.4 PAT 16,350 7,809 15,101 15,856 Dividend Yield (%) 2.1 1.6 1.5 1.2 Adj. PAT 16,350 7,809 15,101 15,856 Change (%) 0.2 -52.2 93.4 5.0 Profitability Ratios (%) Balance Sheet (INR Million) RoE 11.1 5.0 9.3 9.1 RoCE 5.5 5.3 8.0 7.6 Y/E March 2011 2012 2013E 2014E Share Capital 7,231 7,231 7,231 7,231 Reserves 146,277 149,434 160,305 172,776 Turnover Ratios Net Worth 153,508 156,664 167,535 180,007 Debtors (No. of Days) 7 6 6 6 Minority interest 9,975 10,679 11,684 12,689 Asset Turnover (x) 4.8 5.9 5.7 4.8 Loans 251,855 237,117 207,115 197,217 Deferred Tax 13,074 13,074 12,733 12,392 Leverage Ratio Capital Employed 428,412 417,535 399,068 402,305 Debt / Equity (x) 1.6 1.5 1.2 1.1
Gross Fixed Assets 344,851 375,695 459,927 481,870 Cash Flow Statement (INR Million) Less: Depreciation 152,581 176,690 202,405 229,705 Y/E March 2011 2012 2013E 2014E Net Fixed Assets 192,269 199,005 257,522 252,165 OP/(Loss) before Tax 28,632 15,995 23,594 23,898 Capital WIP 82,864 90,000 45,000 45,000 Depreciation 18,914 24,108 25,715 27,300 Investments 84,600 96,510 111,510 126,510 Intangibles 3,855 3,855 3,855 3,855 Interest Paid 12,468 22,591 20,582 15,776 Curr. Assets, L & Adv. Direct Taxes Paid -12,475 -7,482 -7,830 -7,379 Inventory 182,135 186,953 178,997 169,887 Other operating items -13,028 0 0 0 Debtors 28,779 42,576 38,034 35,443 (Inc)/Dec in Wkg. Capital 13,489 48,863 29,765 12,881 Cash & Bank Balance 7,971 20,174 2,955 9,430 CF from Op. Activity 48,001 104,075 91,827 72,476 Loans & Advances 86,421 86,356 86,356 86,356 Current Liab. & Prov. (Inc)/Dec in FA & CWIP -43,057 -37,980 -39,232 -21,943 Liabilities 206,051 278,217 295,725 297,598 (Pur)/Sale of Investments38,532 -11,910 -15,000 -15,000 Provisions 34,462 29,709 29,469 28,777 CF from Inv. Activity -4,525 -49,890 -54,232 -36,943 Net Current Assets 64,792 28,133 -18,852 -25,258 Less: Miscellaneous exp. 33 33 33 33 Issue of Shares 0 0 0 0 Application of Funds 428,412 417,535 399,068 402,305 Net Inc / (Dec) in Debt 4,137 -14,738 -30,002 -9,898 Key assumptions/operating metrics Interest paid -13,967 -22,591 -20,582 -15,776 Y/E March 2011 2012 2013E 2014E Dividends Paid -6,449 -4,653 -4,230 -3,384 Exchange rate 45.6 47.9 53.5 52.0 Other Fi. Activities 3,278 0 0 0 Marketing sales (mmt) 29.1 31.1 32.9 33.5 CF from Fin. Activity -13,001 -41,981 -54,814 -29,058 Refinery throughput (mmt) 21.8 22.9 24.0 24.2 GRM (USD/bbl) 4.5 3.2 4.7 6.0 Inc / ( Dec) in Cash 30,475 12,203 -17,219 6,475 Singapore GRM (USD/bbl) 5.2 8.2 7.8 8.0 Cash (incl ST borrowings)-22,504 7,971 20,174 2,955 Prem/(disc) -0.7 -5.1 -3.1 -2.0 Closing Balance 7,971 20,174 2,955 9,430 E: MOSL Estimates
August 27 - 31, 2012 33 8th Annual Global Investor Conference
Bharti Airtel
Company description Key news flows / triggers to watch Bharti Airtel is one of the world's leading providers of 2G spectrum auction mandated by the Supreme telecom services with significant presence in India, Court is expected to be held in Nov-12. The auction operations spread over 17 countries of Africa, Sri Lanka is expected to set the base price for all future and Bangladesh with an aggregate customer base of spectrum payments. ~260m. It is an integrated operator with presence in Potential listing of passive infrastructure subsidiary wireless, fixed-line and broadband, long distance, Bharti Infratel. enterprise, and passive infrastructure. It is India's Final government decision on spectrum re-farming. largest wireless operator with revenue market share Ramp-up of its 3G subscriber base post recent sharp of ~30% and population coverage of 86%. tariff cuts introduced by the industry. Key investment positives 1QFY13 highlights; guidance for FY13, FY14 Bharti continues to consolidate its wireless 1QFY13 PAT declined 37% YoY and 24% QoQ to leadership in India with wireless subscriber share INR7.6b, significantly below estimate of INR10.7b. of ~20% and revenue share of ~30%. Consolidated revenue of INR 193.5b (+ 3.3% QoQ) Well positioned to capture rural growth given deep was broadly in-line. EBITDA/PAT were 8/29% below coverage and favorable frequency allocation. estimates due to 300bp QoQ EBITDA margin Industry consolidation is inevitable given continued decline. PAT was boosted by INR1.6b forex gain. high losses of challengers and stretched balance India mobile traffic grew 3.7% QoQ and mobile RPM sheets across operators. declined 2.5% QoQ to 42.7p; both in-line. Africa EBITDA declined 8% QoQ to USD275m (v/s Key challenges est flat) on 0.4% QoQ revenue growth (2.7% traffic Hyper-competition in the Indian mobile business. growth, 3.1% RPM decline). EBITDA margin declined Regulatory uncertainty and significant potential 200bp QoQ to 25.8%. liability of ~INR400b related to allocated spectrum Africa business was impacted from higher economic if incumbents are required to pay in line with the linkages of economy with Europe, violence in announced reserve price of INR28b per MHz for pan- Nigeria/DRC and increased competition in Ghana. India spectrum in 1,800MHz band. Net debt increased by INR32.5b QoQ to ~INR683b. High sensitivity to forex and interest rates. Bharti has guided for capex of USD2-2.2b in India & Adverse macro environment in Africa. SA, and USD900m in Africa.
Stock info Quarterly Performance (INR Million) Bloomberg BHARTI IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 3,798 Revenue 169,749 172,698 184,767 187,294 193,501 714,507 801,736 CMP (INR) 262 YoY Change(%) 38.8 13.5 17.3 15.1 14.0 20.2 12.2 Mcap (USD b) 17.8 EBITDA 57,058 58,151 59,584 62,329 58,487 237,122 244,597 52-Wk Range (INR) 417 / 253 YoY Change(%) 29.3 13.5 19.6 14.4 2.5 18.8 3.2 1, 6, 12 Rel Perf (%) -22 / -22 / -39 EBITDA Margin(%) 33.6 33.7 32.2 33.3 30.2 33.2 30.5 Adjusted PAT 12,152 10,270 10,113 10,059 7,622 42,595 28,439 YoY Change(%) -27.7 -38.2 -22.4 -28.2 -37.3 -29.6 -33.2 Key operating metrics Shareholding pattern (%) India Mobile Jun-12 Mar-12 Jun-11 Traffic (B Min) 221 217 219 231 239 889 997 Promoter 45.7 45.7 45.5 RPM (INR/min) 0.43 0.43 0.45 0.44 0.43 0.44 0.43 Dom. Inst. 8.4 8.2 8.5 Africa Foreign 39.9 40.0 40.6 Subscribers (m) 46 48 51 53 56 53 65 Others 6.0 6.2 5.4 ARPU (USD/mon) 7.2 7.3 7.1 6.8 6.5 7.1 6 EBITDA margin (%) 25.2 26.2 26.7 27.8 25.8 26.5 25.9 E: MOSL Estimates
34 August 27 - 31, 2012 8th Annual Global Investor Conference
Bharti Airtel: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Revenues 594,672 714,507 801,736 884,756 Basic (INR) Change (%) 42.1 20.2 12.2 10.4 EPS 15.9 11.2 7.5 10.4 Total Expenses 395,007 477,385 557,138 609,474 Cash EPS 42.8 46.5 48.6 53.4 EBITDA 199,664 237,122 244,597 275,282 Book Value 136.1 140.7 143.7 154.0 % of Gross Sales 33.6 33.2 30.5 31.1 DPS 1.0 1.1 0.7 1.0 Depn. & Amortization 102,066 133,680 155,780 162,892 Payout %(Incl.Div.Taxes) 6.3 10.0 10.0 10.0 EBIT 97,598 103,442 88,818 112,390 Net finance cost 21,813 38,185 38,559 38,963 Valuation (x) Other Income 998 -73 -222 -245 P/E 16.4 23.3 35.0 25.1 PBT 76,783 65,184 50,037 73,182 Cash P/E 6.1 5.6 5.4 4.9 Tax 17,790 22,602 21,217 27,654 EV/EBITDA 8.0 6.9 6.9 5.8 Rate (%) 23.2 34.7 42.4 37.8 EV/Sales 2.7 2.3 2.1 1.8 Minority Interest -1,475 -13 381 5,952 Price/Book Value 1.9 1.9 1.8 1.7 Adjusted PAT 60,468 42,595 28,439 39,577 Dividend Yield (%) 0.4 0.4 0.3 0.4
Balance Sheet (INR Million) Profitability Ratios (%) Y/E March 2011 2012 2013E 2014E RoE 12.6 8.1 5.3 7.0 Share Capital 18,988 18,988 18,988 18,988 RoCE 8.7 6.2 4.5 5.1 Add. Paid up Capital 56,499 56,499 56,499 56,499 Reserves 412,181 430,626 443,150 476,363 Turnover Ratios Net Worth 487,668 506,113 518,637 551,850 Debtors (Days) 34 33 34 34 Loans 616,708 690,232 871,062 970,254 Asset Turnover (x) 0.78 0.65 0.70 0.78 Minority Interest 28,563 27,695 26,409 32,360 Other Liabilities 28,078 31,920 38,739 39,845 Leverage Ratio Deferred Tax Liability 18,572 18,861 22,124 22,943 Net Debt/Equity (x) 1.2 1.2 1.3 1.0 Capital Employed 1,179,589 1,274,821 1,476,971 1,617,252 Cash Flow Statement (INR Million) Gross Block 1,599,377 1,776,560 1,928,439 2,037,680 Y/E March 2011 2012 2013E 2014E Less : Depreciation 310,634 440,740 517,139 680,037 Op.Profit/(Loss) bef Tax 199,664 237,122 244,597 275,282 Net Block 1,288,743 1,335,820 1,411,300 1,357,643 Other Income 998 -73 -222 -245 Other Non-Curr. Assets 64,244 86,711 106,505 107,146 Interest Paid -21,813 -38,185 -38,559 -38,963 Direct Taxes Paid -37,970 -25,730 -28,673 -27,654 Curr. Assets 112,077 148,084 304,832 504,140 (Inc)/Dec in Wkg. Cap. 120,819 -18,280 42,819 -4,344 Inventories 2,139 1,308 1,341 1,479 CF from Op.Activity 261,699 154,854 219,963 204,076 Debtors 54,929 63,735 75,675 82,182 Cash & Bank Balance 9,575 20,300 82,921 172,921 (inc)/Dec in FA + CWIP -848,290 -180,757 -231,260 -109,235 Short-term investments 6,968 18,934 93,490 193,490 (Pur)/Sale of Investments 45,451 -11,990 -83,761 -100,000 Other Current Assets 38,466 43,807 51,405 54,068 CF from Inv. Activity -802,839 -192,748 -315,020 -209,235
Curr. Liab. & Prov. 285,475 295,795 345,666 351,678 Issue of Shares 9,624 -19,791 -18,641 -74 Creditors 249,737 243,461 297,728 303,465 Inc/(Dec) in Debt 514,810 73,524 180,830 99,192 Other Current Liabilities 35,738 52,334 47,937 48,213 Other Financing Activities 961 -5,113 -4,508 -3,959 Net Curr. Assets -173,398 -147,710 -40,834 152,462 CF from Fin.Activity 525,395 48,620 157,681 95,159
Appl. of Funds 1,179,589 1,274,821 1,476,970 1,617,252 Inc/(Dec) in Cash -15,748 10,725 62,621 90,000 E: MOSL Estimates Add: Opening Balance 25,323 9,575 20,300 82,921 Closing Balance 9,575 20,300 82,921 172,921
August 27 - 31, 2012 35 8th Annual Global Investor Conference
Cairn India
Company description Key challenges Cairn India, an E&P company, listed in January 2007 Smooth approvals for Rajasthan production through an IPO after it spun off from its parent Cairn ramp-up Energy Plc. Recently, Cairn Energy sold its majority stake Clarity on cash utilization and payment of maiden in Cairn India to Vedanta Group. Cairn has working dividend. interest in 10 E&P blocks. Ravva and Cambay blocks produce about 40kboepd (Cairn WI ~10kbpd). The Key news flows / triggers to watch Rajasthan block, which accounts for ~80% of Cairn's Debottlenecking of pipeline. reserves, produced at 167kbpd (Cairn WI ~ 117kbpd) in Approvals for further exploration in Rajasthan 1QFY13 and is currently producing at 175kbpd. block. Likely special dividend given the comfortable cash Key investment positives position (net cash at USD2b as on June 30, 2012). Expect ramp-up in production, smooth government approvals: Resolution of royalty and cess issue has 1QFY13 highlights; guidance for FY13, FY14 realigned its economic interests with its JV partner, Rajasthan production averaged 167kbpd in 1QFY13 ONGC, and the government. Post Vedanta with exit rate of 175kbpd. acquisition, it has ramped up its production from Rajasthan realization stood at USD100/bbl, implying 125 to 175kbpd. Key things to be watch out in near 9.1% discount to Brent price. term are (1) debottlenecking of pipeline, and (2) Guided capex of USD2b over FY13-14 includes: production ramp-up. Expect significant free cash (1) USD600m for Rajasthan exploratory activities flow as production from Rajasthan ramps up. (subject to government approvals), (2) USD600m for Upside from additional exploration: Rajasthan block Rajasthan development activities (management is a world-class asset. There remains upside from hopeful of easy approvals), and (3) USD800m for current area and additional area to be developed. other exploratory activities in its exploration blocks. Initial success in other exploratory blocks: Of the Ramp-up delayed due to (a) delay in pipeline de- current 7 exploration blocks, 3 (2 in KG basin and 1 bottlenecking, and (b) delay in the Aishwarya start in Sri Lanka) have already recorded discoveries and from 2HCY12 to 4QFY13. are likely to provide valuation upsides.
Stock info Quarterly Performance (INR Billion) Bloomberg CAIR IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,908 Operating Income 37 27 31 37 44 131 175 CMP (INR) 334 Change (%) 341.7 -1.3 0.0 -0.1 19.6 27.6 33.1 Mcap (USD b) 11.4 EBITDA 32 21 25 30 35 108 132 52-Wk Range (INR) 401 / 250 Change (%) 390.6 -3.3 -0.7 -5.0 10.0 27 22 1, 6, 12 Rel Perf (%) 2 / -10 / 15 EBITDA Margin (%) 85.5 79.3 82.2 81.6 78.7 82.4 75.6 Reported PAT 27 21 23 22 38 93 107 Adjusted PAT 27 8 23 22 38 79 107 Change (%) 868.9 -51.9 12.5 -11.0 40.3 25.3 35.1 PAT Margin (%) 73.4 28.8 73.0 59.9 86.2 60.5 61.4 Shareholding pattern (%) Key Metrics Jun-12 Mar-12 Jun-11 Rajasthan (gross) 125.1 125.3 125.1 137.6 167.1 128.3 173.0 Promoter 58.9 58.9 62.2 Sales - Cairn's Share (kboepd) Dom. Inst. 6.4 7.0 7.3 Ravva and Cambay 12.1 11.5 11.4 10.9 10.2 11.5 10.2 Foreign 26.9 29.2 7.5 Rajasthan 87.6 87.7 87.6 96.3 117.0 89.8 121.1 Others 7.9 4.9 23.0 Realiz. (USD/bbl) 103.4 100.0 98.3 106.7 99.3 102.1 92.5 Disc. to Brent (%) 10.5 10.0 8.2 8.7 8.7 9.0 11.0 E: MOSL Estimates
36 August 27 - 31, 2012 8th Annual Global Investor Conference
Cairn India: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 102,779 131,130 174,533 180,090 Basic (INR) Change (%) 533.3 27.6 33.1 3.2 EPS 33.3 41.7 56.3 48.4 Change in Stock -264 -263 -180 0 Adjusted EPS 33.3 48.8 56.3 48.4 Employee Costs 1,105 861 991 1,139 Cash EPS 39.6 49.3 67.0 60.2 Operating Costs 16,709 22,475 41,793 53,901 Book Value 211.9 244.0 287.4 324.7 EBITDA 85,228 108,056 131,929 125,050 Adj. Book Value 78.7 110.9 154.3 191.7 DPS 0.0 8.3 11.3 9.7 % of Net Sales 82.9 82.4 75.6 69.4 Payout (incl. Div. Tax.) 0.0 19.5 22.9 22.9 D,D&A (incl. w/off) -13,596 -17,391 -25,255 -27,668 Interest -2,909 -2,220 -345 0 Valuation (x) Other Income 1,288 3,194 4,861 7,378 P/E 8.0 5.9 6.9 EBIT 70,011 91,639 111,190 104,761 Cash P/E 6.8 5.0 5.5 Forex Fluctuations -1,112 6,148 5,841 0 EV / EBITDA 5.3 3.9 3.8 Exceptional Item 0 -13,552 0 0 EV / BOE (in USD, 1P basis) 16.5 13.3 12.5 PBT 68,899 84,235 117,031 104,761 Price / Book Value 1.4 1.2 1.0 Tax 5,556 4,857 9,824 12,647 Dividend Yield (%) 2.5 3.4 2.9 Rate (%) 7.9 5.3 8.8 12.1 PAT 63,343 79,378 107,207 92,113 Profitability Ratios (%) Adjusted PAT 63,343 92,929 107,207 92,113 RoE 17.1 21.4 21.2 15.8 Change (%) 502.6 46.7 15.4 -14.1 RoCE 17.9 20.7 21.7 17.7
Balance Sheet (INR Million) Turnover Ratios Debtors (No. of Days) 32 29.0 25.0 25.0 Y/E March 2011 2012 2013E 2014E Fixed Asset Turnover (x) 1.5 1.7 2.1 1.3 Share Capital 19,019 19,026 19,026 19,026 Reserves & Surplus 383,913 445,126 527,800 598,834 Leverage Ratio Net Worth 402,932 464,152 546,826 617,860 Net Debt / Equity (x) 0.0 -0.1 -0.2 -0.3 Total Loans 26,782 0 0 0 Deferred Tax 5,750 6,876 11,643 9,623 Capital Employed 435,465 471,027 558,468 627,483 Cash Flow Statement (INR Million) Y/E March 2011 2012 2013E 2014E Net Fixed Assets 59,236 61,582 60,678 99,485 Profit /(Loss) before Tax 68,900 84,235 117,031 104,761 Prod. Proper.(net ofdeple.)20,850 54,101 42,329 33,557 Depreciation 12,226 14,403 20,175 22,422 Capital WIP 39,819 10,318 51,209 45,963 Other op activities 4,860 14,801 10,030 5,246 Goodwill 253,193 253,193 253,193 253,193 Direct Taxes Paid -12,592 -15,544 -10,007 -14,666 Investments 10,945 18,356 18,356 18,356 (Inc)/Dec in Wkg. Capital -10,088 4,031 1,437 0 Deferred tax assets 138 138 138 138 CF from Op. Activity 63,306 101,925 138,666 117,762 Curr. Assets, L & Adv. Inventory 3,277 5,389 7,173 7,401 (Inc)/Dec in FA & CWIP -25,648 -23,488 -53,471 -52,457 Debtors 14,829 10,419 11,954 12,335 (Pur)/Sale of Invest. -24,004 -7,411 0 0 Cash & Bank Balance 44,847 70,933 131,595 175,820 Other In activities 903 0 0 0 Loans&Adv. and Other CA 16,655 16,655 16,655 16,655 CF from Inv. Activity -48,749 -30,899 -53,471 -52,457 Current Liab. & Prov. Liabilities 12,638 14,370 19,127 19,736 Change in Equity 670 7 0 0 Provisions 16,628 16,628 16,628 16,628 Inc / (Dec) in Debt -7,255 -26,782 0 0 Net Current Assets 50,342 72,397 131,622 175,848 Other fin, activities -2,071 0 0 0 Misc. Expenses 943 943 943 943 Dividends Paid 0 -18,165 -24,533 -21,079 Application of Funds 435,465 471,027 558,468 627,483 CF from Fin. Activity -8,656 -44,940 -24,533 -21,079 Key assumptions/operating metrics Exchange rate (USD/INR) 45.6 47.9 53.5 52.0 Inc / ( Dec) in Cash 5,902 26,086 60,662 44,225 Brent (USD/bbl) 87 114 105 100 Add: Opening Balance 6,367 12,045 70,933 131,595 Rajasthan gross prod. (kbpd) 99 128 173 200 Closing Balance 12,269 38,132 131,595 175,820 Rajasthan net reali. (USD/bbl)76 104 93 88 Bank deposit adj 32,578 32,802 0 0 Disc.(Rajasthan Crude-USD/bbl)12 9 11 13 Closing Balance 44,847 70,933 131,595 175,820 E: MOSL Estimates
August 27 - 31, 2012 37 8th Annual Global Investor Conference
CESC
Company description Key risk CESC, an RP Sanjiv Goenka Group Company, is one of Continued losses at Spencer's and funding through the oldest integrated power utilities in India with standalone cash flows of CESC. Economic slowdown presence in generation, distribution and mining. Its could have a bearing on revival of Spencer's. installed generation capacity stands at 1.2GW and Fuel availability and tariff/structure PPA for balance distribution network encompasses 2.5m consumers in (0.8GW) open capacity of the 1.2GW of projects Kolkata and Howrah region. 1.2GW of generation under construction. projects are under construction and additional 5.9GW Possible funding gap if the development on Orissa of projects are in pipeline. CESC has presence in retail / Chattisgarh project has to commence in near term. business with ~1msf area in operation under the brand Spencer's. Key news flows / triggers to watch Committee of Secretaries (CoS) recommended 51% Key investment positives FDI in multi-brand retail. Cabinet approval awaited. Assured return from existing generation and Improvement in cash losses at Spencer's and distribution business provides steady cash flow at improvement in store level EBITDA. INR4b+ p.a. Improved visibility return for 1.2GW of project Recent multi-year tariff order improves visibility on based on PPA and Fuel sourcing. capex till FY14 and hence, on core profit growth. CESC has spent INR8.3b towards under construction 1QFY13 highlights; guidance for FY13, FY14 projects of 1.2GW and has initiated development CESC's 1QFY13 PAT stood in-line with estimate. activity for further generation projects of 5.9GW. Store revenue growth and higher store EBITDA for Restructuring at Spencer's has led to improvement Spencer was key positive. in gross margins and reduction in EBITDA losses to Tariff Approval for the period of FY12-14 received INR1.5b in FY12 v/s INR1.7b in FY11. Store level for Kolkata Distribution business; capex of INR19b EBITDA has further improved to INR42/sft/mth in over FY12-14E approved; RoE increased by 1.5%. 1QFY13 v/s INR26 in 1QFY12. Further reduction in Consolidation continues at Spencer's with closure losses / value unlocking would be key positive. of 19 Small Express Stores. 1QFY13 store level CESC has cash/liquid investment of INR10b, which EBITDA stood at INR42/sft/mth, up from INR26 YoY. along with regulated profit of INR4b pa provides CESC targets to reduce Spencer's cash losses by near term growth capital. INR400m in FY13E.
Stock info Quarterly Performance (INR Million) Bloomberg CESC IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 125 Operating Income 11,830 12,410 10,320 13,790 14,200 45,930 52,527 CMP (INR) 312 Change (%) 7.9 12.3 9.9 57.6 20.0 12.2 14.4 Mcap (USD b) 0.7 EBITDA 2,671 2,600 2,130 4,320 2,900 11,570 12,426 52-Wk Range (INR) 320 / 186 Change (%) 4.3 -18.2 -15.8 75.6 8.6 7.8 7.4 1, 6, 12 Rel Perf (%) 1 / 11 / -1 EBITDA Margin (%) 22.6 21.0 20.6 31.3 20.4 25.2 23.7 Reported PAT 1,111 1,140 740 2,660 1,250 5,500 5,970 Adjusted PAT 1,111 1,140 740 2,510 1,250 5,500 5,970 Shareholding pattern (%) Change (%) 1.0 -15.6 -32.7 124.1 12.5 17.8 8.5 Jun-12 Mar-12 Jun-11 PAT Margin (%) 9.4 9.2 7.2 18.2 8.8 12.0 11.4 Promoter 52.5 52.5 52.5 Key Operating metrics Dom. Inst. 16.0 16.8 18.0 Plant PLF (%) 94.9 91.8 86.5 76.6 96.4 88 92.5 Foreign 18.4 17.9 17.9 Spencer Area (msf) 0.95 0.99 1.01 1.00 0.97 1.00 1.17 Others 13.1 12.9 11.6 EBITDA(INR/sft/mth)* 26 31 35 n.a. 43 32 n.a. E: MOSL Estimates; * Spencer Store
38 August 27 - 31, 2012 8th Annual Global Investor Conference
CESC: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Total Revenues 40,942 46,050 52,527 58,139 Basic (INR) EBITDA 10,047 10,822 11,706 12,352 EPS * 38.9 44.1 47.5 53.0 % of Total Revenues 24.5 23.5 22.3 21.2 CEPS 60.2 67.2 72.8 79.5 Depreciation 2,674 2,900 3,171 3,323 Book Value 342.7 386.6 428.5 475.8 Interest 2,755 2,758 2,982 3,044 DPS 4.0 5.0 5.0 5.0 Other Income 1,524 1,769 1,914 2,348 Payout (incl. Div. Tax.) 10.2 11.3 10.5 9.4 PBT 6,142 6,933 7,467 8,333 Valuation (x) Tax 1,259 1,390 1,497 1,671 P/E 8.0 7.1 6.6 5.9 Rate (%) 20.5 20.0 20.0 20.0 EV/EBITDA 5.5 5.2 4.9 4.6 Reported PAT 4,870 5,543 5,970 6,662 EV/Sales 1.3 1.2 1.1 1.0 Adjusted PAT 4,670 5,543 5,970 6,662 Price/Book Value 0.9 0.8 0.7 0.7 Change (%) 7.8 18.7 7.7 11.6 Dividend Yield (%) 1.3 1.6 1.6 1.6 Excl Spencers; fully diluted Profitability Ratios (%) Balance Sheet (INR Million) RoE 11.3 12.1 11.7 11.7 RoCE 10.2 10.6 10.4 10.2 Y/E March 2011 2012 2013E 2014E Share Capital 1,256 1,256 1,256 1,256 Turnover Ratios Reserves and Surplus 41,787 47,304 52,558 58,505 Debtors (Days) 55 82 74 66 Revaluations Reserves 12,650 11,558 10,980 10,431 Inventory (Days) 86 67 61 55 Share Holder Funds 55,692 60,118 64,794 70,191 Asset Turnover (x) 55.2 0.6 0.7 0.7
Leverage Ratio LT Borrowings 21,529 21,671 26,904 29,781 Debt/Equity (x) 0.6 0.5 0.6 0.6 Advance against Depn. 5,143 5,660 5,660 5,660 Consumer Security Dep. 9,355 10,509 11,034 11,586 Cash Flow Statement (INR Million) Other LT Liabilities 7,423 7,997 7,997 7,997 2011 2012 2013E 2014E LT Provisions 673 893 982 1,080 PBT before EO Items 6,142 6,933 7,467 8,333 Non Current Liabilities 44,122 46,730 52,577 56,104 Add: Depreciation 2,674 2,900 3,171 3,323 Interest 2,755 2,758 2,982 3,044 ST Borrowings 4,897 4,328 3,895 3,505 Less : Direct Taxes Paid 1,259 1,390 1,497 1,671 Trade Payables 2,803 2,910 3,515 3,890 (Inc)/Dec in WC -832 -1,336 -2,467 -2,445 Other Current Liabilities 9,084 12,305 13,223 14,029 CF from Operations 9,480 9,865 9,656 10,584 Current Liabilities 17,506 20,427 21,641 22,541 CF from Op. incl EOI 9,480 9,865 9,656 10,584 Total Equity & Liab. 117,321 127,274 139,012 148,836 (Inc)/dec in FA -5,070 -3,561 -2,785 -3,143 Fixed Assets 77,355 80,915 83,700 86,843 (Pur)/Sale of Investments -4,058 -1,939 -3,102 -3,200 Non Current Investments 8,543 10,482 13,583 16,783 CF from Investments -9,127 -5,499 -5,886 -6,343 Non Current Assets 86,855 92,142 98,028 104,372 Current Investments 2,300 850 850 850 (Inc)/Dec in Net Worth -557 -690 0 0 Inventories 2,944 2,947 3,137 2,965 (Inc)/Dec in Debt 2,039 -1,174 -5,233 -2,876 Trade Receivables 5,589 9,770 10,619 10,578 (Inc)/Dec in Custo. Secu. Dep.390 -1,154 -525 -552 Less: Interest Paid 2,755 2,758 2,982 3,044 Cash and Bank Balance 8,388 8,598 12,105 14,707 Dividend Paid 581 716 716 716 ST Loan and Advances 10,908 12,215 13,415 14,415 CF from Fin. Activity -3,163 -4,156 -263 -1,639 Other Current Assets 336 752 857 949 Current Assets 30,466 35,132 40,984 44,464 Inc/Dec of Cash -2,810 210 3,507 2,602 Total Assets 117,321 127,274 139,012 148,836 Add: Beginning Balance 11,198 8,388 8,598 12,105 Closing Balance 8,388 8,598 12,105 14,707 Key assumptions/operating metrics Y/E March 2011 2012 2013E 2014E Capex 5,500 6,238 6,603 6,466 Regulated Equity 23,303 24,834 27,379 29,602 Infra Investments 7,161 8,261 11,312 14,412 Spencer Investments 10,029 11,093 12,293 13,293 Installed Capacity (MW) 1,225 1,225 1,225 1,825
August 27 - 31, 2012 39 8th Annual Global Investor Conference
DB Corp
Company description Relatively lower average cover price at INR2.5 for D B Corp (DBCL), one of the largest print media DB Corp acts as a competitive barrier. companies of India, publishes 8 newspapers with 65 editions and 199 sub editions in 4 languages Key challenges (Hindi, Gujarati, English and Marathi) across 13 states Lower ad spends led by macro slowdown. in India. Newsprint cost inflation; INR depreciation resulting Flagship newspapers Dainik Bhaskar (in Hindi) in higher cost of newsprint. established in 1958, Divya Bhaskar and Saurashtra EBITDA losses in emerging editions. Samachar (in Gujarati) have a combined readership of ~19 million. Key news flows / triggers to watch Other business interests include (1) the radio Break-even of Jharkhand and Maharashtra business. segment through the brand "My FM" Radio station Improvement in macro factors. with presence in 7 states and 17 cities, and (2) a Potential moderation in the newsprint prices. strong online presence in internet portals. 1QFY13 highlights; guidance for FY13, FY14 Key investment positives Revenue improved 7% YoY and 5% QoQ to INR3.77b. DBCL is the only media conglomerate to enjoy Ad revenue remained flat YoY at INR2.7b; Circulation leadership position in multiple states, in multiple revenue grew 15% YoY to INR656m. languages. It is a dominant player in all its major EBITDA declined 24% YoY to INR765m, primarily due markets. to sluggish revenue growth. EBITDA margin in mature editions remains healthy EBITDA margin declined ~800bp YoY to 20.3%. at ~30% despite significant slowdown in ad PAT declined 29% YoY to INR437m. revenues led by lower GDP growth. Raw material cost as a percentage of revenue With most of the launches related to Maharashtra increased ~200bp QoQ to 35.3%. Newsprint costs entry already through, we expect EBITDA loss in increased by ~13% YoY led by ~6% increase in emerging editions to peak out and start reversing. volumes as well as pricing. While national advertising remains under pressure, Management expects newsprint tonnage growth to local growth has continued to be strong. be in low single digits in FY13.
Stock info Quarterly Performance (INR Million) Bloomberg DBCL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 Equity Shares (m) 183 Revenue 3,537 3,539 3,956 3,606 3,770 14,638 CMP (INR) 187 YoY Change (%) 18.4 17.6 13.6 13.6 6.6 15.7 Mcap (USD b) 0.6 EBITDA 1,003 771 1,018 757 765 3,550 52-Wk Range (INR) 253 / 170 YoY Change(%) -11.7 -18.9 -11.3 -4.9 -23.8 -11.9 1, 6, 12 Rel Perf (%) -12 / -6 / -31 EBITDA Margin (%) 28.4 21.8 25.7 21.0 20.3 24.3 Adjusted PAT 611 403 554 454 437 2,021 YoY Change (%) -12.1 -26.9 -16.1 0.8 -28.5 -11.9 Shareholding pattern (%) PAT Margin (%) 17.3 11.4 14.0 12.6 11.6 13.8 Jun-12 Mar-12 Jun-11 Key operating metrics Promoter 81.5 86.4 86.5 Ad growth (%) 20.3 15.6 8.2 5.4 -0.2 12.1 Dom. Inst. 6.3 4.7 3.5 Circulation revenue growth (%) 5.8 13.0 17.0 16.1 15.5 12.9 Foreign 8.2 4.9 8.7 RM cost (INR b) 1.2 1.2 1.4 1.3 1.3 5.1 Others 4.0 4.0 1.3 YoY (%) 42.3 38.2 26.9 24.9 12.5 32.3 % of revenue 33.5 35.2 34.1 36.1 35.3 34.7 E: MOSL Estimates
40 August 27 - 31, 2012 8th Annual Global Investor Conference
DB Corp: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2009 2010 2011 2012 Y/E March 2009 2010 2011 2012 Net Sales 9,610 10,630 12,652 14,638 Basic (INR) YoY (%) 11.4 10.6 19.0 15.7 Adjusted EPS 2.8 10.1 12.6 11.0 Operating expenses 8,137 7,200 8,621 11,088 Growth (%) -37.3 257.0 24.8 -12.3 Printing and other exp 4,075 3,279 3,839 5,080 Cash EPS 4.5 12.2 14.9 13.8 Employee Cost 1,331 1,318 1,846 2,429 Book Value 16.0 36.0 45.5 52.4 Administrative exp 2,731 2,604 2,937 3,579 DPS 0.5 2.0 4.0 4.0 EBITDA 1,473 3,429 4,031 3,550 Payout (incl. Div. Tax.) (%) 21 23 37 42 EBITDA margin (%) 15.3 32.3 31.9 24.3 Depreciation 290 378 433 506 Valuation Interest 510 357 153 155 P/E 65.8 18.4 14.8 16.8 Other Income 109 112 123 115 Cash P/E 40.9 15.3 12.4 13.5 PBT 781 2,806 3,569 3,004 EV/EBITDA 24.8 10.2 8.6 9.6 Tax 423 1,057 1,273 982 EV/Sales 3.8 3.3 2.7 2.3 Tax rate (%) 54.2 37.7 35.7 32.7 Price/Book Value 11.6 5.2 4.1 3.5 PAT 358 1,749 2,296 2,022 Dividend Yield (%) 0.3 1.1 2.2 2.2 Minority Interest -118 -79 3 2 Adjusted PAT 476 1,828 2,293 2,021 Profitability Ratios (%) Change (%) -37 284 25 -12 RoE 18.5 39.6 30.9 22.6 Extra-ordinary items 0 0 273 0 RoCE 9.2 20.7 24.6 17.8 Reported PAT 476 1,828 2,566 2,021 Turnover Ratios Balance Sheet (INR Million) Debtors (Days) 67 66 69 62 Inventory (Days) 27 25 21 30 Y/E March 2009 2010 2011 2012 Creditors. (Days) 82 86 70 80 Share Capital 1,688 1,828 1,862 1,862 Asset Turnover (x) 1.5 1.3 1.5 1.5 Share Premium 0 2,366 2,373 2,373 Reserves 889 2,293 4,054 5,356 Leverage Ratio Net Worth 2,577 6,487 8,289 9,590 Debt/Equity (x) 2.1 0.5 0.3 0.2 Loans 5,631 3,207 2,372 2,130 Minority Interest 124 44 4 15 Cash Flow Statement (INR Million) Deffered Tax Liability 393 609 695 746 Y/E March 2009 2010 2011 2012 Capital Employed 8,724 10,347 11,359 12,482 EBITDA 1,473 3,429 4,305 3,550 Other Income 109 112 123 115 Gross Fixed Assets 4,695 7,165 8,408 9,487 Interest Paid -510 -357 -153 -155 Less: Depreciation 932 1,305 1,729 2,235 Direct Taxes Paid -377 -841 -1,187 -931 Net Fixed Assets 3,763 5,861 6,678 7,252 (Inc)/Dec in Wkg. Cap. 161 -153 -346 37 Capital WIP 2,708 614 680 681 CF from Op.Activity 856 2,190 2,741 2,616 Investments 238 205 163 460 (inc)/Dec in FA + CWIP -3,138 -382 -1,316 -1,080 Curr. Assets 3,988 5,614 5,918 6,945 (Pur)/Sale of Investments -170 33 42 -297 Inventory 711 722 728 1,186 CF from Inv.Activity -3,308 -350 -1,274 -1,378 Debtors 1,774 1,934 2,401 2,481 Cash & Bank Balance 452 1,951 1,731 1,884 Issue of Shares 0 2,506 41 0 Loans & Advances 1,052 1,008 1,058 1,394 Inc/(Dec) in Debt 2,195 -2,424 -835 -242 Dividends Paid -99 -424 -849 -854 Current Liab. & Prov. 2,189 2,073 2,189 2,962 Other Financing Activities 0 0 -43 10 Creditors 1,817 1,706 1,648 2,442 CF from Fin.Activity 2,096 -341 -1,687 -1,085 Provisions and other Liab. 372 367 541 520 Net Current Assets 1,799 3,542 3,729 3,983 Inc/(Dec) in Cash -356 1,499 -220 153 Miscellanous exp 217 126 110 106 Add: Opening Balance 808 452 1,951 1,731 Application of Funds 8,724 10,347 11,359 12,482 Closing Balance 452 1,951 1,730 1,884 E: MOSL Estimates
August 27 - 31, 2012 41 8th Annual Global Investor Conference
Dewan Housing Finance
Company description augur well from the margin perspective for the Dewan Housing Finance (DEWH) focuses on providing company. housing loans to low and middle income households in rural and semi-urban areas. It scores higher in terms of Key challenges competitive pricing from money lenders and co- With standalone debt / equity of more than 9x, the operative banks. As on June 2012, DEWH was present company may have to raise capital in near future. across 450+ locations at a group level and has However, uncertain market conditions may act as a consolidated AUM of ~INR290b. deterrent, thereby affecting growth. Banks and other NBFCs getting aggressive in the Key investment positives housing finance space may check DEWH's rapid With the acquisition of DPHFL (now renamed as First growth trajectory. Blue Housing Finance Ltd.), DEWH is present across the spectrum in the housing finance market right Key news flows / triggers to watch from the low-end consumer to the affluent class. It Interest rates have peaked, and rate cut by the RBI, is growing at a rapid pace and grabbing market share if any, would augur well for DEWH. across segments. High Court and other approvals for First Blue merger. DEWH has been maintaining high standards in asset quality despite being present in low and middle 1QFY13 highlights; guidance for FY13, FY14 income group. As on June 2012, its %GNPA was only DEWH's 1QFY13 PAT grew 18% YoY and 13% QoQ, in- 90bp and %NNPA at 13bp. While sharp rise in line with estimates. interest rates and strong growth in the near term Loans grew strongly by 39% YoY and 10% QoQ, raises concerns over asset quality, impeccable asset reported margins remained largely stable quality track record across cycles provides comfort. sequentially at ~2.8% levels. DEWH has historically maintained its margins in a GNPAs in absolute terms increased 50% QoQ, narrow band of 2.8-3.0%. While margins remained seasonal in nature. PCR remained healthy at 86%. under pressure in FY12 due to steep increase in For FY13, the management expects loan growth of interest rates, management expects to maintain 25-30%, margins to remain stable at 2.8-3.0%, and margins in the similar band going forward. asset quality also to remain healthy. DEWH targets to increase the share of high yielding projects loans (currently at ~6% levels), which would
Stock info Quarterly Performance (Standalone) (INR Million) Bloomberg DEWH IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 117 Net Interest Income 4,972 5,886 6,615 7,205 7,385 3,816 6,747 CMP (INR) 162 YoY Gr. (%) 66.6 78.2 71.3 65.8 48.5 28.6 76.8 Mcap (USD b) 0.3 Operating Profit 907 983 1,138 1,193 1,196 3,936 5,907 52-Wk Range (INR) 279 / 142 YoY Gr. (%) 36.1 27.0 40.4 36.4 31.9 24.9 50.1 1, 6, 12 Rel Perf (%) -7 / -34 / -25 Provisions 33 116 150 (62) 150 237 582 PBT 874 867 988 1,255 1,046 3,984 5,325 Shareholding pattern (%) Tax 216 148 238 317 268 920 1,385 Jun-12 Mar-12 Jun-11 Profit after Tax 658 719 750 938 778 3,064 3,941 Promoter 35.2 35.2 39.3 YoY Gr. (%) 28.4 23.9 21.4 59.9 18.2 15.6 28.6 Dom. Inst. 1.0 0.8 8.7 Key Operating Metrics Foreign 42.3 43.7 34.3 Loan Gr. (%) 56.7 50.7 49.8 37.2 39.5 37.2 44.6 Others 21.6 20.2 17.7 Borrowings Gr. (%) 55.9 61.7 50.8 28.9 38.6 28.9 47.6 Cost to Inc. Ratio (%) 34.2 38.5 37.8 40.3 36.0 38.7 35.4 E: MOSL Estimates
42 August 27 - 31, 2012 8th Annual Global Investor Conference
Dewan Housing Finance: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios (Consolidated) Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Operating Income 18,456 28,633 38,829 51,015 Spreads Analysis (%) Interest Expended 13,901 23,496 29,966 39,354 Avg. Yield - Housing loans 12.7 12.6 12.8 12.5 Net Interest Income 4,555 5,138 8,863 11,661 Avg. Cost of Funds 9.3 10.4 10.1 9.8 Change (%) 35.1 28.6 76.8 35.9 Int. Spread on Hsg. loans 3.4 2.3 2.7 2.8 Fee Income 1,495 2,395 1,834 1,981 Net Interest Margin 3.1 2.3 2.9 2.9 Treasury Income 987 610 1,250 1,350 Other Income 90 275 211 232 Profitability Ratios (%) Net Income 7,126 8,418 12,158 15,225 RoAE 26.7 18.5 21.7 22.7 Change (%) 48.2 34.3 42.4 28.3 RoAA 2.0 1.3 1.5 1.4 Operating Expenses 2,562 3,349 4,622 5,581 Int. Expended/Int.Earned 75.3 82.1 77.2 77.1 Operating Profits 4,564 5,069 7,536 9,644 Other Inc./Net Income 36.1 39.0 27.1 23.4 Change (%) 49.5 24.9 50.1 30.2 Provisions 214 463 764 1,231 Efficiency Ratios (%) % of average loans 0.15 0.20 0.25 0.30 Fees/Operating income 32.7 47.2 24.3 20.5 Extra ordinary Income 354 250 0 0 Op. Exps./Net Income 35.9 39.8 38.0 36.7 PBT 4,705 4,857 6,772 8,412 Empl. Cost/Op. Exps. 39.9 35.5 34.3 34.9 Tax 1,131 1,304 1,961 2,414 Tax Rate (%) 24.0 26.9 29.0 28.7 Valuations (Consolidated) Reported PAT 3,574 3,553 4,811 5,998 Book Value (INR) 149.0 173.0 205.7 246.5 Change (%) 125.6 -0.6 35.4 24.7 Price-BV (x) 0.9 0.8 0.7 Adjusted PAT 3,220 3,303 4,811 5,998 Adjusted BV (INR)* 115.9 143.1 178.7 222.5 Change (%) 103.3 2.6 45.7 24.7 Price-ABV (x) 1.1 0.9 0.7 Minority Interest 283 315 403 491 OPS (INR) 43.7 43.4 64.5 82.5 PAT Post MI 2,937 2,987 4,408 5,507 Price-OP (x) 3.7 2.5 2.0 Change (%) 89.5 1.7 47.6 25.0 EPS (INR) 28.1 25.6 37.7 51.3 Proposed Dividend 521 478 692 865 Growth (%) 48.8 -9.1 47.6 36.1 Price-Earnings (x) 6.4 4.3 3.2 Dividend Per Share 3.5 3.5 5.1 6.3 Balance Sheet (Consolidated) (INR Million) Dividend Yield (%) 2.2 3.1 3.9 Y/E March 2011 2012 2013E 2014E E: MOSL Estimates * Adj. for Goodwill Share Capital 1,044 1,168 1,168 1,168 Reserves & Surplus 14,512 19,047 22,863 27,632 Net Worth (Excl Pref sh) 15,556 20,215 24,032 28,800 Borrowings 206,897 246,717 348,180 456,850 Change (%) 122.3 19.2 41.1 31.2 Total Liabilities 224,978 268,859 374,543 488,473 Investments 6,877 2,141 5,228 7,800 Change (%) 562.7 -46.8 65.5 32.7 Loans 199,304 254,694 352,656 461,783 Change (%) 117.1 27.8 38.5 34.0 Net Fixed Assets 2,354 2,582 2,680 2,765 Goodwill 3,452 3,495 3,150 2,805 Net Current Assets 12,991 5,947 10,829 13,319 Total Assets 224,978 268,859 374,543 488,473 E: MOSL Estimates
August 27 - 31, 2012 43 8th Annual Global Investor Conference
Dish TV
Company description Key news flows / triggers to watch Dish TV is Asia Pacific's largest direct-to-home (DTH) Successful implementation of mandatory company and part of the Zee Group. Dish TV has on its digitization. platform more than 400 channels & services with 13.4m Contract renegotiations with content providers. gross subscribers and 9.7m net subscribers as of June Potential increase in subscriber additions in the 30, 2012. The company has a vast distribution network festive season. of over 1,400 distributors and over 90,000 dealers that Competitive discipline post "mandatory span across 8,000+ towns in India. digitization" would be key towards achievement of continued ARPU up-tick. Key investment positives Sustenance of current EBITDA margin of ~30%. Leader in high growth DTH segment. We expect 28% EBITDA CAGR for Dish TV over FY12- 1QFY13 highlights; guidance for FY13, FY14 14 led by 18% subscriber CAGR and 4% ARPU CAGR. Dish TV's 1QFY13 EBITDA grew 39% YoY and 8% QoQ DTH subscriber additions to get boosted by demand to INR1.56b (v/s estimate of INR1.37b). from subscribers expected to transition from analog While overall revenue declined 1% QoQ to INR5.2b systems led by mandatory digitization. due to change in lease rental accounting, EBITDA Mandatory digitization to result in addressability of growth was driven by opex decline. subscribers leading to higher costs of content as EBITDA margin improved 250bp QoQ to 29.9%. well as taxes for cable networks. Potential increase EBITDA ex lease rental grew 40% QoQ. in cable ARPU can drive ARPU enhancement for DTH Net loss for the quarter increased 77% YoY but operators like Dish as well. declined 34% QoQ to INR323m despite higher forex loss (INR140m v/s INR65m in 4QFY12). Key challenges Subs revenue grew 5% QoQ to INR4.6b led by 3% Increase in churn rate for the industry. increase in net sub base to 9.8m and 3% increase in INR depreciation resulting in higher cost of STB. ARPU to INR156 (highlight of the quarter). Potential increase in competitive intensity in Gross subscriber adds at 0.5m increased 20% QoQ markets where digitization is being mandated. but was 30% lower YoY. Churn rate (based on net Possible postponement of digitization deadline. subscribers) remained steady at 1% per month.
Stock info Quarterly Performance (INR Million) Bloomberg DITV IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,064 Revenue 4,604 4,822 4,905 5,247 5,200 19,578 22,622 CMP (INR) 73 YoY Change(%) 51.3 47.8 31.4 21.2 12.9 36.3 15.5 Mcap (USD b) 1.4 EBITDA 1,122 1,217 1,202 1,442 1,556 4,984 6,296 52-Wk Range (INR) 87 / 52 YoY Change(%) 248.5 144.5 80.2 59.9 38.7 108.7 26.3 1, 6, 12 Rel Perf (%) 2 / 12 / -20 EBITDA Margin(%) 24.4 25.2 24.5 27.5 29.9 25.5 27.8 Adjusted PAT -183 -487 -430 -490 -324 -1,588 -653 YoY Change(%) -71.0 7.7 -3.0 32.4 76.8 -16.3 -58.9 Shareholding pattern (%) PAT Margin(%) -4.0 -10.1 -8.8 -9.3 -6.2 -8.1 -2.9 Jun-12 Mar-12 Jun-11 Key operating metrics Promoter 64.8 64.8 64.8 Gross adds (m) 0.7 0.6 0.7 0.4 0.5 2.5 3.0 Dom. Inst. 5.0 5.4 6.2 Net subs (m) 8.9 9.2 9.5 9.6 9.8 9.6 11.3 Foreign 23.4 22.4 22.3 Net adds (m) 0.4 0.3 0.3 0.2 0.2 1.1 1.7 Others 6.9 7.4 6.7 ARPU (INR/month) 150 152 152 151 156 153 157 Monthly churn (%) 1.1 1.2 1.6 0.9 1.0 1.2 1.0 E: MOSL Estimates
44 August 27 - 31, 2012 8th Annual Global Investor Conference
Dish TV: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 14,366 19,578 22,622 28,197 Basic (INR) YoY (%) 32.4 36.3 15.5 24.6 Adjusted EPS -1.8 -1.5 -0.6 0.3 Operating expenses 11,977 14,594 16,326 19,984 Growth (%) -44.1 -16.3 -58.9 -148.0 Cost of goods and services 7,803 9,960 11,182 13,557 Cash EPS 1.7 3.4 5.0 6.9 Employee Cost 566 709 833 983 Book Value 0.6 -0.9 -1.5 -1.2 Selling & distribution exps 2,847 2,909 3,371 4,449 Administrative exps 761 1,016 940 994 Valuation EBITDA 2,388 4,984 6,296 8,213 P/E NA NA 247.2 EBITDA margin (%) 16.6 25.5 27.8 29.1 Cash P/E 21.6 14.7 10.6 Depreciation 3,654 5,180 5,939 7,024 EV/EBITDA 16.9 13.4 10.3 Interest 1,511 1,778 1,442 1,426 EV/EBITDA (ex. lease rent.) 30.4 19.7 14.6 Other Income 880 386 432 550 EV/Sales 4.3 3.7 3.0 PBT -1,897 -1,588 -653 314 Price/Book Value NA NA NA Adjusted PAT -1,897 -1,588 -653 314 EV/net subscriber (INR) 8,751 7,428 6,141 Change (%) -27.6 -16.3 NA -148.0 EV/net subscriber (USD) 159 135 111 Reported PAT -1,897 -1,588 -653 314 Profitability Ratios (%) Balance Sheet (INR Million) RoE NA NA NA NA Y/E March 2011 2012 2013E 2014E RoCE NA NA 2.5 10.4 Share Capital 1,063 1,064 1,064 1,064 Share Premium 15,314 15,314 15,314 15,314 Turnover Ratios Reserves -15,750 -17,316 -17,969 -17,655 Debtors (Days) 5 5 5 5 Net Worth 628 -938 -1,592 -1,278 Inventory (Days) 1 1 1 1 Loans 10,763 12,144 12,208 14,303 Creditors. (Days) 380 253 284 275 Capital Employed 11,390 11,205 10,616 13,026 Asset Turnover (x) 2.5 3.3 4.1 5.3
Gross Fixed Assets 23,520 29,668 38,120 48,725 Less: Depreciation 9,883 15,063 21,002 28,026 Leverage Ratio Net Fixed Assets 13,637 14,605 17,118 20,699 Debt/Equity (x) NA NA NA NA Capital WIP 4,580 3,483 3,500 3,500 Investments 2,002 1,500 1,500 1,500 Cash Flow Statement (INR Million) Curr. Assets 6,649 6,752 7,083 9,318 Y/E March 2011 2012 2013E 2014E Inventory 44 69 79 99 Op.Profit/(Loss) bef Tax 2,388 4,984 6,296 8,213 Debtors 215 286 331 412 Other Income 880 386 432 550 Cash & Bank Balance 3,202 3,851 4,000 6,000 Interest Paid -1,511 -1,778 -1,442 -1,426 Loans & Advances 3,188 2,546 2,673 2,807 (Inc)/Dec in Wkg. Cap. 3,371 225 3,268 3,171 Current Liab. & Prov. 15,478 15,135 18,585 21,991 CF from Op.Activity 5,129 3,817 8,554 10,509 Creditors 12,471 10,136 12,712 15,060 Provisions & other liab. 3,007 4,999 5,873 6,931 (inc)/Dec in FA + CWIP -9,470 -5,050 -8,470 -10,604 Net Current Assets -8,829 -8,382 -11,502 -12,673 (Pur)/Sale of Investments 504 502 0 0 Application of Funds 11,390 11,205 10,616 13,026 CF from Inv.Activity -8,966 -4,549 -8,470 -10,604 Key assumptions/operating metrics Gross subscribers (m) 10 13 16 20 Issue of Shares 33 1 0 0 YoY (%) 51 24 23 25 Gross adds (m) 3.5 2.5 3.0 4.0 Inc/(Dec) in Debt 1,585 1,381 64 2,096 YoY (%) 93 -30 22 33 CF from Fin.Activity 1,617 1,382 64 2,096 Net subscribers (m) 8.5 9.6 11.3 13.7 YoY (%) 50 13 18 21 Inc/(Dec) in Cash -2,220 650 149 2,000 Net adds (m) 2.8 1.1 1.7 2.4 Add: Opening Balance 5,422 3,202 3,851 4,000 YoY (%) 106 -60 51 40 Closing Balance 3,202 3,851 4,000 6,000 E: MOSL Estimates
August 27 - 31, 2012 45 8th Annual Global Investor Conference
DLF
Company description Key challenges DLF, one of the largest and most respected real estate DLF's gross debt stood at to INR250b, while net debt companies in India, has developed many well known at INR236b, implying net DER of 0.91x. urban colonies in Gurgaon, Delhi including South Cost of debt increased to 12.75% as against 10.5% Extension, Greater Kailash, Kailash Colony and Hauz 18 months back. Khas. Since inception, DLF has developed ~240msf, and Overall macro challenges impacting real estate an integrated 3,000-acre township in Gurgaon, called sector. DLF City. The company holds 345msf land bank with almost 80% concentrated in super metros and metros. Key news flows / triggers to watch The company has made meaningful progress in Key investment positives asset sales through divesting NTC Mill land (INR27b) DLF is uniquely positioned to leverage long-term against a target of INR50-60b in FY13. opportunities in India. It has a significant presence Improvement in operations, launch of super in key cities and market leadership across segments. premium project in Gurgaon, progress in other asset Recently adopted operating strategy to combat sales are near-term triggers. prevailing challenges, without sacrificing longer term growth is a key positive: (1) Focus on premium 1QFY13 highlights; guidance for FY13, FY14 and plotted segment to mitigate inflations and DLF posted a subdued sales performance in 1QFY13. maintain profitability (2) Ramp-up execution with It sold 1.34msf (estimated sales value of ~INR6b) v/ third party contractors to augment delivery and cash s 6.8msf (INR26b) in 4QFY12 and 2.2msf (INR11b) in cycle (3) Consolidating land parcels at 1QFY12. outperforming NCR markets, and (4) Value creations However the management has guided for INR65b through infrastructure developments around of sales in FY13 on the back of new launch plan in existing land parcels 2HFY13. Leasing volume remain weak at 2msf owing Sincere effort to asset divestments and higher to weaker demand and several cancellations over visibility in large ticket deals would be key trigger FY12. to de-leveraging Targets to reduce debt by INR50b by FY13 led by divestments.
Stock info Quarterly Performance (INR Million) Bloomberg DLFU IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,714.4 Operating Income 24,458 25,324 20,344 26,168 21,977 96,294 105,281 CMP (INR) 215 Change (%) 20.6 6.9 (18.0) -2.5 -10.1 0.7 9.3 Mcap. (USD b) 6.6 EBITDA 11,110 11,730 8,227 7,976 10,670 39,043 44,083 52-Wk Range (INR) 261/170 Change (%) 13.4 26.3 -30.2 19.7 -4.0 4.0 12.9 1, 6, 12 Rel Perf (%) 3/-8/-8 EBITDA Margin (%) 45.4 46.3 40.4 30.5 48.6 40.5 41.9 Reported PAT 3,584 3,724 2,584 2,117 2,928 12,008 13,843 Adjusted PAT 3,584 3,724 2,584 2,117 2,928 12,008 13,843 Shareholding pattern (%) Change (%) (12.8) (11.0) (44.5) (38.6) (18.3) (26.8) 15.3 Jun-12 Mar-12 Jun-11 PAT Margin (%) 14.7 14.7 12.7 8.1 13.3 12.5 13.1 Promoter 78.6 78.6 78.6 Key Operating metrics Dom. Inst. 0.3 0.3 0.4 Sales volume (msf) 2.2 1.3 3.3 6.8 1.3 13.5 10.5 Foreign 15.8 15.6 15.1 Sales value (INR b) 11.0 6.0 9.6 25.8 6.0 52.7 60.0 Others 5.3 5.5 5.9 Leasing volume (msf) 0.73 0.21 0.22 0.25 0.29 1.41 1.8 E: MOSL Estimates
46 August 27 - 31, 2012 8th Annual Global Investor Conference
DLF: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 95,606 96,294 105,281 107,880 Basic (INR) Change (%) 28.8 0.7 9.3 2.5 Adjusted EPS 9.7 7.1 8.2 9.7 EBITDA 37,527 39,043 44,083 45,116 Growth (%) -5.2 -26.8 15.3 19.5 % of Net Sales 39.3 40.5 41.9 41.8 Cash EPS 12.8 11.0 12.3 14.1 Depreciation 6,307 6,888 7,311 7,703 Book Value 147.0 150.9 156.7 164.1 Interest 17,056 22,465 23,265 20,015 DPS 0.9 2.0 2.0 2.0 Other Income 5,839 5,945 4,722 4,429 Payout (incl. Div. Tax.) 11.0 33.1 28.7 24.0 PBT 20,002 15,635 18,229 21,828 Tax 4,594 3,694 4,740 5,675 Valuation (x) Rate (%) 23.0 23.6 26.0 26.0 P/E 30.7 26.7 22.3 Reported PAT 16,396 12,008 13,843 16,542 Cash P/E 19.8 17.8 15.5 Change (%) -5.2 -26.8 15.3 19.5 EV/EBITDA 15.2 13.0 12.2 EV/Sales 6.2 5.4 5.1 Balance Sheet (INR Million) Price/Book Value 1.4 1.4 1.3 Y/E March 2011 2012 2013E 2014E Dividend Yield (%) 0.9 0.9 0.9 Equity Capital 3,394 3,394 3,394 3,394 Preference Capital 13,960 13,850 13,850 13,850 Profitability Ratios (%) Reserves 245,967 255,114 264,986 277,556 RoE 5.8 4.5 5.0 5.7 Net Worth 263,321 272,359 282,230 294,801 RoCE 7.1 7.4 8.0 8.3 Loans 239,906 250,660 224,133 201,719 Minority Interest 5,752 4,207 4,207 4,207 Leverage Ratio Capital Employed 508,979 527,225 510,570 500,727 Debt/Equity (x) 0.9 0.9 0.8 0.7 Goodwill 13,840 16,248 16,248 16,248 Gross Fixed Assets 198,277 212,949 217,096 223,054 Cash Flow Statement (INR Million) Less: Depreciation 19,556 25,809 33,120 40,822 Y/E March 2011 2012 2013E 2014E Net Fixed Assets 178,721 187,140 183,976 182,232 PBT before EO Items 20,002 15,475 18,229 21,828 Capital WIP 102,344 89,928 100,925 103,198 Add : Depreciation 6,307 6,888 7,311 7,703 Investments 9,958 11,268 11,268 11,268 Interest 17,056 22,465 23,265 20,015 Less : Direct Taxes Paid 4,594 3,694 4,740 5,675 Curr. Assets 452,069 487,718 467,260 462,018 Inc/Dec in WC 13,260 14,964 -20,331 -12,155 Inventory 150,388 161,756 156,222 150,800 CF from Operations 25,511 26,170 64,293 55,912 Debtors 17,536 19,100 19,731 21,359 Cash & Bank Balance 13,218 15,063 10,906 12,690 CF from Investments 31,286 -6,842 -15,143 -8,231 Inventory 150,388 161,756 156,222 150,800 Loans and Advances 41,664 51,741 53,706 55,898 (Inc)/Dec in Networth -58,114 1,000 0 0 Other Current Assets 78,875 78,302 70,472 70,472 (Inc)/Dec in Debt 23,139 10,754 -26,527 -22,413 Current Liab. & Prov. 99,199 106,671 116,234 126,786 Less : Interest Paid 17,056 22,465 23,265 20,015 Creditors 92,249 98,639 108,203 118,754 Dividend Paid 1,803 3,971 3,971 3,971 Provisions 6,950 8,032 8,032 8,032 CF from Fin. Activity -53,833 -14,682 -53,764 -46,400 Net Current Assets 202,482 219,291 194,804 184,432 Application of Funds 508,979 527,225 510,570 500,727 Inc/Dec of Cash 3,936 1,845 -4,156 1,784 Add: Beginning Balance 9,282 13,218 15,063 10,906 Key assumptions/operating metrics Closing Balance 13,218 15,063 10,907 12,690 Y/E March 2011 2012 2013E 2014E Sales (INR b)* 67 52 53 58 Sales volume (msf) 10 14 11 12 Delivery (msf) 7 13 12 12 Annuity income (INR b) 15 18 20 22 Net debt (INR b) 227 236 213 189
August 27 - 31, 2012 47 8th Annual Global Investor Conference
Emami
Company description Key challenges Emami is a unique player in the personal and healthcare Volatile prices in Mentha oil, LLP (two largest inputs) space, with a strong herbal positioning. It has and other crude related inputs are key risks to established leadership in niche categories like Cooling margins. Oil (~49%), Antiseptic Cream (~75%), Men's fairness Increasing competition in Cooling oils from cream (~60%) and Pain Balm (~57%). Emami derives domestic hair oil players (Marico, Bajaj Corp) and in ~14% of its revenues through exports with key regions Men's fairness from MNCs (Hindustan Unilever, being Middle East, Africa and SAARC. L'Oreal, and Nivea) could impact growth and market shares. Key investment positives Emami enjoys strong leadership position in its 4 key Key news flows / triggers to watch categories (Cooling oil, Balm, Men's fairness cream Growth and market shares in Cooling oil and Men's and Antiseptic cream); it continues to post strong fairness categories which have seen new entrants. double-digit sales growth in these categories. Aggressive acquisition intent in the domestic High level of innovations and focus on the acquired market; high deal multiples could be a key risk. OTC portfolio (of erstwhile Zandu) will further Softening of crude prices can boost profit margins accelerate volume growth. (70% of input costs are crude linked). International business growth has been robust and with setting up manufacturing in key markets of 1QFY13 highlights; guidance for FY13, FY14 Bangladesh and Middle East, profitability is also In 1QFY13, Navaratna sales were up ~60% YoY, Talcs likely to improve. grew ~60% YoY, Boroplus cream grew ~70% YoY, and Strong balance sheet with little debt as of FY12 Fair & Handsome (flat growth yoy), and OTC provides room for inorganic foray. products (up ~24%, led by Zandu Pancharishta). PAT grew 24% YoY to INR495m (INR398m in 1QFY12).
Stock info Quarterly Performance (INR Million) Bloomberg HMN IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 Equity Shares (m) 151 Operating Income 2,843 2,969 4,465 3,768 3,310 14,044 CMP (INR) 476 Change (%) 22.9 13.2 13.2 15.2 16.4 15.6 Mcap (USD b) 1.3 EBITDA 732 826 1,468 1,124 872 4,149 52-Wk Range (INR) 553 / 318 Change (%) 71.0 -9.6 15.5 17.4 19.1 16.2 1, 6, 12 Rel Perf (%) -7 / 26 / -6 EBITDA Margin (%) 25.8 27.8 32.9 29.8 26.3 29.5 Reported PAT 398 500 1,013 656 495 2,568 Adjusted PAT 398 500 1,013 718 495 2,630 Shareholding pattern (%) Change (%) 7.0 -11.7 23.6 53.4 24.1 18.1 Jun-12 Mar-12 Jun-11 PAT Margin (%) 14.0 16.8 22.7 19.0 14.9 18.7 Promoter 72.7 72.7 72.7 E: MOSL Estimates Dom. Inst. 4.0 3.5 3.2 Foreign 14.9 15.0 15.0 Others 8.4 8.7 9.1
48 August 27 - 31, 2012 8th Annual Global Investor Conference
Emami: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2009 2010 2011 2012 Y/E March 2009 2010 2011 2012 Net Sales 7,474 10,217 12,590 15,121 Basic (INR) Change (%) 30.5 36.7 23.2 20.1 EPS 7.0 11.9 15.1 18.1 COGS 2,671 3,805 5,232 6,618 Cash EPS 7.6 12.9 16.0 19.2 Gross Profit 4,803 6,412 7,358 8,503 BV/Share 22.9 41.3 45.6 51.7 Gross Margin (%) 64.3 62.8 58.4 56.2 DPS 2.7 3.0 3.5 4.5 Operating expenses 3,528 3,960 4,824 5,631 Payout % 43.4 29.5 27.0 29.0 EBITDA 1,275 2,452 2,534 2,871 Change (%) 33.8 92.3 3.4 13.3 Valuation (x) Margin (%) 17.1 24.0 20.1 19.0 Depreciation 84 154 140 167 P/E 68.0 40.1 31.5 26.3 Int. and Fin. Charges 227 210 -112 -141 Cash P/E 62.4 36.9 29.7 24.8 Financial Other Income 94 83 185 235 EV/Sales 8.9 7.1 5.7 4.7 Profit before Taxes 1,059 2,171 2,691 3,080 EV/EBITDA 52.1 29.5 28.5 24.6 Change (%) 0.9 105.0 24.0 14.5 P/BV 20.7 11.5 10.4 9.2 Margin (%) 14.2 21.2 21.4 20.4 Dividend Yield (%) 0.6 0.6 0.7 0.9 Tax 118 342 337 412 Deferred Tax 23 10 67 -67 Return Ratios (%) Tax Rate (%) 13.3 16.2 15.0 11.2 RoE 31.1 38.8 34.8 37.1 Adjusted PAT 919 1,798 2,287 2,735 RoCE 23.7 28.9 28.3 30.4 Change (%) -1.0 95.7 27.2 19.6 Margin (%) 12.3 17.6 18.2 18.1 Working Capital Ratios Non-rec. (Exp)/Income 0 121 0 0 Debtor (Days) 34 27 31 31 Reported PAT 919 1,697 2,287 2,735 Asset Turnover (x) 1.4 1.2 1.4 1.6 Balance Sheet (INR Million) Leverage Ratio Y/E March 2009 2010 2011 2012 Debt/Equity (x) 1.3 0.2 0.0 -0.2 Share Capital 131 151 151 151 Reserves 2,881 6,103 6,747 7,675 Net Worth 3,013 6,254 6,898 7,827 Minority Interest 0 0 1 8 Cash Flow Statement (INR Million) Loans 4,482 2,591 2,294 1,994 Y/E March 2009 2010 2011 2012 Deferred Liability 60 70 137 150 OP/(loss) before Tax 1,275 2,452 2,534 2,871 Capital Employed 7,554 8,914 9,330 9,978 Int./Div. Received 191 342 269 301 Interest Paid -391 -547 -152 -159 Goodwill on consolidation 0 0 8 77 Direct Taxes Paid -141 -352 -404 -345 Gross Block 7,067 7,638 7,993 8,593 (Incr)/Decr in WC 831 -532 -1,217 -44 Less: Accum. Depn. 940 2,027 3,148 4,336 CF from Operations 1,764 1,362 1,030 2,624 Net Fixed Assets 6,128 5,611 4,845 4,257 Capital WIP 367 62 65 0 (Incr)/Decr in FA -6,242 -266 -358 -535 Investments 393 616 66 367 (Pur)/Sale of Investments 636 -223 550 -301 CF from Invest. -5,606 -489 192 -836 Curr. Assets, L&A 2,430 4,247 5,997 7,238 Inventory 738 826 1,234 1,401 Account Receivables 710 755 1,089 1,306 Change in Equity 7 3,100 0 0 Cash and Bank Balance 141 1,614 2,105 2,992 (Incr)/Decr in Debt 4,100 -1,892 -297 -300 Others 840 1,051 1,570 1,538 Dividend Paid -398 -531 -618 -794 Curr. Liab. and Prov. 1,764 1,621 1,651 1,961 Others 247 -78 183 193 Account Payables 1,201 890 883 1,089 CF from Fin. Activity 3,955 599 -731 -901 Other Liabilities 68 37 34 1 Provisions 494 695 733 871 Incr/Decr of Cash 114 1,473 491 887 Net Current Assets 666 2,625 4,347 5,277 Add: Opening Balance 28 141 1,614 2,105 Application of Funds 7,554 8,914 9,330 9,978 Closing Balance 142 1,614 2,105 2,992 E: MOSL Estimates
August 27 - 31, 2012 49 8th Annual Global Investor Conference
GAIL (India)
Company description Key challenges GAIL (India) is a major public sector undertaking in India, To arrange for incremental gas volumes for its with interests in gas distribution, petrochemicals, LPG, growing transmission capacity. and telecom. It owns ~9,500km of natural gas pipelines, To diversify earnings in view of high and ad hoc two LPG transmission pipelines of 2,000km, 450,000 tpa subsidy sharing. petchem capacity, ~1.4mt LPG/other hydrocarbons Pressure on petchem sales volume led by increased capacity, and over 13,000km of optical fiber cable imports in India. network. GAIL is also involved in city gas distribution, Likely regulation to cap marketing margins on gas E&P and power businesses through its joint ventures. sales.
Key investment arguments Key news flows / triggers to watch Capex to increase capacities significantly: GAIL is in Clarity on the subsidy sharing. the midst of a high capex cycle, which will increase Likelihood of transmission volume increase in near its transmission capacity by 1.7x and double its to medium term. petchem capacity. Incremental gas availability to remain near-term 1QFY13 highlights; guidance for FY13, FY14 headwind: While we like management strategy to Gas transmission volumes stood at ~110mmsmcd build capacity to benefit in the long term, near-term (-6.3% YoY and 5% QoQ). challenges of incremental gas availability remain. Gas trading EBIT was boosted by one-time LNG Model 1.4% transmission volume CAGR through inventory gain of ~INR2b. FY14: The promise of transmission business growth, Petchem EBIT was impacted by lower sales volume though strong in the long term, there are concerns due to capacity shutdown. in the medium term as ramp-up in Reliance GAIL expects its 5mmtpa Dabhol terminal to get Industries' KG-D6 gas output has halted. commissioned in 2HFY13. Near term pressure on profitability: We believe GAIL expects to complete both its major expansion GAIL's profitability ratios would be under pressure projects by December 2013 - for next 2-3 years due to underutilization of new (1) Pata plant expansion (from 450ktpa to 900ktpa); pipelines. Earnings would be depressed due to (2) Bharamputra Cracker and Polymer Ltd (BCPL). revenue increase not commensurate with increase in interest and depreciation.
Stock info Quarterly Performance (INR Million) Bloomberg GAIL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,268 Operating Income 89 97 113 105 111 403 439 CMP (INR) 361 Change (%) 25.0 19.7 34.6 17.6 25.0 24.1 9.1 Mcap (USD b) 8.2 EBITDA 16 16 18 7 19 57 64 52-Wk Range (INR) 446 / 303 Change (%) 8 15 34 -42 22 4 12 1, 6, 12 Rel Perf (%) -2 / -2 / -23 EBITDA Margin (%) 17.5 17.0 15.6 7.0 17.1 14.1 14.6 Reported PAT 10 11 11 5 11 37 39 Shareholding pattern (%) Adjusted PAT 10 11 11 5 11 37 39 Jun-12 Mar-12 Jun-11 Change (%) 11.0 18.5 12.8 -38.3 15.1 2.6 5.8 Promoter 64.6 64.6 64.6 PAT Margin (%) 11.1 11.3 9.7 4.6 10.2 9.1 8.8 Dom. Inst. 17.7 17.9 18.5 Key Metrics (mmscmd) Foreign 14.6 14.2 13.8 Gas transmission 117 119 119 116 110 118 114 Others 3.2 3.3 3.1 Petchem sales(000MT)88 129 113 118 66 448 396 Subsidy (INR b) 7 6 5 14 7 32 32 E: MOSL Estimates
50 August 27 - 31, 2012 8th Annual Global Investor Conference
GAIL India: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 324,586 402,807 439,439 481,622 EPS 28.7 28.8 30.5 32.9 Change (%) 30.2 24.1 9.1 9.6 Cash EPS 33.2 35.0 37.5 42.2 Purchases 220,059 286,791 270,255 298,606 Book Value 151.8 170.4 190.2 211.6 Raw Materials 21,788 24,941 27,209 29,821 DPS 7.5 8.70 9.0 10.0 Change in Stocks -1,325 -4,978 2,349 0 Payout 26.1 30.2 29.5 30.4 Employee Costs 7,527 6,075 6,682 7,351 Power&fuel & other exp. 21,994 32,997 68,937 73,857 Valuation (x) EBITDA 54,544 56,981 64,007 71,988 P/E 10.1 9.8 9.3 8.6 % of Net Sales 16.8 14.1 14.6 14.9 Cash P/E 8.5 8.1 7.5 6.7 Depreciation 6,503 7,907 8,954 11,710 EV / EBITDA 6.3 6.5 6.6 6.2 Interest 829 1,165 2,384 4,968 EV / Sales 1.2 1.0 1.0 1.0 Other Income 5,186 5,491 3,949 5,611 Price / Book Value 1.9 1.7 1.5 1.3 PBT 52,398 53,400 56,618 60,922 Dividend Yield (%) 2.1 2.4 2.5 2.8 Tax 16,788 16,862 17,976 19,162 Rate (%) 32.0 31.6 31.7 31.5 Profitability Ratios (%) Reported PAT 35,610 36,538 38,642 41,760 RoE 18.5 16.9 16.0 15.6 Adjusted PAT 36,408 36,538 38,642 41,760 RoCE 22.9 19.2 15.5 15.7 Change (%) 13.4 2.6 5.8 8.1 Turnover Ratios Balance Sheet (INR Million) Debtors (No. of Days) 21 19 18 19 Y/E March 2011 2012 2013E 2014E Fixed Asset Turnover (x) 1.4 1.4 1.2 1.1 Share Capital 12,685 12,685 12,685 12,685 Reserves 179,849 203,476 228,613 255,680 Leverage Ratio Net Worth 192,533 216,160 241,298 268,365 Debt / Equity (x) 0.1 0.2 0.5 0.5 Loans 23,100 49,659 117,659 127,659 Deferred Tax 16,332 18,909 21,174 23,611 Cash Flow Statement (INR Million) Capital Employed 231,966 284,729 380,130 419,635 Y/E March 2011 2012 2013E 2014E Gross Fixed Assets 221,444 269,778 327,137 453,542 OP/(Loss) before Tax 52,400 53,400 56,618 60,922 Less: Depreciation 97,408 105,315 114,269 125,979 Depreciation 6,504 7,907 8,954 11,710 Net Fixed Assets 124,036 164,463 212,868 327,563 Other op items -873 0 0 0 Capital WIP 58,792 76,793 96,544 39,696 Direct Taxes Paid -14,839 -14,285 -15,711 -16,725 Investments 25,825 25,825 25,825 25,825 Inc/Dec in Wkg.Capital -12,420 7,935 -2,214 1,360 CF from Op. Activity 30,773 54,958 47,646 57,267 Current Assets Inventory 8,551 14,145 13,696 14,724 (Inc)/Dec in FA & CWIP -46,290 -66,336 -77,110 -69,558 Debtors 19,059 20,764 22,173 24,547 Pur/Sale of Investments -5,095 0 0 0 Cash & Bank Balance 21,314 23,583 48,615 31,632 Inc from Invst 4,090 0 0 0 Loansand advances 62,538 64,167 65,892 67,721 CF from Inv. Activity -47,295 -66,336 -77,110 -69,558 Current Liab. & Prov. Liabilities 47,544 60,473 58,923 63,313 Inc / (Dec) in Debt 7,215 26,559 68,000 10,000 Provisions 40,605 44,539 46,559 48,760 Dividends Paid -11,094 -12,911 -13,505 -14,692 Net Current Assets 23,313 17,648 44,893 26,550 CF from Fin. Activity -3,879 13,647 54,495 -4,692 Application of Funds 231,966 284,728 380,130 419,634 Key assumptions/operating metrics Inc / ( Dec) in Cash -20,402 2,270 25,031 -16,983 Y/E March 2011 2012 2013E 2014E Add: Opening Balance 41,715 21,314 23,583 48,615 Exchange rate 46 48 54 52 Closing Balance 21,314 23,583 48,615 31,632 Subsidy (INRb) 21 32 32 24 Natural Gas Transmission Volume (mmsmd) 118 118 114 121 Average Tariff (INR/mscm) 880 894 878 889 Petchem Sales ('000 MT) 420 448 396 464
August 27 - 31, 2012 51 8th Annual Global Investor Conference
GlaxoSmithKline Pharmaceuticals
Company description Key challenges GSK Pharma (a 50% subsidiary of GlaxoSmithKline Plc) The proposed new "Pharma Policy", if is the fourth largest formulations company in India and implemented in the current form will have adverse the second largest MNC, with a strong presence in impact of 13% on GSK's annualized earnings. segments like dermatology, respiratory and vaccines. Possible pre-grant and post-grant patent challenges Its parent has one of the richest product and R&D by domestic generic companies could hamper the pipelines among pharmaceutical companies plans and prospects of the launch of patented worldwide. Further GSK Pharma's profitability is one of products by GSK Pharma in India the best in the industry. Key news flows / triggers to watch Key investment positives Ability of the company to ramp up its presence in the high-growth lifestyle segments, which are GSK has an excellent branded portfolio and a strong negligible contributors as of now. presence in the dermatology, anti-infective, Sustained launch of new products - this is respiratory and vaccines segments. imperative to drive future topline growth. The parent's strong pipeline holds good upside Government's progress on the implementation of potential after IPR implementation, with no conflict the new Pharma Policy. of interest issues with any other subsidiary. GSK deserves premium valuations due to strong 2QCY12 highlights parentage (giving access to large product pipeline), Performance was in-line with topline growth of brand-building ability, and likely positioning in 16.1%, EBITDA growth of 8.4% and Adj PAT growth patent era. It is one of the very few companies with of 11.8%. Topline growth was led by dermatology ability to drive reasonable growth without any major and vaccine segments. GSK Pharma launched 3 new capital requirement leading to high RoCE. products in the quarter. GSK is likely to sustain double-digit topline growth EBITDA margins declined 220bp YoY (v/s our over the next few years. Given the high profitability estimate of 60bp decline). Effectively, higher sales of its operations, we expect this growth to lead to have compensated for lower EBITDA margins. sustainable double-digit earnings growth and RoE Adj PAT growth is higher than EBITDA growth due to of ~30%. This growth is likely to be funded through lower depreciation (down 13%) and higher other miniscule capex and negative net working capital. income (up 14%).
Stock info Quarterly Performance (INR Million) Bloomberg GLXO IN Y/E December Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 CY11 CY12E Equity Shares (m) 85 Operating Income 5,615 6,076 5,660 6,228 6,520 23,380 25,650 CMP (INR) 2,091 Change (%) 12.8 4.4 15.4 3.3 16.1 10.7 9.7 Mcap (USD b) 3.2 EBITDA 1,870 1,760 1,706 1,957 2,028 7,445 7,944 52-Wk Range (INR) 2338 / 1830 Change (%) 2.9 -15.7 15.8 -7.2 8.4 0.9 6.7 1, 6, 12 Rel Perf (%) -2 / 4 / -8 EBITDA Margin (%) 33.3 29.0 30.1 31.4 31.1 31.8 31.0 Reported PAT 1,475 1,459 1,367 1,229 1,635 4,306 6,175 Adjusted PAT 1,517 1,460 1,474 1,857 1,696 6,314 6,864 Shareholding pattern (%) Change (%) 8.6 -7.7 20.5 -0.3 11.8 8.6 8.7 Jun-12 Mar-12 Jun-11 PAT Margin (%) 27.0 24.0 26.0 29.8 26.0 27.0 26.8 Promoter 50.7 50.7 50.7 Key Operating Metrics Dome. Inst. 14.2 14.5 15.9 RM Cost (% of sales) 36.4 39.8 41.0 42.1 41.5 38.9 41.0 Foreign 18.6 18.5 17.1 Staff Cost (% Chg YoY) 22.5 15.5 8.1 0.9 1.6 15.6 2.0 Others 16.6 16.4 16.4 Other Exp (% of sales) 18.3 22.0 11.3 17.4 17.3 17.4 17.0 E: MOSL Estimates
52 August 27 - 31, 2012 8th Annual Global Investor Conference
GlaxoSmithKline Pharmaceuticals: Financials and valuation
Income Statement (INR Million) Income Statement (INR Million) Y/E December 2010 2011 2012E 2013E Y/E December 2010 2011 2012E 2013E Net Sales 21,116 23,380 25,650 28,899 Basic (INR) Change (%) 12.9 10.7 9.7 12.7 EPS 68.6 74.5 81.0 92.6 EBITDA 7,378 7,445 7,944 9,156 Cash EPS 70.7 76.9 83.1 95.1 Change (%) 12.7 0.9 6.7 15.3 BV/Share 228.0 226.7 241.8 270.7 Margin (%) 34.9 31.8 31.0 31.7 DPS 40.0 50.0 60.0 70.0 Depreciation 176 204 171 215 Payout (%) 66.5 76.5 84.4 86.2 Int. and Fin. Charges 6300 Valuation Other Income - Rec. 1,477 1,978 2,248 2,504 P/E 30.5 28.1 25.8 22.6 PBT & EO Expense 8,673 9,216 10,020 11,445 Cash P/E 29.6 27.2 25.2 22.0 Tax 2,859 2,902 3,156 3,605 P/BV 9.2 9.2 8.6 7.7 Tax Rate (%) 33.0 31.5 31.5 31.5 EV/Sales 7.4 6.7 6.1 5.3 Adj PAT 5,814 6,314 6,864 7,840 EV/EBITDA 21.2 20.9 19.6 16.8 EO Expense (net of tax) 177 -2,008 -689 0 Dividend Yield (%) 1.9 2.4 2.9 3.3 Reported PAT 5,637 4,306 6,175 7,840 Change (%) 15.2 8.6 8.7 14.2 Return Ratios (%) Margin (%) 26.7 18.4 24.1 27.1 RoE 30.1 32.9 33.5 34.2 Balance Sheet (INR Million) RoCE 44.8 47.9 48.9 49.9 Y/E December 2010 2011 2012E 2013E Working Capital Ratios Equity Share Capital 847 847 847 847 Fixed Asset Turnover (x) 20.9 22.5 19.6 15.1 Reserves 18,445 18,336 19,614 22,069 Debtor (Days) 8 13 11 11 Capital Reserve 17 17 17 17 Inventory (Days) 49 52 55 57 Net Worth 19,308 19,199 20,478 22,933 Working Capital (Days) -60 -64 -53 -44 Loans 52 49 0 0 Capital Employed 19,360 19,248 20,478 22,933 Leverage Ratio Debt/Equity 0.0 0.0 0.0 0.0 Net Fixed Assets 1,089 991 1,620 2,204 Capital WIP 87 254 254 254 Cash Flow Statement (INR Million) Investments 1,604 1,598 20,426 21,882 Y/E December 2010 2011 2012E 2013E Oper. Profit/Loss bef. Tax 7,378 5,438 7,255 9,156 Curr. Assets 24,483 26,959 8,849 9,826 Interest/Div. Recd. 1,477 1,978 2,248 2,504 Inventory 2,815 3,301 3,848 4,479 Direct Taxes Paid -2,976 -2,953 -3,156 -3,605 Account Receivables 470 853 770 867 (Inc)/Dec in WC -3 -357 -1,320 -1,217 Cash & Bank Balance 19,481 19,864 1,283 1,445 CF from Operations 5,876 4,105 5,026 6,838 Others 1,717 2,940 2,950 3,034 Curr. Liability & Prov. 8,468 11,168 11,286 11,849 EO expense 177 -2,008 -689 0 Account Payables 3,567 3,545 3,591 3,757 CF frm Op. incl EO exp. 5,699 6,113 5,715 6,838 Provisions 4,900 7,623 7,695 8,092 Net Current Assets 16,016 15,790 -2,437 -2,023 (inc)/dec in FA -166 -272 -800 -800 Deferred Tax Assets 564 615 615 615 (Pur)/Sale of Investments 216 5 -18,929 -1,557 Appl. of Funds 19,360 19,248 20,478 22,932 CF from investments 50 -267 -19,729 -2,357 Revenue Mix (INR M) CY10 CY11 CY12E CY13E Change in Net Worth 0 -1,593 311 1,476 Pharmaceuticals 19,603 22,049 24,695 27,905 Inc/(Dec) in Debt -3 -3 -49 0 Growth (%) 14.3 11.2 12.0 13.0 Interest Paid -6 -3 0 0 Exports 631 365 183 183 Dividend Paid -2,985 -3,863 -4,829 -5,795 Growth (%) -11.9 -42.2 -50.0 - CF from Fin. Activity -2,994 -5,462 -4,567 -4,319 Iodex 882 966 773 811 Growth (%) 3.9 9.5 -20.0 5.0 Inc/Dec of Cash 2,755 383 -18,581 163 Total 21,116 23,380 25,650 28,899 Add: Beginning Balance 16,726 19,481 19,864 1,283 Growth (%) 12.9 10.7 9.7 12.7 Closing Balance 19,481 19,864 1,283 1,445
August 27 - 31, 2012 53 8th Annual Global Investor Conference
Glenmark Pharmaceuticals
Company description Key challenges Glenmark is a second-tier generic company. It has The proposed new "Domestic Pharma Policy", may differentiated itself through successful NCE research. adversely impact earnings. It has a pipeline of 5 novel drugs in different phases of NCE research is a high-gestation and expensive clinical studies, generating cumulative R&D licensing business, and may pressurize margins in near term. income of USD207m. Its key markets are: US (38% of Needs to broaden its therapeutic coverage in India sales), India (27%) and emerging markets (19%). to fully exploit the domestic market potential.
Key investment positives Key news flows / triggers to watch Approvals & ramp-up of the OC portfolio in the US. Most successful NCE research company from India Reduction in debt – expected to begin in FY13. with cumulative licensing income of USD207m. Release of data from Revamilast clinical trials (likely Currently, it has 2 out-licensed NCEs (to Sanofi) and by 1QFY14); favourable data could lead to successful a total of 5 NCEs undergoing clinical trials. out-licensing. Expect improved working capital and moderate capex to help the management reduce debt. Return 1QFY13 highlights ratios are expected to gradually improve over the Performance was above estimates led by strong next two years – RoCE from 12.1% to 21% and RoE traction in US, India and emerging markets but partly from 13.5% to 21%. boosted by favorable currency. Improved working capital cycle coupled with Core EBITDA at INR1.85b was higher than our potential debt reduction is likely to address investor estimate of INR1.47b while core EBITDA margin was concerns on adverse balance sheet. 18.7% v/s our estimate of 16.2%. Glenmark is trying to build a differentiated product Adj PAT de-growth of 54% was mainly due to forex portfolio in the US through a combination of oral losses of INR550m. contraceptives (OC) and dermatology products. Overall working capital continued to be under Expect 54% EPS CAGR over FY12-14, albeit on a low control at 125-130 days. base.
Stock info Quarterly Performance (INR Million) Bloomberg GNP IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 271 Operating Income 8,683 10,554 10,311 10,659 10,404 40,206 47,946 CMP (INR) 416 Op.Inc.(ex one-offs&R&D) 7,570 9,272 9,780 10,302 9,863 36,925 47,404 Mcap (USD b) 2.0 Change (%) 27.8 32.3 34.3 30.0 30.3 31.2 28.4 52-Wk Range (INR) 427 / 265 EBITDA 2,966 2,983 2,046 1,864 2,198 9,860 9,487 EBITDA (ex one-offs) 1,854 1,731 1,603 1,631 1,841 6,819 9,129 1, 6, 12 Rel Perf (%) 4 / 42 / 24 Change (%) 32.7 12.7 6.4 511.1 -0.7 44.9 33.9 EBITDA Margin (%) 24.5 18.7 16.4 15.8 18.7 18.5 19.3 Reported PAT 2,093 548 451 1,511 783 4,603 6,484 Adj.PAT (ex one-offs) 1,092 745 76 1,331 506 3,244 5,493 Change (%) 17.8 -24.6 -92.2 101.4 -53.6 -8.6 69.3 Shareholding pattern (%) PAT Margin (%) 14.4 8.0 0.8 12.9 5.1 8.8 11.6 Jun-12 Mar-12 Jun-11 Key Operating Metrics - Revenue Break-up Promoter 48.3 48.3 48.3 US 2,512 3,001 3,190 3,435 3,924 12,137 16,233 Dome. Inst. 5.4 4.6 6.9 Europe 390 563 971 1,083 602 3,008 3,525 Foreign 34.0 35.5 31.9 India 2,254 2,539 2,547 2,682 2,798 10,021 12,026 Others 12.3 11.7 12.9 Latam 621 780 860 751 670 3,012 3,932 ROW 1,047 1,479 1,571 1,828 1,348 5,926 7,624 APIs 646 763 836 850 1,005 3,094 3,892 R&D Income 1,112 1,185 238 - - 2,535 241 Others 101 246 97 30 58 474 474 E: MOSL Estimates 54 August 27 - 31, 2012 8th Annual Global Investor Conference
Glenmark Pharmaceuticals: Financials and valuation
Income Statement (INR Million) Ratio Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 29,491 40,206 47,946 54,603 Basic (INR) Change (%) 19.8 36.3 19.2 13.9 EPS (Fully diluted)* 12.5 11.4 19.3 27.1 EBITDA 5,923 9,860 9,487 11,618 Cash EPS 15.8 14.9 23.1 31.3 Margin (%) 20.1 24.5 19.8 21.3 BV/Share 75.4 88.8 108.9 136.8 Adjusted EBITDA 5,028 7,325 9,246 11,384 DPS 3.7 10.0 5.0 5.7 Margin (%) 17.6 19.4 19.4 20.9 Payout (%) 5.2 13.6 5.4 4.5 Depreciation 947 979 1,067 1,189 Valuation (x) EBIT 4,976 8,882 8,420 10,429 P/E (Fully diluted) 33.3 36.4 21.5 15.3 Interest 1,566 1,466 1,462 1,280 PEG (x) 4.6 -4.3 0.3 0.4 OI & forex gains/losses 1,405 -1,218 -91 281 Cash P/E 26.3 28.0 18.0 13.3 PBT before EO Expense 4,816 6,198 6,867 9,431 P/BV 5.5 4.7 3.8 3.0 PBT after EO Exp. 4,816 4,881 6,867 9,431 EV/Sales 4.5 3.2 2.7 2.3 Tax 237 238 1,018 1,415 EV/EBITDA 22.2 13.2 13.7 10.9 Tax Rate (%) 4.9 4.9 14.8 15.0 Dividend Yield (%) 0.9 2.4 1.2 1.4 Reported PAT 4,578 4,643 5,849 8,016 Adj PAT** 3,548 3,244 5,493 7,713 Return Ratios (%) Margin (%) 12.4 8.6 11.5 14.2 RoE 17.4 13.5 18.6 20.8 **Excl NCE upsides & incl adjustment for R&D exp capitalization RoCE 13.4 12.1 17.5 20.9
Balance Sheet (INR Million) Working Capital Ratios Y/E March 2011 2012 2013E 2014E Fixed Asset Turnover (x) 1.5 1.8 1.9 2.1 Equity Share Capital 270 271 271 271 Debtor (Days) 140 113 115 115 Fully Diluted Eq Cap 284 284 284 284 Inventory (Days) 100 72 75 75 Reserves 20,102 23,746 29,198 36,751 Working Capital (Days) 203 127 137 137 Net Worth 20,372 24,016 29,468 37,022 Minority Interest 267 250 170 70 Leverage Ratio (x) Loans 21,258 20,779 19,279 15,779 Current Ratio 3.4 2.4 2.4 2.4 Deferred liabilities -1081 -2674 -2674 -2674 Debt/Equity 1.0 0.9 0.7 0.4 Capital Employed 40,816 42,371 46,243 50,197 Cash Flow Statement (INR Million) Net Fixed Assets 21,023 23,790 25,681 26,992 Y/E March 2011 2012 2013E 2014E Capital WIP 1,100 1,100 1,100 1,100 Op. Profit/Loss before Tax 5,923 9,860 9,487 11,618 Investments 309 298 298 298 Interest/Dividends Recd. 1,405 -1,218 -91 281 Intangibles (net) 10,329 11,862 11,031 10,259 Direct Taxes Paid -2,029 -1,830 -1,018 -1,415 Curr. Assets 25,988 29,472 32,750 37,267 (Inc)/Dec in WC 1,530 2,443 -3,958 -2,503 Inventory 8,070 7,877 9,852 11,220 CF from Operations 6,829 9,254 4,420 7,982 Account Receivables 11,308 12,436 15,106 17,204 Cash and Bank Balance 1,959 3,201 1,224 1,364 CF frm Op.incl EO Exp. 6,829 7,937 4,420 7,982 Others 4,651 5,958 6,568 7,480 (Inc)/Dec in FA 810 -3,746 -2,957 -2,500 Curr. Liability & Prov. 7,605 12,289 13,586 15,460 CF from Investments 682 -3,735 -2,957 -2,500 Net Current Assets 18,384 17,183 19,165 21,807 Appl. of Funds 40,816 42,371 46,243 50,197 Change in Networth -7,521 -366 -80 -100 Revenue model (INR M) Inc/(Dec) in Debt 2,701 -496 -1,580 -3,600 Y/E March 2011 2012 2013E 2014E Interest Paid -1,566 -1,466 -1,462 -1,280 India Formulations 8,447 10,021 12,026 13,950 Dividend Paid -236 -633 -317 -363 Branded form. exports 7,516 10,771 13,568 15,686 CF from Fin. Activity -6,621 -2,961 -3,439 -5,342 Generics 9,296 13,311 17,746 19,909 NCE Income 895 2,535 241 234 Inc/Dec of Cash 890 1,242 -1,976 139 API & Others 3,337 3,568 4,366 4,824 Add: Beginning Balance 1,069 1,959 3,201 1,224 Closing Balance 1,959 3,201 1,224 1,364 Gross Sales 29,491 40,206 47,946 54,603
August 27 - 31, 2012 55 8th Annual Global Investor Conference
Godrej Consumer Products
Company description Key challenges Godrej Consumer Products (GCPL) enjoys leadership GCPL will have to pay INR3-4b every year to acquire position in India's household insecticide business. remaining geographies of Darling Group. Given the Besides, it is the second largest player in the INR90b already laid-out roadmap for this, incremental Toilet Soap category (~10% market share) and market acquisitions can impact cash flows. leader in the INR10b hair dye category with a market Sustaining 20%+ growth and margins in toilet soaps share of ~32%. GCPL has been very aggressive in is a challenge, given the high penetration and international acquisitions which now account for more competitive intensity. than 36% of consolidated revenues. Key news flows / triggers to watch Key investment positives Any big ticket acquisition by the company. Synergies from GHPL (Godrej Home Products Ltd) Synergies and cross-pollination between post the merger have paid of well by way of strong geographies and acquired companies. volume growth, increase in distribution reach, and INR and PFAD prices are an overhang on margins. access to various new geographies. Market leadership and strong 20%+ growth in the 1QFY13 highlights; guidance for FY13, FY14 domestic household insecticides business is the key 1QFY13 Consolidated sales grew 39% to INR13.8b growth driver for the company. GCPL has ~37% led by 27% sales growth in domestic Household market share in the INR25b market in India. Insectices, 42% growth in Toilet Soaps, 40% growth GCPL has acquired leading brands in their respective in Megasari, and 94% growth in Latin America. geographies. In several of these territories these GCPL received INR165m (INR80m after minority companies are already competing with their MNC interest) as a result of zero tax status to its Nigeria counterparts and have shown ability to compete business. It will enjoy this status for 5 years. with them and grow successfully. Megasari has been We remain positive on the rapidly growing competing with S C Johnson in Indonesia, whereas household insecticides business which has in the the LatAm subsidiaries have been competing with last two years consistently outperformed market MNCs like L'Oreal and P&G. growth. We expect profit margins in toilet soaps in the coming quarters to remain under check due to firm PFAD prices.
Stock info Quarterly Performance (INR Million) Bloomberg GCPL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 340 Operating Income 9,978 11,860 13,441 13,230 13886 48,509 63147 CMP (INR) 639 Change (%) 39.6 23.3 35.9 32.4 39.2 32.0 30.17 Mcap (USD b) 3.9 EBITDA 1,427 2,088 2,653 2,481 1988 8,607 11298 52-Wk Range (INR) 658 / 370 Change (%) 11.5 25.1 60.1 39.6 39.3 35.4 31.26 1, 6, 12 Rel Perf (%) 9 / 49 / 49 EBITDA Margin (%) 14.3 17.6 19.7 18.8 14.3 17.7 17.89 Reported PAT 2,393 1,277 1,671 1,927 1305 7,267 7446 Shareholding pattern (%) Adjusted PAT 1,002 1,277 1,671 1,730 1305 5,266 7446 Jun-12 Mar-12 Jun-11 Change (%) 10.3 -2.0 40.7 22.1 30.2 11.2 41.42 Promoter 64.0 64.0 67.3 PAT Margin (%) 10.0 10.8 12.4 13.1 9.4 10.9 11.79 Dom. Inst. 1.0 1.8 2.2 Key Operating metrics Foreign 27.2 25.3 19.3 India EBITDA margin (%) 15.3 17.6 18.8 19.0 14.1 Others 7.8 9.0 11.2 Intl. EBITDA margin (%) 12.6 17.2 21.0 18.3 14.5 E: MOSL Estimates
56 August 27 - 31, 2012 8th Annual Global Investor Conference
Godrej Consumer Products: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 36,763 48,509 63,147 78,327 Basic (INR) Change (%) 80.1 32.0 30.2 24.0 EPS 14.6 16.3 21.9 26.7 Total Expenditure 30,405 39,903 51,849 64,378 Cash EPS 16.2 18.3 24.5 29.7 EBITDA 6,358 8,607 11,298 13,949 BV/Share 53.3 64.5 94.0 109.0 Change (%) 55.7 35.4 31.3 23.5 DPS 5.0 6.0 8.0 10.0 Margin (%) 17.3 17.7 17.9 17.8 Payout (%) 34.4 36.9 36.6 37.5 Depreciation 499 644 887 1,044 Int. and Fin. Charges 436 658 1,046 1,114 Interest Income 643 672 430 596 Valuation (x) Other Income-rec. 0 0 660 713 P/E 37.2 27.6 22.7 forex gain/(loss) -52.8 205 0 0 Cash P/E 33.1 24.7 20.3 PBT 6,118 7,771 10,454 13,102 EV/Sales 4.5 3.6 2.9 Change (%) 45.7 27.0 34.5 25.3 EV/EBITDA 25.4 20.0 16.3 Tax 1,382 2,261 2,352 3,079 P/BV 9.4 6.4 5.6 Deferred Tax 0 0 -76 -91 Dividend Yield 1.0 1.3 1.7 Tax Rate (%) 22.6 29.1 23.2 24.2 PAT 4,736 5,511 8,025 9,932 Return Ratios (%) Change (%) 39.5 16.4 45.6 23.8 minority interest 0.0 245 579 856 RoE 27.5 25.2 23.3 24.5 Group Adjusted PAT 4,736 5,266 7,446 9,076 RoCE 18.4 20.4 22.7 24.5 Non-rec. (Exp.)/Income 411 2,002 0 0 Reported PAT 5,148 7,267 8,025 9,932 Working Capital Ratios Debtor (Days) 38 30 30 30 Balance Sheet (INR Million) Asset Turnover (x) 2.4 2.5 2.6 2.7 Y/E March 2011 2012 2013E 2014E Share Capital 324 324 340 340 Leverage Ratio Reserves 16,928 20,561 31,656 36,750 Minority Int 591 1,170 2,027 Debt/Equity (x) 1.2 1.1 0.7 0.7 Networth 17,252 20,885 31,996 37,090 Loans 20,054 23,800 23,250 24,750 Cash Flow Statement (INR Million) Deferred Liability 14 74 150 241 Y/E March 2011 2012 2013E 2014E Capital Employed 37,320 45,350 56,567 64,108 OP/(Loss) before Tax 6,358 8,607 11,298 13,949 Gross Block 19,147 23,347 29,562 34,787 Other Income 643 672 1,089 1,310 Less: Accum. Depn. 3,775 4,452 5,339 6,382 Interest Paid 436 658 1,046 1,114 Net Fixed Assets 15,373 18,896 24,224 28,405 Direct Taxes Paid 1,382 2,261 2,352 3,079 Capital WIP 154 150 150 150 (Inc)/Dec in WC 3,605 429 1,214 1,365 Goodwill 15,404 20,444 23,444 25,444 CF from Operations 1,578 5,931 7,774 9,701 Currents Assets 15,062 16,776 22,266 26,334 Inventory 4,394 6,264 8,131 10,086 Extraordinary Items 411 2,002 0 0 Account Receivables 3,840 3,998 5,190 6,438 Inc in FA 15,144 4,196 6,215 5,225 Cash and Bank Balance 2,269 1,311 2,985 2,979 Pur of Investments -670 0 0 0 Loans and Advances 4,437 4,703 5,360 6,110 Other Current Assets 122 500 600 720 Goodwill 12,285 5,040 3,000 2,000 Curr. Liab. & Prov. 8,673 10,916 13,518 16,225 CF from Investments -26,348 -7,235 -9,215 -7,225 Account Payables 5,499 7,424 9,556 11,780 Other Liabilities 3,084 3,466 3,926 4,399 Issue of Shares 4,976 337 6,850 0 Provisions 89 26 35 46 Inc in Debt 19,685 3,746 -550 1,500 Net Current Assets 6,389 5,860 8,748 10,108 Dividend Paid 1,966 2,272 3,185 3,982 Net Assets 37,320 45,350 56,567 64,108 Other Item 1,293 -1,466 Key assumptions/operating metrics CF from Fin. Activity 23,988 345 3,115 -2,482 FY11 FY12 FY13E FY14E Net Sales Growth (%) 80.1 32.0 30.2 24.0 Inc/Dec of Cash -782 -958 1,674 -5 EBITDA 6,358 8,607 11,298 13,949 Add: Beginning Balance 3,052 2,269 1,311 2,985 EBIT Margin (%) 17.3 17.7 17.9 17.8 Closing Balance 2,269 1,311 2,985 2,979
August 27 - 31, 2012 57 8th Annual Global Investor Conference
Grasim Industries
Company description Key news flows / triggers to watch Grasim is a diversified company with business interest Entered into agreement to acquire 40% stakein in VSF (35% of revenue) and cement (through subsidiary Terrace Bay Inc (US-based paper grade pulp maker) UltraTech, 65% of revenue). UltraTech Cement, its for USD44m. subsidiary, is number one cement company in India Grasim's capex program to add 156,500 tons of VSF with total capacity of ~50mt. capacity is on track: (1) Harihar brownfield addition of 36,000 tons in Key investment positives two phases by Aug-12 and Jan-13, and UltraTech, Grasim's 60% subsidiary, is a truly pan- (2) Vilayat greenfield addition of 120,000 tons by India play without concentration in any particular 4QFY13. region, insulating it from volatility in regional It is also expanding pulp capacity in Domsjo by 45,000 demand & prices. tons to 255,000 tons, which is expected to be Grasim is a global leader in VSF business, with operational by 2QFY13. backward integration in pulp. Expect robust VSF demand in both global and domestic markets. 1QFY13 highlights; guidance for FY13, FY14 The outlook for VSF is improving driven by likely 1QFY13 VSF volumes were ahead of estimate at low cotton output in FY13, coupled with limited 77,013 tons (v/s estimate 73,375 tons), up 40% YoY downside risk to VSF prices from current levels as (-19% QoQ). some Chinese players are making EBITDA loss. Average realization was also ahead of estimate at With planned VSF capacity expansion of ~50% of INR128/kg (v/s estimate INR125/Kg). existing capacity, Grasim is well placed to benefit Higher realizations and softening costs (e.g. pulp from any improvement in demand and pricing. prices down 3% QoQ ) led to PBDIT margin improving Key challenges 710bp QoQ. Post ongoing capex in VSF, Grasim needs avenues Grasim indicated that it does not see any further to deploy its strong cash flow from VSF business. downside to VSF prices, as at current levels of global Deriving synergies from recent acquisitions of VSF prices, Chinese players would be making Domsjo, Terrace Bay, and planned capacity addition losses. Chinese players are operating at 65-68% in Turkey through JV. utilizations.
Stock info Quarterly Performance (INR Million) Bloomberg GRASIM IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 92 Net Op. Income 10,237 12,035 12,429 13,885 12,390 48,724 50,876 CMP (INR) 3,017 Change (%) 8.3 29.0 2.4 -2.6 21.0 7.3 4.4 Mcap (USD b) 5.0 EBITDA 3,529 2,905 2,854 2,168 2,953 11,611 11,984 52-Wk Range (INR) 3,046 / 2,040 Change (%) 17.2 10.1 -21.5 -53.3 -16.3 -18.3 3.2 1, 6, 12 Rel Perf (%) 13 / 8 / 37 EBITDA Margin (%) 34.5 24.1 23.0 15.6 23.8 23.8 23.6 Reported PAT 3,141 3,448 2,745 2,436 2,729 11,770 12,327 Adjusted PAT 3,141 3,448 2,745 2,436 2,729 11,770 12,327 Shareholding pattern (%) Change (%) 40.3 23.3 -2.9 -38.4 -13.1 -0.4 4.7 Jun-12 Mar-12 Jun-11 PAT Margin (%) 30.7 28.7 22.1 17.5 22.0 24.2 24.2 Promoter 25.5 25.6 25.6 Key Operating metrics Dom. Inst. 16.8 16.9 17.8 VSF Volume (t) 54,839 78,959 78,215 94,904 77,013 306,917 338,428 Foreign 39.0 38.6 38.2 Realiz.(INR/t) 152,409 124,689 128,499 121,293 128,024 129,563 127,293 Others 18.7 19.0 18.5 Cem. Volume (mt) 9.86 9.22 10.11 11.54 10.33 40.7 43.8 E: MOSL Estimates
58 August 27 - 31, 2012 8th Annual Global Investor Conference
Grasim Industries: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 213,183 249,878 269,921 308,646 Basic (INR) Change (%) 6.9 17.2 8 14.3 EPS 248.5 288.6 345.3 371.8 EBITDA 47,635 53,184 62,923 72,112 Cash EPS 371 458 534.7 586.8 Change (%) -17.7 11.7 18.3 14.6 BV/Share 1,587 1,861 2,171 2,502 Margin (%) 22.3 21.3 23.3 23.4 DPS 20 22.5 30 35 Depreciation 11,384 11,544 12,108 15,363 Payout (%) 9.4 9 10.2 11 Interest cost 4,068 3,136 2,868 2,810 Valuation (x) Other Income - Rec. 6,310 10,018 10,306 9,906 P/E 12 10.3 8.6 8 PBT after EO items 38,494 48,522 58,252 63,845 Cash P/E 8 6.5 5.6 5.1 Tax Rate (%) 24.8 27.2 26.2 27.4 P/BV 1.9 1.6 1.4 1.2 Consolidated PAT 22,790 26,475 31,673 34,098 EV/ EBITDA 6.6 6.6 5.9 4.8 Change (%) -16.6 16.2 19.6 7.7 Dividend Yield (%) 0.7 0.8 1 1.2 Consolidated Balance Sheet EV/Ton (US$) 115 121 124 90 Y/E March 2011 2012 2013E 2014E Return Ratios (%) Equity Share Capital 917 917 917 917 RoE 15.7 15.5 15.9 14.9 Net Worth 145,586 170,687 199,140 229,483 RoCE 19.9 21.9 23.4 23.2 Loans 67,827 65,513 62,420 57,420 Deferred liabilities 19,616 19,790 19,790 19,711 Working Capital Ratios Minority Interest 43,514 52,334 63,661 75,898 Debtor (Days) 25 25 24 24 Capital Employed 276,543 308,324 345,012 382,512 Inventory (Days) 47 45 44 44 Creditor (Days) 50 38 51 51 Net Fixed Assets 144,316 153,140 176,532 244,169 Leverage Ratio Capital WIP 13,578 22,000 70,000 20,000 Debt/Equity (x) 0.5 0.4 0.3 0.3 Investments 79,185 78,758 58,670 76,404 Goodwill 24,191 24,964 24,964 24,964 Consolidated Cash Flow Statement Y/E March 2011 2012 2013E 2014E Curr. Assets 58,797 86,483 71,529 81,791 OP/(Loss) before Tax 47,635 53,184 62,923 72,112 Inventory 27,229 30,711 32,390 37,037 Interest/Div./ Recd. 6,310 10,018 10,306 9,906 Debtors 14,346 17,288 17,545 20,062 Direct Taxes Paid -9,984 -13,033 -15,252 -17,589 Cash & Bank Bal. 2,844 3,252 4,049 4,630 (Inc)/Dec in WC -8,311 -13,781 15,413 -1,549 Others 14,378 35,232 17,545 20,062 CF from Operations 35,650 36,389 73,389 62,880 Curr. Liability & Prov. 43,524 57,020 56,683 64,816 Account Payables 29,357 26,353 37,789 43,210 (inc)/dec in FA -23,751 -28,790 -83,500 -33,000 Other Liabilities 6,395 20,883 8,098 9,259 (Pur)/Sale of Invest. -16,742 -347 20,088 -17,734 Net Current Assets 15,273 29,462 14,846 16,976 CF from Invest. -40,493 -29,136 -63,412 -50,734 Appl. of Funds 276,542 308,324 345,012 382,512
Issue of Shares -304 1,020 0 0 VSF business - Key assumptions (Inc)/Dec in Debt 11,835 -2,314 -3,093 -5,000 FY11 FY12 FY13E FY14E Interest Paid -4,068 -3,136 -2,868 -2,810 Capacity (ton) 333,975 333,975 490,475 490,475 Dividend Paid -2,146 -2,394 -3,219 -3,756 Sales volume (ton) 305,072 306,917 338,428 362,952 CF from Fin. Activity 5,317 -6,824 -9,181 -11,566 Net Turnover (INR m) 41,695 42,924 46,440 50,587 Avg Realiz. (INR/ton) 126,614 129,563 127,293 129,293 Inc/Dec of Cash 474 428 797 581 PBIDT Margin (%) 35.5 27.2 25.3 25.8 Add: Beginning Bal. 2,370 2,844 3,252 4,049 PBDIT (INR m) 14,793 11,673 11,772 13,036 Closing Balance 2,844 3,252 4,049 4,630
August 27 - 31, 2012 59 8th Annual Global Investor Conference
HDFC
Company description capital infusion. HDFC does not need to dilute Housing Development Finance Corporation (HDFC) is capital to fund subsidiaries; strong core RoE's will India's largest housing finance company, operating help fund own growth. Value unlocking through through a pan India network of 318 outlets. Its AUM listing of insurance subsidiary could provide capital size was INR1.6t as on 30th June 2012 with 2/3rd of the for infusion in HDFC Bank, as and when needed. portfolio coming from individual loans. Besides the core housing finance business, HDFC has interest in Key challenges banking, insurance and asset management businesses Continued change in regulation from NHB relating through its group companies. to (a) Teaser loan portfolio, (b) uniform rates for existing and new customers could act as a deterrent Key investment positives to growth and margins. Across the cycle, HDFC has demonstrated a Moderation in economic growth and high real successful track record of healthy growth. Over estate prices may impact overall demand. FY02-12, disbursements and sanctions have both grown @ 25% CAGR each. During the same period, Key news flows / triggers to watch individual loans (including sell-downs) grew @ 23%. Warrants issued in September 2009 to get converted Despite higher interest rates and elevated property into equity in August 2012. prices in India, HDFC's sanctions and disbursements Any announcement by NHB related to capital growth remains healthy at 17% and 20% in 1QFY13. requirements. HDFC has done a commendable job of managing Listing of insurance venture. spreads in the range of 2.1-2.3% irrespective of the interest rate cycle and competitive pressure. With 1QFY13 highlights; guidance for FY13, FY14 the teaser loan portfolio repricing and expected fall Performance highlights of 1QFY13: Individual loan in interest rates, we expect HDFC to comfortably growth (including sell down) of 22%, spread at maintain spreads in its stated band of 2.1-2.3%. 227bp, GNPA ratio of 79bp, interest on ZCBs of HDFC has demonstrated its superior credit appraisal INR1.5b charged to reserves, and CAR at 14.6% with capabilities by maintaining healthy asset quality Tier I ratio of 11.6%. with gross NPAs remaining below 1%. Guidance for FY13-14: Loan growth of 18-20%, Its subsidiaries/associates have grown sizably and spreads in the range of 2.15-2.35%, Consolidated become self-sufficient. The life insurance business ROE to improve 100bp every year (except FY13 due has turned profitable and should not need further to warrant conversion), stable cost to income ratio.
Stock info Quarterly Performance (INR Million) Bloomberg HDFC IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,489 Net Int. Income 10,948 12,435 12,364 17,434 13,042 52,121 63,852 CMP (INR) 712 YoY Change (%) 17.1 14.7 15.1 27.2 19.1 16.3 22.5 Mcap (USD b) 19.0 Profit on Sale of Inv. 163 869 880 791 202 2,702 2,500 52-Wk Range (INR) 726 / 601 Other oper. income 1,909 1,430 1,306 1,233 2,223 6,939 8,524 1, 6, 12 Rel Perf (%) 1 / 3 / 3 Net Oper. Income 13,020 14,734 14,549 19,458 15,467 61,762 74,876 Pre Provi. Profit 11,935 13,547 13,483 18,491 14,199 57,456 69,622 Shareholding pattern (%) YoY Change (%) 21.6 17.9 9.8 17.1 19.0 16.4 21.2 Jun-12 Mar-12 Jun-11 PAT 8,445 9,707 9,813 13,261 10,019 41,226 49,225 Promoter 0.0 0.0 0.0 YoY Change (%) 21.6 20.2 10.1 16.1 18.6 16.6 19.4 Dom. Inst. 15.1 15.4 14.3 Key Operating Metrics Foreign 71.3 70.8 73.3 AUM Growth (%) 20.6 20.2 20.7 20.2 19.2 20.2 22.0 Others 13.6 13.9 12.4 Spreads (%; Cum.) 2.30 2.29 2.27 2.27 2.27 2.27 NA GNPA (%) 0.83 0.82 0.82 0.74 0.79 0.74 0.74 E: MOSL Estimates
60 August 27 - 31, 2012 8th Annual Global Investor Conference
HDFC: Financials and valuation
Income statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 120,431 163,689 203,277 236,504 Spreads Analysis (%) Interest Expended 75,599 111,568 139,426 159,267 Avg Yield on Housing Loans 10.5 11.8 12.1 11.6 Net Interest Income 44,832 52,121 63,852 77,237 Avg. Yield on Earning Assets 9.8 11.1 11.6 11.4 Change (%) 25.3 16.3 22.5 21.0 Avg. Cost-Int. Bear. Liab. 7.1 8.8 9.3 9.0 Fees and Other Charges 2,204 2,684 3,419 4,034 Interest Spread 2.6 2.3 2.4 2.5 Net Int. Inc. (incl fees) 47,035 54,805 67,270 81,271 Net Interest Margin 3.6 3.5 3.6 3.7 Change (%) 23.5 16.5 22.7 20.8 Other Operating Income 5,894 6,957 7,606 8,627 Profitability Ratios (%) Miscellanous Income 251 213 250 275 RoE 21.7 22.7 22.7 22.8 Net Income 53,181 61,975 75,126 90,173 Adjusted RoE 26.6 27.3 29.4 30.9 Change (%) 23.7 16.5 21.2 20.0 RoA 2.9 2.8 2.9 2.9 Operating Expenses 3,812 4,519 5,504 6,647 Adjusted RoA 2.8 2.7 2.7 2.8 Operating Income 49,370 57,456 69,622 83,525 Change (%) 24.2 16.4 21.2 20.0 Efficiency Ratios (%) Provisions/write offs 700 800 1,958 2,187 Int. Expended/Int.Earned 62.8 68.2 68.6 67.3 Reported PBT 48,670 56,656 67,664 81,338 Other Inc./Net Income 15.7 15.9 15.0 14.3 Tax 13,320 15,430 18,438 22,165 Op. Exps./Net Income 7.2 7.3 7.3 7.4 Tax Rate (%) 27.4 27.2 27.3 27.3 Empl. Cost/Op. Exps. 46.1 45.5 44.9 44.6 Reported PAT 35,350 41,226 49,225 59,173 Change (%) 25.1 16.6 19.4 20.2 Valuation PAT adjusted for EO 35,350 41,226 49,225 59,173 Book Value (INR) 118.1 128.8 159.3 179.2 Change (%) 25.1 16.6 19.4 20.2 Price-BV (x) 5.3 4.3 3.8 Adjusted BV* (INR) 91.2 100.5 105.9 125.8 Adj Price-ABV (x) 5.0 4.5 3.6 Balance sheet (INR Million) EPS (INR) 24.1 27.9 32.1 38.6 Y/E March 2011 2012 2013E 2014E EPS Growth (%) 22.4 15.8 15.1 20.2 Capital 2,934 2,954 3,063 3,063 Adj Price-Earnings (x) 18.0 15.0 11.6 Reserves & Surplus 170,231 187,222 240,945 271,410 Adjusted EPS (INR)# 22.6 26.0 29.8 35.7 Net Worth 173,165 190,176 244,008 274,473 Adjusted EPS Growth (%) 21.8 15.1 14.4 20.0 Loans from Banks 424,898 406,966 460,313 560,947 Adj Price-Adj EPS (x) 19.3 16.1 12.5 Bonds/Debentures 482,956 621,381 745,657 894,789 Dividend per share (INR) 9.0 11.0 12.2 14.7 Deposits 243,269 362,928 417,367 479,972 Dividend yield (%) 1.6 1.8 2.1 Borrowings 1,151,123 1,391,275 1,623,338 1,935,708 E: MOSL Estimates; * BV is adj. by deducting investments in key Change (%) 19.2 20.9 16.7 19.2 ventures from NW; # Adjusted EPS is adjusting for dividend from key ventures Total Liabilities 1,324,288 1,581,451 1,867,346 2,210,181 Housing Loans 1,171,266 1,408,746 1,726,955 2,081,406 Change (%) 19.6 20.3 22.6 20.5 Investments 118,324 122,070 128,174 134,582 Change (%) 10.3 3.2 5.0 5.0 Total Assets 1,324,288 1,581,451 1,867,346 2,210,181
August 27 - 31, 2012 61 8th Annual Global Investor Conference
HDFC Bank
Company description HDFCB also carries floating provision of INR16.75b HDFC Bank (HDFCB) is India's largest retail bank and (INR7/share) created during FY11-12 to smoothen second largest private sector bank, with balance sheet earnings growth led by better than factored in size of INR3.6t+. Backed by its consistent performance credit cost on retail loans. In FY13/14, even though (enviable track record of 52 quarters of 30%+ earnings slippages might get normalized to average levels growth), HDFCB enjoys highest market capitalization in retail segment and credit cost would increase, among Indian banks. Retail assets and liabilities are its buffer on account of higher base due to floating core strategy. Rated as one of the best banks in India, it provisions would provide cushion to earnings. has 2,550+ branches and 9,700+ ATMs across the country. Key challenges Key investment positives Lower systemic loan growth and expected increase HDFCB is best placed in the current environment, in credit cost pose threat to 30% earnings growth. with (1) CASA ratio of ~46%, (2) growth outlook of Operating efficiencies and improvement in 1.3x the industry, and (5) best-in-class asset quality. productivity remain key. HDFCB's loan growth is expected to stay strong due Key news flows / triggers to watch to (1) sharper focus on medium/long tenure Retail loans asset quality is the decadal best, corporate loans, (2) strong demand for auto loans, increase in stress here could threaten earnings. and (3) growth from rural and semi-urban areas for Competitors' strategy on retail products need to be existing products. watched. Recently Axis, Yes, IndusInd, State Bank Strong CASA ratio and a higher share of retail loans and foreign banks have become very aggressive. helped HDFCB to post NIMs (on total assets) of 4%+. It is expected to retain its funding cost advantage 1QFY13 highlights; guidance for FY13, FY14 through strong focus on new customer acquisitions Performance highlights of 1QFY13: (a) Above and floats from multiple transaction banking industry loan growth (+9% QoQ, 22% YoY), (b) NIM franchises. In a falling interest rate scenario, higher of 4.3% (+10bp QoQ), (c) strong fee income (+23% share of fixed rate loans will also cushion margins. YoY), (d) SA deposits up 4% QoQ and 18% YoY, and A third of HDFCB's branches are less than 24 months (e) stable asset quality. old; further, a large part of branch expansion Guidance for FY13-14: Loan growth 3-5% higher than happened outside top 9 cities, where break-even system, margins of 3.9-4.3%, fall in cost to income period is 24-30 months. This strong expansion in ratio with higher productivity and ageing of new hinterland will help (1) customer acquisition, (2) branches, and annual addition of 250-300 branches. product penetration, and (3) priority sector targets.
Stock info Quarterly Performance (INR Million) Bloomberg HDFCB IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 2356 Net Int. Income 28,480 29,445 31,160 33,883 34,841 122,968 148,233 CMP (INR) 595 % Change (Y-o-Y) 18.6 16.6 12.2 19.3 22.3 16.6 20.5 Mcap (USD b) 25.1 Other Income 11,200 12,117 14,200 14,920 15,295 52,437 68,990 52-Wk Range (INR) 610 / 400 Operating Exp. 19,346 20,304 21,580 24,671 24,326 85,901 102,860 1, 6, 12 Rel Perf (%) -1 / 16 / 22 Operating Profit 20,334 21,258 23,780 24,132 25,809 89,504 114,364 % Change (Y-o-Y) 16.3 17.6 14.7 15.1 26.9 15.9 27.8 Shareholding pattern (%) Other Provisions 4,437 3,661 3,292 2,983 4,873 14,373 15,819 Jun-12 Mar-12 Jun-11 Net Profit 10,850 11,994 14,297 14,531 14,174 51,671 67,257 Promoter 23.1 23.2 23.3 % Change (Y-o-Y) 33.7 31.5 31.4 30.4 30.6 31.6 30.2 Dom. Inst. 10.7 10.5 11.1 Loan Growth (%) 20.0 20.0 22.1 22.2 21.5 22.2 22.0 Foreign 49.0 48.8 47.7 NIM (%) 4.2 4.1 4.1 4.2 4.3 4.2 4.1 Others 17.3 17.5 17.9 Gross NPA (%) 1.0 1.0 1.0 1.0 1.0 1.0 1.3 E: MOSL Estimates
62 August 27 - 31, 2012 8th Annual Global Investor Conference
HDFC Bank: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 199,282 272,864 335,204 392,809 Spreads Analysis (%) Interest Expense 93,851 149,896 186,971 214,486 Avg. Yield-Earning Assets 9.2 10.2 10.2 9.9 Net Interest Income 105,431 122,968 148,233 178,323 Avg. Yield on loans 10.6 11.6 11.7 11.2 Change (%) 25.7 16.6 20.5 20.3 Avg. Yield on Invt 7.2 7.7 7.5 7.3 Non Interest Income 43,352 52,437 68,990 85,039 Avg. Cost-Int. Bear. Liab. 4.7 6.1 6.3 6.0 Net Income 148,783 175,405 217,224 263,361 Avg. Cost of Deposits 4.3 5.6 5.7 5.3 Change (%) 20.3 17.9 23.8 21.2 Interest Spread 4.5 4.1 3.9 3.9 Operating Expenses 71,529 85,901 102,860 121,182 Net Interest Margin 4.9 4.6 4.5 4.5 Pre Provision Profits 77,254 89,504 114,364 142,179 Change (%) 20.2 15.9 27.8 24.3 Profitability Ratios (%) Provisions (excl tax) 19,067 14,373 15,819 19,818 RoE 16.7 18.7 20.7 21.9 PBT 58,187 75,132 98,544 122,361 RoA 1.6 1.7 1.8 1.8 Tax 18,923 23,461 31,288 38,544 Int. Expense/Int.Income 47.1 54.9 55.8 54.6 Tax Rate (%) 32.5 31.2 31.8 31.5 Fee Income/Net Income 29.5 31.0 30.4 30.6 PAT 39,264 51,671 67,257 83,817 Non Int. Inc./Net Income 29.1 29.9 31.8 32.3 Change (%) 33.2 31.6 30.2 24.6 Equity Dividend (Incl tax) 8,948 11,806 15,737 16,763 Efficiency Ratios (%) Core PPP* 77,780 91,463 111,364 137,679 Cost/Income* 47.9 48.4 48.0 46.8 Change (%) 27.8 17.6 21.8 23.6 Empl. Cost/Op. Exps. 39.6 39.6 40.3 40.4 *Core PPP is (NII+Fee income-Opex) Busi. per Empl. (INR m) 61.5 66.5 71.4 81.8 NP per Empl. (INR lac) 0.7 0.8 1.0 1.1 Balance Sheet (INR Million) * ex treasury Y/E March 2011 2012 2013E 2014E Equity Share Capital 4,652 4,693 4,693 4,693 Asset-Liability Profile (%) Reserves & Surplus 249,140 294,553 346,073 410,278 Loans/Deposit 76.7 79.2 79.9 80.5 Net Worth 253,793 299,247 350,766 414,971 CASA Ratio 52.7 48.4 46.0 44.5 Deposits 2,085,864 2,467,064 2,985,148 3,701,584 Investment/Deposit 34.0 39.5 37.6 34.8 Change (%) 24.6 18.3 21.0 24.0 G-Sec/Investment 75.6 78.2 74.6 77.5 of which CASA Dep 1,099,083 1,194,059 1,372,663 1,647,196 CAR 16.2 16.5 15.1 13.6 Change (%) 26.2 8.6 15.0 20.0 Tier 1 12.2 11.6 11.0 10.3 Borrowings 143,941 238,465 243,581 256,397 Other Liabilities & Prov. 289,929 374,319 522,123 729,025 Valuation Total Liabilities 2,773,526 3,379,095 4,101,618 5,101,977 Book Value (INR) 109.1 127.4 149.4 176.7 Current Assets 296,688 209,377 245,251 316,212 Change (%) 16.0 16.8 17.2 18.3 Investments 709,294 974,829 1,121,053 1,289,211 Price-BV (x) 4.7 4.0 3.4 Change (%) 21.0 37.4 15.0 15.0 Adjusted BV (INR) 108.2 126.4 147.1 172.2 Loans 1,599,827 1,954,200 2,384,124 2,980,155 Price-ABV (x) 4.7 4.0 3.5 Change (%) 27.1 22.2 22.0 25.0 EPS (INR) 16.9 22.0 28.7 35.7 Fixed Assets 21,706 23,472 25,365 27,660 Change (%) 31.0 30.4 30.2 24.6 Other Assets 146,011 217,216 325,825 488,737 Price-Earnings (x) 27.0 20.8 16.7 Total Assets 2,773,526 3,379,095 4,101,618 5,101,977 Dividend Per Sh (INR) 3.3 4.3 5.7 7.1 Dividend Yield (%) 0.7 1.0 1.2 Asset Quality (%) E: MOSL Estimates Y/E March 2011 2012 2013E 2014E GNPA (INR m) 16,943 19,994 31,263 55,169 NNPA (INR m) 2,964 3,523 7,692 15,165 GNPA Ratio 1.05 1.01 1.30 1.83 NNPA Ratio 0.19 0.18 0.32 0.51 PCR (Excl Tech. write off) 82.5 82.4 75.4 72.5 E: MOSL Estimates
August 27 - 31, 2012 63 8th Annual Global Investor Conference
Hero MotorCorp
Company description Key challenges Hero MotoCorp (HMCL), erstwhile JV between Honda Maintaining market share amidst rising competitive Corporation Japan and the Munjal family, is the leader pressure to test pricing power and margins. in India's domestic motorcycle market with ~45% share. Ensure continuous flow of new/refreshed products. It has a strong dealer network and high penetration in Weak INR may put pressure on margins. rural areas (~45% of sales). Post split from Honda, HMCL Scaling up nascent export business, where it is late is free to tap global opportunity in 2W. entrant.
Key investment positives Key news flows / triggers to watch Strong franchise of Splendor & Passion, and wide Announces capex plan of ~INR26b over FY13-14, to distribution reach makes it best placed to tap strong add 2m capacity (at two new plants), R&D center. demand growth, especially in rural markets. We Performance of the Hero branded products, estimate ~9% volume growth in FY13 to 6.8m. particularly in the rural markets. Apart from recent launch of Impulse and Maestro, Response to new launches of Ignitor and Maestro. HMCL further plans to launch the 125cc Ignitor and 110cc Passion XPro (both showcased at Auto Expo 1QFY13 highlights; guidance for FY13, FY14 2012) along with 5-6 other model refreshes in FY13. 1QFY13 realization was flat QoQ (+2.6% YoY) at Model launches and addition of 500 dealers should INR37,799 (v/s est INR38,284) impacted by adverse reduce impact of demand slowdown, if any. market mix, despite price increases in April & May Margins to improve from historical low levels, and higher excise benefit at Haridwar plant. driven by vendor rationalization, operating Adj EBITDA margin was flat QoQ and YoY at 10.8% as leverage, and completion of fixed royalty payment benefit of operating leverage was offset by hit of by Jun-14. weaker INR on RM and royalty. Higher other income Post split with Honda, Hero MotoCorp is free to and lower tax boosted reported PAT to INR6.15b. explore global markets; it is targeting exports of 1m While consumer sentiments remain weak, it units by FY16 (of total target sales of 10m units). maintained its industry growth guidance at 9-10% The company has announced plans to invest for FY13. It expects short-run margins to remain INR25.75b in the coming years to (1) expand under pressure due to weaker INR and increase in capacity (by 2m units to 9m units), (2) set up a part advertising spends. distribution centre (Rajasthan) and R&D center. Plans to start exports to Africa and LatAm in 2QFY13.
Stock info Quarterly Performance (INR Million) Bloomberg HMCL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 200 Net Op. Income 56,376 57,843 59,836 59,625 62,078 233,681 261,940 CMP (INR) 1,930 Change (%) 32.2 28.2 16.9 11.4 10.1 21.4 12.1 Mcap (USD b) 6.9 EBITDA 6,020 6,637 6,669 6,449 6,694 25,775 29,015 52-Wk Range (INR) 2279 / 1703 Change (%) 5.5 17.0 25.1 5.2 11.2 12.9 12.6 1, 6, 12 Rel Perf (%) -11 / -5 / -5 EBITDA Margin (%) 10.7 11.5 11.1 10.8 10.8 11.0 11.1 Adjusted PAT 5,579 6,036 6,130 6,036 6,155 23,781 26,406 Shareholding pattern (%) Change (%) 13.5 19.4 24.3 20.3 10.3 18.5 11.0 Jun-12 Mar-12 Jun-11 Key Operating metrics Promoter 52.2 52.2 52.2 Volumes (m units) 1.53 1.54 1.59 1.57 1.64 6.24 6.80 Dom. Inst. 5.9 5.6 4.6 Realiz. (INR) 36,858 37,456 37,649 37,929 37,799 37,478 38,541 Foreign 33.3 33.5 33.8 RM Cost (%) 75.3 73.0 73.4 74.1 74.1 74.0 74.0 Others 8.5 8.7 9.5 E: MOSL Estimates
64 August 27 - 31, 2012 8th Annual Global Investor Conference
Hero MotorCorp: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Total Op. Income 192,450 233,681 261,940 300,369 EPS (INR) 100.5 119.1 132.2 146.2 Change (%) 22.1 21.4 12.1 14.7 EPS Growth (%) -10 18.4 11 10.6 EBITDA 24,603 34,078 37,715 44,179 Cash EPS (INR) 107.6 132.1 147.2 163.3 Adj. EBITDA (%) 11.8 11 11.1 11.8 Book Value per Share 148 214.8 282.7 358.7 Depreciation 4,024 10,973 11,693 12,105 DPS (INR) 105 45 55 60 Interest -19 213 120 100 Payout (Incl. Div. Tax) % 125.1 43.5 47.8 47.2 Other Income 4,249 5,756 5,722 6,618 Valuation (x) PBT 24,048 28,647 31,624 38,592 P/E 15.8 14.2 12.8 Effective tax Rate (%) 19.8 17 16.5 24.3 Cash P/E 14.2 12.8 11.5 Adj. PAT 20,077 23,781 26,406 29,205 EV/EBITDA 10.1 8.7 7.2 Change (%) -10 18.4 11 10.6 EV/Sales 1.5 1.3 1.1 Balance Sheet (INR Million) Price to Book Value 8.7 6.6 5.2 Y/E March 2011 2012 2013E 2014E Dividend Yield (%) 2.4 2.9 3.2 Share Capital 399 399 399 399 Profitability Ratios (%) Net Worth 29,501 42,839 56,394 71,580 RoE 62.5 55.4 46.8 40.8 Loans 14,912 10,114 3,028 327 RoCE 59.2 52.4 51.6 52.3 Capital Employed 46,940 55,035 61,505 73,990 Leverage Ratio Net Fixed Assets 40,803 33,504 46,511 53,106 Debt/Equity (x) 0.5 0.2 0.1 0 Capital WIP 1,251 5,000 1,000 1,000 Investments 51,288 39,643 39,643 39,643 Cash Flow Statement (INR Million) Y/E March 2011 2012 2013E 2014E Curr.Assets, Loans 15,046 20,743 31,420 44,965 Profit before Tax 24,048 28,647 31,624 38,592 Inventory 5,249 6,756 7,573 8,684 Depreciation & Amort. 4,024 10,973 11,693 12,105 Sundry Debtors 1,306 2,723 3,052 3,500 Direct Taxes Paid -4,812 -4,866 -5,218 -9,387 Cash/ Bank Bal. 715 768 9,030 19,290 Inc/Dec in Working Capital2,181 -23,238 10,799 4,370 Extra-ordinary Items -798 0 0 0 Current Liab. & Prov. 61,448 43,854 57,069 64,724 CF after EO Items 23,262 11,517 48,898 45,680 Sundry Creditors 14,268 22,932 25,705 29,476 Net Current Assets -46,402 -23,111 -25,648 -19,759 (Inc)/Dec in FA+CWIP -3,292 -7,797 -20,700 -18,700 Appl. of Funds 46,940 55,035 61,505 73,990 (Pur)/Sale of Invest. -9,994 11,645 0 0 CF from Inv. Activity -13,286 3,848 -20,700 -18,700 Key assumptions/operating metrics Y/E March 2011 2012 2013E 2014E Inc/(Dec) in Debt -333 -4,798 -7,086 -2,701 Volumes ('000 units) 5.4 6.24 6.8 7.65 Interest Paid -158 0 0 0 Growth (%) 17.4 15.4 9 12.5 Dividends Paid -9,401 -10,514 -12,851 -14,019 Realizations (INR/unit) 35,623 37,478 38,541 39,285 CF from Fin. Activity -9,892 -15,312 -19,936 -16,720 Growth (%) 4 5.2 2.8 1.9 RM Cost (% of sales) 73.3 74 74 73.5 Inc/(Dec) in Cash 84 53 8,262 10,260 FCF (CFO-Capex) 20,768 3,720 28,198 26,980 Add: Beginning Balance 632 715 768 9,030 Net Debt -37,091 -30,297 -45,644 -58,605 Closing Balance 716 768 9,030 19,290
August 27 - 31, 2012 65 8th Annual Global Investor Conference
Hindalco Industries
Company description set up with capex of INR105b. Timely start of coal Hindalco (HNDL) is the largest aluminum producer in mining will lead to rerating of the company. India. It has captive bauxite mines from which it sources Current LME prices for aluminium at USD1,850/ton 67% of the requirement for its 1.5mtpa alumina refinery. are close to marginal cost of production. Stronger The company also has a 0.54mtpa smelting capacity and spot regional premiums and subsidies by Chinese is the largest maker of flat-rolled aluminum products and Australian governments have so far prevented in India. After turning Novelis around in 2010, HNDL is production cutbacks. Significant capacity shutdowns focusing on tripling its aluminum production capacity will boost prices in subdued demand scenario. in India in the next three years through brownfield and 1QFY13 highlights; guidance for FY13, FY14 greenfield projects. Its copper smelting capacity of Hindalco standalone 1QFY13 performance was 500ktpa is the largest in Asia. below estimate due to disappointing copper Key investment positives segment and production disturbances at aluminum smelter. Dividends from subsidiaries boosted other Its new smelting capacities are coming up near income, and Adj S/A PAT at INR4.2b was broadly in- energy sources and its alumina facilities are near line with estimate of INR4.4b. bauxite mines, ensuring low cost of production. Novelis' adjusted EBITDA improved QoQ on We expect Novelis to deliver strong earnings expected lines to USD259m. Novelis is experiencing growth, given its focus on high-margin business, gradual recovery in volumes with 3% QoQ growth. expansions in its key markets, and continued efforts Hindalco will commission Hirakud smelter to improve operating efficiencies across its expansion from 155kt to 213kt and 200kt FRP locations. facilities by end of FY13. Further, 1.5mtpa Uktal Key challenges Alumina is likely to get commissioned by end of Unexpected fall in aluminum prices, sluggish growth FY13 although uncertainty still persists. We are in developed countries, and further delays in modeling in 600kt incremental alumina volume expansion could adversely impact earnings. from Utkal in FY14. Mahan smelters are in advance stage, but the actual Key news flows / triggers to watch commissioning is being delayed due to weak LME. Mahan coal mine is very critical for the viability of So far, INR222b has been spent on all Indian projects 359ktpa Mahan aluminum smelter, which is being with total capex of INR306b.
Stock info Quarterly Performance (INR Million) Bloomberg HNDL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1915 Operating Income 60,309 62,719 66,470 76,471 60,279 265,968 269,665 CMP (INR) 114 Change (%) 16.5 7.0 11.3 11.7 0.0 11.5 1.4 Mcap (USD b) 3.9 EBITDA 8,671 6,692 7,149 8,648 4,631 31,160 24,462 52-Wk Range (INR) 165 / 105 Change (%) 4.2 -7.1 -3.4 -1.0 -46.6 -1.6 -21.5 1, 6, 12 Rel Perf (%) -8 / -21 / -25 EBITDA Margin (%) 14.4 10.7 10.8 11.3 7.7 11.7 9.1 Reported PAT 6,440 5,025 4,507 6,400 4,248 22,372 17,115 Adjusted PAT 6,440 5,025 4,507 6,400 4,248 22,372 17,115 Shareholding pattern (%) Change (%) 20.5 10.2 -2.1 -4.1 -34.0 5.6 -23.5 Jun-12 Mar-12 Jun-11 PAT Margin (%) 10.7 8.0 6.8 8.4 7.0 8.4 6.3 Promoter 32.1 32.1 32.1 Key operating metrics Dome. Inst. 15.2 14.9 12.8 Alumina (Prodn, kt) 335 332 343 345 335 1355 1400 Foreign 36.5 37.5 42.4 Aluminium (sales,kt)131 129 147 149 124 556 564 Others 16.2 15.5 12.7 Copper (sales, kt) 73 75 84 94 71 325 332 E: MOSL Estimates
66 August 27 - 31, 2012 8th Annual Global Investor Conference
Hindalco Industries: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net sales 720,779 808,214 802,787 840,886 Basic (INR) EBITDA 85,868 81,897 85,602 100,019 EPS 17.6 17.1 18.1 19.8 % of Net Sales 11.9 10.1 10.7 11.9 Cash EPS 28.3 25.0 31.2 34.6 Depn. & Amortization 27,500 28,699 25,090 28,394 BV/Share (adj.) 83.6 94.9 111.2 129.3 EBIT 58,368 53,199 60,512 71,625 DPS 1.5 1.5 1.5 1.5 Net Interest 14,411 17,579 19,082 23,661 Payout (%) 8.5 8.8 8.3 7.6 Other income 4,309 7,831 7,907 4,905 Valuation (x) PBT before EO 48,266 43,450 49,337 52,869 P/E 6.7 6.3 5.8 EO income -9,834 -14,616 -54 Cash P/E 4.6 3.6 3.3 PBT after EO 38,432 28,834 49,284 52,869 P/BV 1.2 1.0 0.9 Tax 9,638 7,862 12,223 12,448 EV/Sales 0.7 0.7 0.7 Reported PAT 28,793 20,972 37,061 40,421 EV/EBITDA 6.5 6.8 5.7 Minority interests 3,659 2,113 1,089 1,089 Dividend Yield (%) 1.3 1.3 1.3 Share of asso. 29 496 29 29 Adjusted PAT 34,998 33,970 36,054 39,360 Return Ratios (%) Balance Sheet RoE 23.1 19.1 17.6 16.4 Y/E March 2011 2012 2013E 2014E RoCE (pre-tax) 10.2 7.9 7.9 8.6 Share Capital 1,990 1,990 1,990 1,990 RoIC (pre-tax) 15.6 13.0 14.6 16.2 Reserves 288,243 310,762 343,334 379,265 Growth (%) Net Worth 290,233 312,752 345,324 381,255 Sales 18.7 12.1 -0.7 4.7 Minority Interest 22,169 14,167 14,167 14,167 EBITDA 21.9 -4.6 4.5 16.8 Total Loans 276,920 361,920 411,920 416,920 PAT 279.5 -2.9 6.1 9.2 Deferred Tax Liability 37,596 36,556 40,299 43,898 Capital Employed 626,918 725,395 811,709 856,240 Leverage Ratio (x) Current Ratio 1.5 1.6 1.6 1.7 Gross Block 392,654 426,359 436,859 530,259 Interest Cover Ratio 4.1 3.0 3.2 3.0 Less: Accum. Deprn. 158,014 182,873 207,962 236,356 Debt/Equity 1.2 1.6 1.6 1.3 Net Fixed Assets 234,640 243,486 228,896 293,902 Goodwill on consolid. 123,940 123,940 123,940 123,940 Cash Flow Statement (INR Million) Capital WIP 131,308 228,770 323,795 281,345 Y/E March 2011 2012 2013E 2014E Investments 20,124 20,124 20,124 20,124 EBITDA 85,868 81,897 85,602 100,019 Curr. Assets 333,746 290,061 295,243 325,235 Non-cash items in EBITDA-3,443 -20,905 -53.5 Inventory 140,956 128,021 126,560 135,184 tax paid -13,131 -7,862 -8,481 -8,849 Account Receivables 79,996 75,364 75,085 79,657 Change in working Capital-7,031 -18,287 1,044 -5,180 Cash and Bank Balance 79,461 53,342 60,265 77,061 CF from Op. Activity 62,263 34,843 78,112 85,991 Others 33,334 33,334 33,334 33,334 Curr. Liability & Prov. 216,840 180,987 180,290 188,307 (Inc)/Dec in FA + CWIP -77,171 -131,167 -105,525 -50,950 Account Payables 164,692 129,015 128,319 136,336 (Pur)/Sale of Investments Provisions & Others 52,149 51,971 51,971 51,971 & yield thereon 5,143 6,213 6,846 3,844 Net Current Assets 116,906 109,074 114,953 136,928 CF from Inv. Activity -72,027 -124,954 -98,679 -47,106 Appl. of Funds 626,918 725,395 811,709 856,240 Equity raised/(repaid) 99 Key assumptions/operating metrics Debt raised/(repaid) 37,384 85,000 50,000 5,000 Y/E March 2011 2012 2013E 2014E Interest -25,410 -17,579 -19,082 -23,661 Alumina (Production, kt) 1,353 1,355 1,400 2,000 Dividend (incl. tax) -3,838 -3,429 -3,429 -3,429 Aluminium (sales, kt) 535 556 564 700 CF from Fin. Activity 8,236 63,992 27,490 -22,089 Copper (sales, kt) 330 325 332 333 (Inc)/Dec in Cash -1,528 -26,119 6,923 16,796 Exchange USD/INR 45.6 47.9 53.5 52.0 Add: Opening Balance 80,990 79,461 53,342 60,265 Avg LME Al (USD/T) 2,282 2,352 1,996 2,100 Closing Balance 79,461 53,342 60,265 77,061 EBITDA-Al (INR m) 24,223 21,309 14,118 27,272 EBITDA-Cu (INRm) 7,441 9,851 10,343 10,861
August 27 - 31, 2012 67 8th Annual Global Investor Conference
Hindustan Unilever
Company description Continued high competitive intensity is likely to Hindustan Unilever (HUL, a 52.5% Unilever subsidiary) keep ad spends at high levels which remains a key is one of the largest Consumer companies in India with challenge and could restrict margin expansion. presence across segments like Household and Personal Care, Processed Foods and Water (Purifier). It has Key news flows / triggers to watch leading market shares in Toilet Soaps, Detergents, Skin Volume growth trend in soaps & detergents and Care and Shampoos and has strong presence in oral care, personal care products (PP) in the coming quarters. coffee, tea and processed foods categories. Gross margin and EBITDA margin trends. Success of new launches in skin care, hair care, oral Key investment positives care and processed foods. HUL has the widest product range in Indian Level of competitive activity by players like ITC, Consumer space, and being a subsidiary of Unilever, P&G, Godrej Consumer, Colgate and L'Oreal. has access to a host of products, brands and the latest technology. Aggressive new product launches 1QFY13 highlights; guidance for FY13, FY14 and increasing innovation are key positives. 1QFY13 revenue grew 14% YoY, EBITDA margin HUL has the largest distribution network in the expanded 170bp YoY and Adj PAT grew 28% YoY. entire Consumer universe; it expanded direct rural Soaps & detergents sales grew 23.7% while EBIT reach by 0.5m outlets in FY11 and plans to further grew 63%, as margins expanded 300bp to 12.2%. expand rural distribution. Laundry products reported robust double-digit Sustained growth in Soaps and detergents and growth. personal products is a key positive. Personal products sales grew 16.7%, with healthy performance in Skin Care, Hair Care and Oral Care. Key challenges Over FY12-14, we expect double-digit growth to After 4 quarters of ~10% volume growth, further continue in the Personal Products segment, with price hikes could moderate volume growth. ~25% EBIT margin. Also, Soaps & detergents margins should sustain at ~12%.
Stock info Quarterly Performance (INR Million) Bloomberg HUVR IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 FY13E Equity Shares (m) 2,162 Operating Income 55,889 56,105 59,561 57,659 63,788 221,164 259,476 CMP (INR) 502 Change (%) 14.6 17.8 16.2 16.1 14.1 12.1 17.3 Mcap (USD b) 19.5 EBITDA 7,543 8,267 9,890 8,334 9,665 32,913 39,626 52-Wk Range (INR) 504 / 311 Change (%) 10.8 27.8 36.4 29.8 28.1 22.9 20.4 1, 6, 12 Rel Perf (%) 9 / 34 / 54 EBITDA Margin (%) 13.5 14.7 16.6 14.5 15.2 14.9 15.3 Reported PAT 6,172 6,889 7,538 6,866 13,312 26,914 32,201 Adjusted PAT 5,684 6,525 7,622 6,636 7,265 25,725 32,201 Shareholding pattern (%) Change (%) 9.1 22.3 29.9 29.0 27.8 22.6 25.2 Jun-12 Mar-12 Jun-11 PAT Margin (%) 10.2 11.6 12.8 11.5 11.4 11.6 12.4 Promoter 52.5 52.5 52.5 Key Operating metrics Dom. Inst. 9.9 10.3 11.8 Volume Growth (%) 8.3 9.8 9.1 10.0 9.0 9.3 9.0 Foreign 20.4 19.8 18.7 S& D EBIT margin (%) 9.2 12.4 13.5 11.3 12.2 11.6 12.5 Others 17.2 17.4 17.0 PP EBIT margin (%) 25.3 24.4 25.9 26.3 25.8 25.5 25.3 E: MOSL Estimates
68 August 27 - 31, 2012 8th Annual Global Investor Conference
Hindustan Unilever: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 194,011 217,356 255,319 284,554 Basic (INR) Other Oper. Income 3,341 3,808 4,157 4,611 EPS 10.0 11.9 14.9 17.2 Total Revenue 197,352 221,164 259,476 289,164 Cash EPS 11.0 13.3 16.0 18.5 Change (%) 11.3 12.1 17.3 11.4 BV/Share 12.2 16.0 20.9 27.0 COGS 100,569 117,378 135,733 151,008 DPS 6.5 7.5 8.5 9.5 Gross Profit 96,783 103,786 123,744 138156 Payout % 65.5 63.0 57.0 55.3 Operating Exp 69,790 70,873 84,117 92,949 EBITDA 26,993 32,913 39,626 45,207 Margin (%) 13.7 14.9 15.3 15.6 Valuation (x) Depreciation 2,208 2,182 2,357 2,721 P/E 38.8 31.0 26.9 Int. and Fin. Charges 2 12 70 20 Cash P/E 34.8 28.9 25.0 Other Income - Recurring 2,520 2,783 4,894 6,386 EV/Sales 4.4 3.7 3.3 Profit before Taxes 27,302 33,502 42,093 48,852 EV/EBITDA 29.2 24.0 20.7 Change (%) 0.9 22.7 25.6 16.1 P/BV 28.9 22.1 17.1 Margin (%) 14.1 15.4 16.5 17.2 Dividend Yield (%) 1.6 1.8 2.1 Tax 5,488 7,776 9,471 11,236 Deferred Tax 281 0 421 489 Return Ratios (%) Tax Rate (%) 21.1 23.2 23.5 24.0 RoE 81.8 74.6 71.2 63.7 Profit after Taxes 21,533 25,725 32,201 37,128 Change (%) 2.4 19.5 25.2 15.3 RoCE 103.7 97.2 93.3 83.8 Margin (%) 11.1 11.8 12.6 13.0 Non-rec. (Exp)/Income 1,527 1,189 0 0 Working Capital Ratios Reported PAT 23,060 26,914 32,201 37,128 Debtor (Days) 18 19 18 18 Asset Turnover (x) 7.4 6.3 5.6 4.9 Balance Sheet (INR Million) Y/E March 2011 2012 2013E 2014E Leverage Ratio Share Capital 2,160 2,160 2,160 2,160 Debt/Equity (x) 0.0 0.0 0.0 0.0 Reserves 24,180 32,318 43,043 56,167 Net Worth 26,339 34,477 45,202 58,327 Capital Employed 26,339 34,477 45,202 58,327 Cash Flow Statement (INR Million) Y/E March 2011 2012 2013E 2014E Gross Block 37,596 40,596 43,596 47,096 OP/(loss) before Tax 26,993 32,913 39,626 45,207 Less: Accum. Depn. -15,905 -18,250 -20,608 -23,329 Net Fixed Assets 21,692 22,346 22,988 23,768 Int./Div. Received 2,520 2,783 4,894 6,386 Capital WIP 2,991 2,500 2,500 2,500 Interest Paid -2 -12 -70 -20 Investments 26,188 32,571 45,136 59,455 Direct Taxes Paid -5,488 -7,776 -9,471 -11,236 Deferred Charges 2,097 2,243 2,399 2,566 (Incr)/Decr in WC -2,345 -989 2,317 2,371 Curr. Assets, L&A 47,371 53,095 58,478 64,523 Change in Deff 392 -146 -156 -167 Inventory 28,113 31,348 35,216 39,249 CF from Operations 22,068 26,773 37,140 42,540 Account Receivables 9,432 11,131 12,591 14,033 Extraordinary Items 1,527 1,189 0 0 Cash and Bank Balance 2,819 3,276 2,953 3,183 Others 7,007 7,340 7,718 8,059 (Incr)/Decr in FA -2,028 -2,509 -3,000 -3,500 Curr. Liab. and Prov. 73,999 78,277 86,300 94,485 (Pur)/Sale of Investments 3,062 -6,383 -12,566 -14,319 Account Payables 47,262 52,211 57,750 63,340 CF from Invest. 2,561 -7,703 -15,566 -17,819 Other Liabilities 19,178 17,428 18,832 20,348 Provisions 7,558 8,638 9,718 10,798 Change in Networth -6,136 174 0 0 Net Current Assets -26,628 -25,182 -27,822 -29,962 change in equity -22 0 0 0 Application of Funds 26,339 34,477 45,202 58,327 change in reserves -6,114 174 0 0 Key assumptions/operating metrics Dividend Paid -16,420 -18,950 -21,476 -24,003 Sales Growth (%) Others -1,568 163 -421 -549 Soaps and Detergents 1.5 6.4 21.0 8.2 CF from Fin. Activity -24,124 -18,613 -21,897 -24,552 Personal Products 15.8 17.1 14.0 16.8 EBIT Margin (%) Incr/Decr of Cash 506 457 -323 168 Soaps and Detergents 9.5 11.6 12.5 12.3 Add: Opening Balance 2,314 2,819 3,276 2,953 Personal Products 25.6 25.5 25.3 25.3 Closing Balance 2,819 3,276 2,953 3,183 E: MOSL Estimates FY09 Fifteen month ending (March)
August 27 - 31, 2012 69 8th Annual Global Investor Conference
Hindustan Petroleum Corporation
Company description Key challenges A Fortune-500 company, HPCL is an oil refining and Delays in the diesel deregulation and ad hoc subsidy marketing in India with also interests in upstream. It sharing. owns 14.8mmt of refining capacity, split across Mumbai Non-commensurate increase in retail fuel prices as (6.5mmt) and Vishakapatnam (8.3mmt). It has a crude crude prices rise leads to under-recoveries for the and product pipeline network of ~2,100km and sells company. ~30mmt of petroleum products. HPCL also holds 49% Ad hoc nature of subsidy sharing impacts profits. stake in the new Bhatinda refinery and 16.9% stake in MRPL. HPCL is a state-owned company, with 51.11% Key news flows / triggers to watch stake held by Government of India. Start of commercial production at Bhatinda refinery at full utilization levels. Key investment positives Subsidy rationalization by the government and Earnings contingent on subsidy sharing: HPCL's decontrol of diesel prices. profitability continues to be determined by the Timelines on cash transfer for PDS kerosene, and quantum of under-recoveries and sharing limiting of LPG cylinders to households. mechanism, rather than fundamentals. Bhatinda refinery to boost medium-term growth: 1QFY13 highlights; guidance for FY13, FY14 Medium to long-term growth would come from its Of the gross under-recovery of INR107b in 1QFY13, 9mmtpa grassroot refinery being set up in JV (49% HPCL received INR33.6b (32%) from upstream and stake) with Mittal Energy Investments, with an nil from the government, resulting in net under- estimated capex of INR172b. recoveries of INR73.2b (68%). Eventual likely deregulation to boost valuations: 1QFY13 GRM stood at USD-2.1/bbl v/s USD1.1 in Post deregulation and subsidy rationalization, 1QFY12 and USD3.7 in 4QFY12. HPCL's valuations should rise due to improvement HPCL plans to set up 9mmtpa refinery at Bramer in in (1) earnings quality, (2) RoCE/RoE, (3) cash cycle, Rajasthan. and (4) debt levels.
Stock info Quarterly Performance (Standalone) (INR Billion) Bloomberg HPCL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 339 Operating Income 408 370 479 524 441 1,781 1,821 CMP (INR) 311 Change (%) 39.6 31.6 41.3 32.1 8.0 36.1 2.2 Mcap (USD b) 1.9 EBITDA -27 -29 36 55 -89 34 32 52-Wk Range (INR) 395 / 239 Change (%) 66 nm 470 177 nm 3.0 -218 1, 6, 12 Rel Perf (%) -14 / 11 / -23 EBITDA Margin (%) nm nm 7.5 10.4 nm 1.9 1.7 Reported PAT -31 -34 27 46 -92 9 8 Adjusted PAT -31 -34 27 46 -92 9 8 Shareholding pattern (%) Change (%) nm nm 1191.6 312.5 nm -40.8 -11.8 Jun-12 Mar-12 Jun-11 PAT Margin (%) nm nm 5.7 8.8 nm 0.5 0.4 Promoter 51.1 51.1 51.1 Key Metrics Dom. Inst. 27.5 26.6 29.1 GRM (USD/bbl) 1.1 1.9 4.8 3.7 -2.1 3.1 4.4 Foreign 7.6 9.0 9.6 Gross under recovery 95 47 71 91 107 304 327 Others 13.8 13.4 10.2 Upstream sharing 32 16 34 40 34 121 130 Govt. sharing 33 0 66 85 0 183 197 Net Under/(Over)reco. 31 31 -28 -34 73 0 0 As a % of Gross 32.2 66.7 -39.4 -36.9 68.6 0.0 0.0 E: MOSL Estimates
70 August 27 - 31, 2012 8th Annual Global Investor Conference
HPCL: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 1,309,342 1,781,392 1,820,739 1,892,506 Basic (INR) Change (%) 19.9 36.1 2.2 3.9 EPS 45.4 26.9 23.8 28.5 Finished Goods 843,135 1,093,707 1,131,891 1,235,601 Cash EPS 143.0 127.4 117.0 144.2 Raw Materials Cons 366,443 561,189 595,964 574,728 Book Value 370.1 387.0 403.7 423.2 Other Exp 66,677 92,414 61,274 42,941 DPS 14.0 8.5 6.1 7.7 EBITDA 33,088 34,082 31,610 39,236 Payout (incl. Div. Tax.) 30.7 37.0 30.0 31.6 % Growth 30.1 3.0 -7.3 24.1 Depreciation 14,070 17,129 18,822 20,297 Valuation (x) Interest 8,840 16,977 15,732 13,063 P/E 6.9 11.6 13.1 10.9 Other Income 13,435 12,222 13,023 8,358 Cash P/E 2.2 2.4 2.7 2.2 Extraordinary Items (net) -152 -5 0 0 EV / EBITDA 8.3 8.6 8.2 6.3 PBT 23,461 12,192 10,078 14,235 EV / Sales 0.2 0.2 0.1 0.1 Tax 8,071 3,077 2,010 4,571 Price / Book Value 0.8 0.8 0.8 0.7 Total Rate (%) 34.4 25.2 19.9 32.1 Dividend Yield (%) 4.5 2.7 2.0 2.5 PAT 15,390 9,115 8,068 9,664 Adjusted PAT 15,390 9,115 8,068 9,664 Profitability Ratios (%) Change (%) 18.3 -40.8 -11.5 19.8 RoE 12.8 7.1 6.0 6.9 RoCE 8.6 6.8 6.0 6.7 Balance Sheet (INR Million) Y/E March 2011 2012 2013E 2014E Turnover Ratios Share Capital 3,390 3,390 3,390 3,390 Debtors (No. of Days) 7.1 6.4 7.3 7.3 Reserves 122,068 127,812 133,461 140,071 Asset Turnover (x) 4.8 5.6 5.0 4.8 Net Worth 125,458 131,202 136,851 143,461 Loans 250,212 285,000 250,000 225,000 Leverage Ratio Deferred Tax 31,956 31,956 31,956 33,380 Debt / Equity (x) 2.0 2.2 1.8 1.6 Capital Employed 407,626 448,158 418,807 401,840 Gross Fixed Assets 296,484 344,471 379,471 416,471 Cash Flow Statement (INR Million) Less: Depreciation 110,039 127,168 145,990 166,287 Y/E March 2011 2012 2013E 2014E Net Fixed Assets 186,445 217,303 233,481 250,184 OP/(Loss) before Tax 23,461 12,192 10,078 14,235 Capital WIP 37,987 20,000 15,000 8,000 Depreciation 14,082 17,129 18,822 20,297 Investments 113,350 113,350 113,350 113,350 Other op -2,456 0 0 0 Interest Paid 6,457 16,977 15,732 13,063 Curr. Assets, L & Adv. 265,910 315,147 277,411 271,450 Direct Taxes Paid -5,645 -3,077 -2,010 -3,147 Inventory 166,223 192,257 198,421 201,991 (Inc)/Dec in Wkg.Capital -25,876 -14,090 40,429 15,682 Debtors 26,544 36,174 36,973 38,431 CF from Op. Activity 10,024 29,132 83,052 60,129 Cash & Bank Balance 800 14,372 14,272 3,284 Loans & Advances 71,358 71,358 26,759 26,759 (Inc)/Dec in FA & CWIP -46,101 -30,000 -30,000 -30,000 Other Current Assets 985 985 985 985 (Pur)/Sale of Investments 5,371 0 0 0 Current Liab. & Prov. 196,066 217,642 220,436 241,144 Inc from Invst 6,919 0 0 0 Liabilities 178,018 199,977 202,642 218,343 CF from Inv. Activity -33,810 -30,000 -30,000 -30,000 Provisions 18,048 17,665 17,793 22,801 Net Current Assets 69,844 97,504 56,976 30,306 Inc / (Dec) in Debt 30,408 34,788 -35,000 -25,000 Application of Funds 407,626 448,158 418,807 401,840 Interest paid & other Inv -8,933 -16,977 -15,732 -13,063 Key assumptions/operating metrics Dividends Paid -4,731 -3,371 -2,419 -3,054 Y/E March 2011 2012 2013E 2014E CF from Fin. Activity 16,744 14,440 -53,152 -41,117 Exchange rate (USD/INR) 46.0 47.9 53.5 52.0 Marketing sales (mmt) 27.0 29.5 30.5 31.7 Inc / ( Dec) in Cash -7,042 13,572 -100 -10,988 Refinery throughput (mmt) 14.8 16.2 16.2 17.0 Add: Op. Balance 2,431 800 14,372 14,272 GRM (USD/bbl) 5.0 3.1 4.4 5.9 Bank Balance Adj. 5,410 0 0 0 Singapore GRM (USD/bbl) 5.2 8.2 7.8 8.0 Closing Balance 800 14,372 14,272 3,284 Prem/(disc) -0.2 -5.0 -3.4 -2.2
August 27 - 31, 2012 71 8th Annual Global Investor Conference
HT Media
Company description Key news flows / triggers to watch HT Media has a diversified portfolio of media assets Break-even of Mint and HT Mumbai business. with exposure to English, Hindi, Business, Radio, and Plans on expansion of radio business with phase III online. Hindustan Times (English daily) and Hindustan likely to be introduced. (Hindi daily) are ranked 2nd and 3rd respectively in their HT Media is highly leveraged to macroeconomic respective genres pan-India with a combined recovery given its lower margin profile and high readership base of ~16m. 'Mint' is the second most read exposure to the mature Delhi market. business daily in India. Radio business is concentrated in four metros. HT Media's online portfolio is focused 1QFY13 highlights; guidance for FY13, FY14 on news, networking, jobs and education space. 1QFY13 revenue declined 1% YoY/QoQ to INR4.9b (9% below our estimate of INR5.4b). Key investment positives EBITDA declined 26% YoY to INR669m (v/s our HT has a strong franchise in Delhi (INR15b+ market) estimate of INR684m), primarily due to sluggish and Bihar. Its readership share in Delhi is ~50% revenue growth. EBITDA margin declined ~450bp (head-to-head with TOI) and ~70% share in the fast- YoY to 13.7%. Raw material cost as a percentage of growing Bihar market. revenue increased ~160bp QoQ to 36.3%. Several investments made by HT Media are at an PAT declined 21% YoY to INR407m (20% above our inflection point. While Radio business posted a estimate). sharp turnaround in FY11, HT Mumbai and Mint are Ad revenue declined 3% YoY to INR3.73b (9% below yet to break even. our estimate) despite a 5% YoY growth in the Hindi Diversified presence across media platforms. HT is segment. Circulation revenue grew 8-9% YoY/QoQ the only listed print media company with significant to INR525m. presence in English as well as Hindi. 1QFY13 EBITDA performance was broadly in line Key challenges with our expectations, despite significant revenue Lower ad spends led by macro slowdown, especially shortfall, as the company was able to keep costs given high exposure to metro markets like Mumbai under control. and Delhi. HT Media does not expect meaningful inflation in Weak INR results in higher cost of newsprint. its cost base for the rest of FY13.
Stock info Quarterly Performance (INR Million) Bloomberg HTML IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 235 Revenue 4,969 4,931 5,266 4,941 4,899 20,107 20,144 CMP (INR) 85 YoY Change(%) 22.9 10.7 13.2 5.0 -1.4 12.6 0.2 Mcap (USD b) 0.4 EBITDA 903 713 777 481 669 2,873 2,558 52-Wk Range (INR) 157 / 82 YoY Change(%) 13.0 -9.9 -12.0 -45.1 -25.9 -14.2 -10.9 1, 6, 12 Rel Perf (%) -15 / -37 / -49 EBITDA Margin(%) 18.2 14.4 14.8 9.7 13.7 14.3 12.7 PAT 515 438 482 220 407 1,655 1,437 Adjusted PAT 515 438 482 220 407 1,655 1,437 YoY Change(%) 24.4 13.0 0.8 -58.5 -21.0 -8.5 -13.2 Shareholding pattern (%) PAT Margin(%) 10.4 8.9 9.1 4.4 8.3 8.2 7.1 Jun-12 Mar-12 Jun-11 Key operating metrics Promoter 68.8 68.8 68.8 Ad revenue growth (%) 17 12 10 3 -3 10 -2 Dom. Inst. 10.4 11.2 13.2 - English 18 8 11 -4 -6 8 -6 Foreign 12.5 12.1 12.6 - Hindi 15 24 8 21 5 17 8 Others 8.3 7.8 5.4 Circulation rev. gr. (%) 3 21 7 3 8 8 9 -English 4 34 0 -15 -3 4 -2 -Hindi 3 16 10 13 13 10 14 E: MOSL Estimates
72 August 27 - 31, 2012 8th Annual Global Investor Conference
HT Media: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 17,861 20,030 20,144 22,329 Adjusted EPS 7.7 7.0 5.4 6.3 YoY (%) 24.2 12.1 0.6 10.8 Growth (%) 26.1 -8.5 -22.8 16.1 EBITDA 3,357 2,869 2,558 2,899 Cash EPS 11.3 10.9 10.0 11.2 EBITDA margin (%) 18.8 14.3 12.7 13.0 Book Value 60.9 67.4 72.9 79.4 Depreciation 842 916 923 964 DPS 0.4 0.4 0.5 0.6 Interest 236 362 405 411 Payout (incl. Div. Tax.) (%) 5 7 10 8 Other Income 291 750 774 816 Valuation PBT 2,571 2,341 2,006 2,340 P/E 11.0 12.1 15.6 13.5 Tax 713 626 401 468 Cash P/E 7.5 7.8 8.5 7.6 Tax rate (%) 27.7 26.7 20.0 20.0 EV/EBITDA 5.0 5.8 6.0 4.9 PAT 1,858 1,715 1,605 1,872 EV/Sales 0.9 0.8 0.8 0.6 Minority Interest 49 60 167 203 Price/Book Value 1.4 1.3 1.2 1.1 Reported PAT 1,809 1,655 1,437 1,669 Dividend Yield (%) 0.4 0.5 0.6 0.7 Change (%) 33 -9 -13 16 Adjustments 0 0 -160 -187 Profitability Ratios (%) Adjusted PAT 1,809 1,655 1,277 1,482 RoE 14.9 11.0 7.7 8.3 RoCE 13.0 10.5 9.2 9.8 Balance Sheet (INR Million) Y/E March 2011 2012 2013E 2014E Turnover Ratios Share Capital 470 470 470 470 Debtors (Days) 52 50 52 53 Share Premium 4,012 4,012 4,012 4,012 Inventory (Days) 30 33 33 34 Reserves 8,540 9,988 11,118 12,438 Creditors. (Days) 80 69 69 69 Net Worth 13,022 14,470 15,600 16,920 Asset Turnover (x) 2.2 2.3 2.3 2.6 Loans 3,122 3,462 3,281 3,568 Leverage Ratio Minority Interest 1,299 1,360 1,527 1,730 Debt/Equity (x) 0.2 0.2 0.2 0.2 Deffered Tax Liability 0 460 460 460 Capital Employed 17,444 19,752 20,868 22,678 Cash Flow Statement (INR Million) Y/E March 2011 2012 2013E 2014E Gross Fixed Assets 12,127 12,928 13,432 14,101 EBITDA 3,357 2,869 2,558 2,899 Less: Depreciation 4,077 4,993 5,915 6,879 Other Income 291 750 774 816 Net Fixed Assets 8,050 7,935 7,516 7,222 Interest Paid -236 -362 -405 -411 Capital WIP 194 125 125 125 Direct Taxes Paid -977 -887 -491 -468 Deferred Tax Assets 86 807 897 897 (Inc)/Dec in Wkg. Cap. 395 -723 -177 -291 Investments 7,595 8,320 8,320 8,320 CF from Op.Activity 2,831 1,646 2,260 2,545
Curr. Assets 7,557 8,914 10,516 13,302 (inc)/Dec in FA + CWIP -679 -733 -504 -670 Inventory 1,456 1,819 1,849 2,055 (Pur)/Sale of Investments -2,840 -725 0 0 Debtors 2,525 2,757 2,887 3,214 CF from Inv.Activity -3,519 -1,458 -504 -670 Cash & Bank Balance 1,152 1,571 3,000 5,000 Loans & Advances 2,109 2,320 2,333 2,586 Inc/(Dec) in Debt -180 340 -181 287 Other current assets 315 447 447 447 Dividends Paid -99 -110 -147 -162 Other Financing Activities 1,032 1 0 0 Current Liab. & Prov. 6,037 6,349 6,506 7,188 CF from Fin.Activity 753 231 -328 125 Creditors 3,176 3,224 3,304 3,650 Prov. & other liabilities 2,862 3,125 3,202 3,538 Inc/(Dec) in Cash 65 419 1,429 2,000 Net Current Assets 1,520 2,565 4,010 6,114 Add: Opening Balance 1,087 1,152 1,571 3,000 Application of Funds 17,444 19,752 20,868 22,678 Closing Balance 1,152 1,571 3,000 5,000
August 27 - 31, 2012 73 8th Annual Global Investor Conference
ICICI Bank
Company description Key challenges ICICI Bank (ICICIBC) has effectively used consolidation Rapid loan growth in corporate segment, particularly phase in business (FY08-10) to structurally improve in infrastructure and power, could lead to higher balance sheet profile, bring in efficiency and reduce slippages. risk. Combination of all the above factors has led to ICICI Bank is highly leveraged to growth; slower than sharp improvement in core operating profitability and expected loan growth can impact earnings and RoA (1.5% in FY12 v/s 1.1% in FY10). ICICIBC, through its valuations. subsidiaries, is also a leading player in insurance and asset management. Key news flows / triggers to watch Continued better than expected performance on Key investment positives asset quality and improvement in fee income. NIM has significantly improved from 2.2% in FY08 to Life insurance venture holds significant value. 2.7% in FY12 (3% in 1QFY13). Strong CASA ratio of Increase in FDI limit in insurance/listing would lead 40%+, lower securitization losses, and higher to potential unlocking of value for the company. international NIMs, will help ICICIBC to gradually improve NIM in FY13 as well. We factor 25bp 1QFY13 highlights; guidance for FY13, FY14 improvement in FY13. Performance highlights of 1QFY13: Reported loan Lower proportion of unsecured loan (1.3% as against growth of 22% led by strong growth in corporate, high of 9.8%), loan sourcing via branches rather than SME and international portfolio. Even after the DSAs, and higher provision coverage will help sharp 30bp+ QoQ improvement in NIM in 4QFY12, cushion asset quality. However, there may be some stable NIM QoQ was a positive surprise. Fee income stress in corporate segment. We have modeled in growth was muted at 4% YoY, and asset quality was credit cost of 75bp in FY13 v/s 42bp in FY12. This stable. would however be offset by higher NIM, and risk- Management guidance: Domestic loan growth of adjusted margin is expected to improve to 2.3% v/s 20%, (b) CASA ratio to be maintained in the range average of 1.3% (FY08-11). of 38-40%, (c) NIM guidance raised to 3-3.1% from Expect excess capitalization (in standalone entity 2.85-2.9% earlier, (d) credit cost maintained at and international subs) and value unlocking from ~75bp for FY13, and (e) fee income growth to be in insurance venture will ensure dilution-free growth low double digits. for next 3-4 years.
Stock info Quarterly Performance (INR Million) Bloomberg ICICIBC IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1153 NII 24,109 25,064 27,120 31,048 31,929 107,342 137,069 CMP (INR) 962 Change (%) 21.1 13.7 17.3 23.7 32.4 19.0 27.7 Mcap (USD b) 19.9 Other Income 16,429 17,396 18,919 22,285 18,799 75,028 85,969 52-Wk Range (INR) 999 / 641 Opex 18,200 18,922 19,168 22,216 21,235 78,504 90,880 1, 6, 12 Rel Perf (%) 1 / 1 / 1 Operating Profit 22,338 23,537 26,871 31,116 29,493 103,865 132,158 Change (%) 2.1 6.4 14.7 35.0 32.0 14.8 27.2 Provisions 4,539 3,188 3,411 4,693 4,659 15,830 22,443 Shareholding pattern (%) PAT 13,320 15,032 17,281 19,018 18,151 64,653 80,092 Jun-12 Mar-12 Jun-11 Change (%) 29.8 21.6 20.3 31.0 36.3 25.5 23.9 Promoter 0.0 0.0 0.0 Key Operating metrics Dom. Inst. 27.7 26.6 24.9 NIM (%) 2.6 2.6 2.7 3.0 3.0 2.7 3.0 Foreign 62.7 63.2 65.5 Loan Gr. YoY (%) 19.7 20.5 19.1 17.3 21.6 17.3 15.4 Others 9.6 10.2 9.6 GNPA (%) 4.4 4.1 3.8 3.6 3.5 3.6 3.3 E: MOSL Estimates
74 August 27 - 31, 2012 8th Annual Global Investor Conference
ICICI Bank: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 259,741 335,427 399,260 455,433 Spreads Analysis (%) Interest Expended 169,572 228,085 262,190 295,216 Avg. Yield - Earning Assets 7.7 8.5 8.7 8.6 Net Interest Income 90,169 107,342 137,069 160,217 Avg. Yield on loans 8.3 9.4 9.8 9.6 Change (%) 11.1 19.0 27.7 16.9 Avg. Yield on Investments 6.2 6.6 6.6 6.7 Other Income 66,479 75,028 85,969 101,001 Avg. Cost-Int. Bear. Liab. 4.8 5.7 5.6 5.5 Net Income 156,648 182,369 223,038 261,219 Avg. Cost of Deposits 4.7 5.9 6.0 5.8 Change (%) 0.5 16.4 22.3 17.1 Interest Spread 2.9 2.8 3.1 3.1 Operating Exp. 66,172 78,504 90,880 105,441 Net Interest Margin 2.7 2.7 3.0 3.0 Operating Profits 90,475 103,865 132,158 155,778 Profitability Ratios (%) Change (%) -7.0 14.8 27.2 17.9 RoE 9.7 11.3 12.9 13.7 Provisions & Cont. 22,868 15,830 22,443 28,141 Adjusted RoE 12.2 13.3 15.1 15.7 PBT 67,607 88,034 109,715 127,637 RoA 1.3 1.5 1.6 1.6 Tax 16,093 23,382 29,623 34,462 Int. Expended/Int.Earned 65.3 68.0 65.7 64.8 Tax Rate (%) 23.8 26.6 27.0 27.0 Other Inc./Net Income 42.4 41.1 38.5 38.7 PAT 51,514 64,653 80,092 93,175 Change (%) 28.0 25.5 23.9 16.3 Efficiency Ratios (%) Dividend (Including Tax) 18,170 21,228 28,112 32,704 Op. Exps./Net Income* 41.7 43.0 41.7 41.6 Core PPP* 92,625 103,995 127,158 148,278 Empl. Cost/Op. Exps. 42.6 44.8 46.4 47.2 Change (%) 8.3 12.3 22.3 16.6 Busi. per Empl. (INR m) 72.4 81.6 89.5 99.5 *Core PPP is (NII+Fee income-Opex) NP per Empl. (INR lac) 9.0 11.1 12.9 14.1 Balance Sheet (INR Million) * ex treasury Y/E March 2011 2012 2013E 2014E Asset-Liability Profile (%) Share Capital 15,018 15,028 15,028 15,028 Loan/Deposit Ratio 95.9 99.3 95.0 93.1 Equity Share Capital 11,518 11,528 11,528 11,528 CASA Ratio % 45.1 43.5 40.9 39.8 Preference Capital 3,500 3,500 3,500 3,500 Invest./Deposit Ratio 59.7 62.5 58.2 55.7 Reserves & Surplus 539,391 592,525 644,504 704,975 G-Sec/Invest. Ratio 47.6 54.5 56.9 56.8 Net Worth 554,409 607,552 659,532 720,003 CAR 19.5 18.5 17.0 15.5 Of which Equity Net Worth 550,909 604,052 656,032 716,503 Tier 1 13.2 12.7 11.8 11.0 Deposits 2,256,021 2,555,000 3,082,483 3,707,468 Change (%) 11.7 13.3 20.6 20.3 Valuation Of which CASA Deposits 1,016,465 1,110,194 1,259,236 1,474,358 Book Value (INR) 478.7 516.6 561.7 614.1 Change (%) 20.7 9.2 13.4 17.1 BV Growth (%) 3.4 7.9 8.7 9.3 Borrowings 1,092,043 1,398,149 1,507,768 1,692,315 Price-BV (x) 1.9 1.7 1.6 Other Liabilities & Prov. 159,864 175,770 209,915 251,172 ABV (for Subsidaries, INR) 365.2 402.4 447.5 499.9 Total Liabilities 4,062,337 4,736,471 5,459,698 6,370,958 ABV Growth (%) 4.9 10.2 11.2 11.7 Current Assets 340,901 362,293 457,268 526,370 Price-ABV (x) 2.0 1.7 1.5 Investments 1,346,860 1,595,600 1,795,050 2,064,308 ABV(for Subs Invst&NPA,INR)351.6 391.9 438.4 489.1 Change (%) 11.4 18.5 12.5 15.0 Adjusted Price-ABV (x) 2.0 1.7 1.5 Loans 2,163,659 2,537,277 2,927,362 3,451,990 EPS (INR) 44.7 56.1 69.5 80.8 Change (%) 19.4 17.3 15.4 17.9 EPS Growth (%) 23.9 25.4 23.9 16.3 Net Fixed Assets 47,443 46,147 45,833 47,268 Price-Earnings (x) 17.1 13.8 11.9 Other Assets 163,475 195,154 234,185 281,022 Adj. Price-Earnings (x) 14.2 10.8 9.7 Total Assets 4,062,337 4,736,471 5,459,698 6,370,958 Dividend Per Share (INR) 14.0 16.5 20.8 24.2 Asset Quality (%) Dividend Yield (%) 1.7 2.2 2.5 GNPA (INR m) 100,343 94,753 99,327 114,352 E: MOSL Estimates NNPA (INR m) 24,074 18,608 16,024 19,118 GNPA Ratio 4.5 3.6 3.3 3.2 NNPA Ratio 1.1 0.7 0.5 0.6 PCR (Excl Tech. write off) 76.0 80.4 83.9 83.3
August 27 - 31, 2012 75 8th Annual Global Investor Conference
Idea Cellular
Company description Key news flows / triggers to watch Idea Cellular, an Aditya Birla Group company, is India's 2G spectrum auction mandated by the Supreme third largest wireless operator with a revenue market Court is expected to be held in November 2012. share of ~15%. Idea operates in all 22 Indian telecom The auction is expected to set the base price for all service areas, of which 13 are classified as established future spectrum payments. service areas and balance nine as new service areas. Potential monetization of tower assets. Idea carries 1.4b+ minutes on a daily basis (among top Final government decision on the issue of spectrum 10 globally) and has a strong ~20% revenue market re-farming. share in its established circles. Ramp-up of 3G subscriber base post recent sharp tariff cuts introduced by the industry. Key investment positives Idea is the fastest growing major wireless company 1QFY13 highlights; guidance for FY13, FY14 in India. Over FY08-12, its revenue market share has 1QFY13 proforma EBITDA declined ~5% QoQ but increased from 10% to 15%. grew 19% YoY to INR14.4b (v/s estimate of INR15.5b). Strong incumbency advantage in eight established Revenue grew 22% YoY and 2.5% QoQ to INR55b circles and spectrum allocation in the 900MHz band (v/s estimate of INR55.3b) led by ~5% QoQ traffic in nine circles. growth but offset by 2.5% RPM decline (second Well positioned to capture rural growth given deep consecutive quarter of QoQ decline). coverage and favorable frequency allocation. EBITDA margin stood at 26.1%, down ~200bp QoQ Industry consolidation is inevitable given continued on an adjusted basis. Margin decline was largely high losses of challengers and stretched balance led by network costs (up 100bp) and roaming and sheets across operators. access charges (up 60bp). Key challenges Proforma PAT increased 32% YoY but declined 32% Hyper-competition in the Indian mobile business. QoQ to INR2.34b. Regulatory uncertainty and significant potential Capex guidance for FY13 remains unchanged at liability of ~INR300b related to allocated spectrum INR35b. if incumbents are required to pay in line with the We expect consolidated EBITDA CAGR of 20% over announced reserve price of INR28b per MHz for pan- FY12-14E driven by 15-16% CAGR in revenue/ India spectrum in 1,800MHz band. wireless traffic.
Stock info Quarterly Performance (INR Million) Bloomberg IDEA IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 3,310 Revenue 45,207 46,199 50,308 53,697 55,037 195,411 231,314 CMP (INR) 76 YoY Change(%) 23.7 26.3 27.2 27.8 21.7 26.0 18.4 Mcap (USD b) 4.5 EBITDA 12,040 11,866 13,446 15,071 14,355 50,924 60,919 52-Wk Range (INR) 104 / 71 YoY Change(%) 35.5 35.0 41.8 50.2 19.2 34.3 19.6 1, 6, 12 Rel Perf (%) -12 / -16 / -29 EBITDA Margin(%) 26.6 25.7 26.7 28.1 26.1 26.1 26.3 Adjusted PAT 1,773 1,058 2,010 3,429 2,342 7,231 11,707 Shareholding pattern (%) YoY Change(%) -12.0 -41.1 -17.3 69.4 32.1 -19.5 61.9 Jun-12 Mar-12 Jun-11 PAT Margin(%) 3.9 2.3 4.0 6.4 4.3 3.7 5.1 Promoter 46.0 46.0 46.0 Key operating metrics Dom. Inst. 6.9 6.2 8.0 Mobile Traffic (B Min)109 106 114 124 131 453 556 Foreign 44.8 45.2 43.0 QoQ Change(%) 6.5 -2.2 7.3 9.1 2.7 Others 2.4 2.6 3.0 Mobile RPM (INR) 0.41 0.43 0.43 0.42 0.41 0.42 0.41 QoQ Change(%) 0.9 4.1 1.2 -2.0 -2.5 E: MOSL Estimates
76 August 27 - 31, 2012 8th Annual Global Investor Conference
Idea Cellular: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Revenues 155,032 195,412 231,315 260,293 Basic (INR) Change (%) 24.5 26.0 18.4 12.5 EPS 2.7 2.2 3.5 6.0 Total Expenses 117,127 144,489 170,397 187,317 Cash EPS 10.0 11.2 14.0 16.9 Book Value 37.2 39.5 43.0 48.9 EBITDA 37,906 50,924 60,919 72,976 % of Gross Sales 24.5 26.1 26.3 28.0 Valuation (x) Depn.&Amortization 23,973 29,814 34,474 36,023 P/E 27.7 34.4 21.3 12.6 EBIT 13,933 21,110 26,445 36,953 Cash P/E 7.6 6.7 5.4 4.5 Net Interest 3,965 10,557 9,706 8,709 EV/EBITDA 9.3 7.5 6.1 4.7 EV/Sales 2.3 1.9 1.6 1.3 PBT 9,968 10,553 16,739 28,244 Price/Book Value 2.0 1.9 1.8 1.5 Tax 982 3,322 5,032 8,473 Profitability Ratios (%) Rate (%) 9.9 31.5 30.1 30.0 RoE 7.6 5.7 8.6 13.0 RoCE 5.2 5.4 6.6 9.3 Adjusted PAT 8,986 7,231 11,707 19,770 Change (%) -5.8 -19.5 61.9 68.9 Turnover Ratios PAT after EO 8,986 7,231 11,707 19,770 Debtors (Days) 10 10 16 16 Asset Turnover (x) 0.75 0.78 0.86 0.97 Balance Sheet (INR Million) Y/E March 2011 2012 2013E 2014E Leverage Ratio Share Capital 33,033 33,088 33,097 33,097 Debt/Equity Ratio(x) 1.0 1.0 0.9 0.6 Add. Paid up Capital 139,406 139,406 139,406 139,406 Reserves -49,440 -41,994 -30,334 -10,563 Cash Flow Statement (INR Million) Net Worth 122,999 130,501 142,170 161,940 Y/E March 2011 2012 2013E 2014E Loans 120,228 133,372 124,050 100,035 Op.Profit/(Loss) bef Tax 37,906 50,924 60,919 72,976 Other Liabilities 3,099 6,273 7,129 7,129 Interest Paid -3,965 -10,557 -9,706 -8,709 Capital Employed 246,326 270,146 273,349 269,104 Direct Taxes Paid -25 -148 -4,176 -8,473 (Inc)/Dec in Wkg. Cap. 23,098 -20,156 712 -6,914 Gross Block 373,505 418,016 455,316 480,181 CF from Op.Activity 57,014 20,063 47,748 48,879 Less : Depreciation 112,128 141,040 175,514 211,537 Net Block 261,377 276,976 279,802 268,644 (inc)/Dec in FA + CWIP -98,145 -45,413 -37,300 -24,865 CF from Inv.Activity -98,145 -45,413 -37,300 -24,865 Curr. Assets 42,378 36,192 58,823 65,737 Inventories 542 688 1,136 1,278 Issue of Shares 69 -74 9 0 Debtors 4,057 5,144 10,324 11,618 Inc/(Dec) in Debt 41,635 13,144 -9,322 -24,015 Cash & Bank Balance 14,777 2,497 3,632 3,632 Other Financing Activities -2 -2 -2 -2 Other Current Assets 23,002 27,863 43,731 49,210 CF from Fin.Activity 41,704 13,070 -9,313 -24,015
Curr. Liab. & Prov. 57,429 43,022 65,277 65,277 Inc/(Dec) in Cash 573 -12,280 1,135 0 Net Curr. Assets -15,051 -6,830 -6,454 460 Add: Opening Balance 14,204 14,777 2,497 3,632 Appl. of Funds 246,326 270,146 273,349 269,104 Closing Balance 14,777 2,497 3,632 3,632 E: MOSL Estimates
August 27 - 31, 2012 77 8th Annual Global Investor Conference
IDFC
Company description Key challenges Incorporated in 1997, Infrastructure Development Over 40% of IDFC's exposure is to the power Finance Company (IDFC) is India's leading infrastructure segment, which in an uncertain environment poses finance player. Besides infrastructure financing, IDFC a threat to asset quality due to execution risks, has interests in broking, asset management and inadequate fuel supply, and delays in getting investment banking. It has strategic investments in requisite clearances. institutions like NSE and ARCIL. As of June 2012, IDFC's Outlook for the capital market business is loan book was INR500b and total asset base INR630b. challenging and would act as a drag on earnings.
Key investment positives Key news flows / triggers to watch Over FY08-12, IDFC posted 25% loan CAGR to Expected monetary easing and government INR500b.Considering lumpy nature of business, addressing key issues faced by the infrastructure future growth can be similar if there is any change sector would be major catalysts in further improving in macro environment led by policy action. IDFC's growth and profitability outlook. IDFC maintained spreads at 2.2%+ over the years. In an uncertain environment and high interest rate 1QFY13 highlights; guidance for FY13, FY14 scenario, the management does not plan to grow Performance highlights of 1QFY13: Loan growth of aggressively, thereby spreads are likely to be 34% YoY and 4% QoQ; TTM basis spreads improved protected at current levels. 10bp to 2.5%; healthy fee income growth led by Asset quality is healthy with gross NPAs at 0.3% and strong sanctions growth; muted trading gains; stable net NPAs at 0.2%. IDFC has negligible exposure to asset quality; higher provisions for investments; state utilities, which reduces the threat to asset significant control over cost. quality to a great extent in the current scenario. Guidance for FY13: 15-20% loan growth, stable IDFC has been prudently making provisions, which spreads at 2.2-2.4%, no significant pressure points provides cushion in case of any asset quality shocks. on asset quality for now. Outstanding loan loss provisions stand at 1.6% of loans as on June 2012.
Stock info Quarterly Performance (INR Million) Bloomberg IDFC IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,513 Net Int. Income 10,948 12,435 12,364 17,434 13,042 52,121 63,852 CMP (INR) 141 YoY Change (%) 17.1 14.7 15.1 27.2 19.1 16.3 22.5 Mcap (USD b) 3.8 Profit on Sale of Inv. 163 869 880 791 202 2,702 2,500 52-Wk Range (INR) 161 / 90 Other Op. income 1,909 1,430 1,306 1,233 2,223 6,939 8,524 1, 6, 12 Rel Perf (%) 0 / -2 / 20 Net Op. Income 13,020 14,734 14,549 19,458 15,467 61,762 74,876 Pre Prov. Profit 11,935 13,547 13,483 18,491 14,199 57,456 69,622 YoY Change (%) 21.6 17.9 9.8 17.1 19.0 16.4 21.2 Shareholding pattern (%) PAT 8,445 9,707 9,813 13,261 10,019 41,226 49,225 Jun-12 Mar-12 Jun-11 YoY Change (%) 21.6 20.2 10.1 16.1 18.6 16.6 19.4 Promoter 0.0 0.0 0.0 Key Operating Metrics Dom. Inst. 35.1 34.7 36.9 Loan Growth (%) 22.2 19.5 21.2 20.3 19.4 20.3 22.6 Foreign 50.2 49.6 47.1 Spreads (%, Cumu.) 2.30 2.29 2.27 2.27 2.27 2.27 NA Others 14.7 15.7 16.0 GNPA (%) 0.83 0.82 0.82 0.74 0.79 0.74 0.74 E: MOSL Estimates
78 August 27 - 31, 2012 8th Annual Global Investor Conference
IDFC: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income* 40,186 54,841 71,296 81,757 Spreads Analysis (%) Interest Expended 23,875 34,562 44,746 50,312 Avg. Yield - Infra. loans 11.0 11.2 11.8 11.3 Net Interest Income 16,311 20,279 26,550 31,444 Avg. Yield - Earning Assets 11.0 10.9 11.6 11.1 Change (%) 44.8 24.3 30.9 18.4 Avg. Cost-Int. Bear. Liab. 7.5 8.2 8.6 8.0 Other Income 9,144 9,509 6,786 8,366 Interest Spread on loans 3.5 2.7 3.0 3.1 Fees Based income 6,413 4,495 5,162 6,092 Net Interest Margin 3.8 3.7 4.0 4.0 Principal Invt-Incl Carry Inc**2,350 3,890 1,424 2,024 Miscellanous Income 382 1,124 200 250 Profitability Ratios (%) Net Income 25,455 29,788 33,336 39,810 RoE 14.7 13.7 13.0 14.2 Change (%) 20.7 17.0 11.9 19.4 Core RoE 17.8 16.2 15.0 16.1 Operating Expenses 5,321 5,216 5,734 6,867 RoA 3.2 2.9 2.6 2.6 Operating Income 20,135 24,573 27,603 32,943 Int. Expended/Int.Earned 59.4 63.0 62.8 61.5 Change (%) 29.4 22.0 12.3 19.3 Other Income./Net Income 35.9 31.9 20.4 21.0 Other Provisions 2,346 2,846 3,716 3,675 PBT 17,788 21,727 23,886 29,268 Efficiency Ratios (%) Tax 4,998 6,219 7,166 9,073 Total Assets/Equity(x) 4.6 4.8 5.2 5.6 Tax Rate (%) 28.1 28.6 30.0 31.0 Debt/Equity (x) 3.6 3.8 4.2 4.6 PAT 12,791 15,508 16,720 20,195 Fee income/Net Income 25.2 15.1 15.5 15.3 Change (%) 20.5 21.2 7.8 20.8 Op. Exps./Net Income 20.9 17.5 17.2 17.3 (MI)/Associate profit 25.7 32.0 0.0 10.0 Empl. Cost/Op. Exps. 55.6 58.4 52.3 52.2 Consolidated PAT 12,817 15,540 16,720 20,205 Change (%) 20.7 21.3 7.6 20.8 Valuation Proposed Dividend 2,925 3,478 3,762 4,546 Book Value (INR) 71.2 81.2 89.4 99.2 *Includes debt trading gains; ** Excludes debt trading gains Price-BV (x) 1.7 1.6 1.4 Adjusted BV (INR)* 60.6 72.7 80.9 90.7 Balance Sheet (INR Million) Price-ABV (x) 1.6 1.5 1.3 Y/E March 2011 2012 2013E 2014E EPS (INR) 8.8 10.3 11.1 13.4 Capital 14,609 15,124 15,124 15,124 EPS Growth (%) 7.4 17.1 7.6 20.8 Reserves & Surplus 89,475 107,733 120,052 134,937 Price-Earnings (x) 13.7 12.7 10.5 Net Worth 104,084 122,856 135,175 150,061 OPS (Rs) 13.8 16.2 18.3 21.8 Minority Interest 2 178 178 178 OPS Growth (%) 15.2 17.9 12.3 19.3 Borrowings 371,439 472,750 571,467 692,072 Price-OP (x) 8.7 7.7 6.5 Change (%) 39.9 27.3 20.9 21.1 Dividend per Share (INR) 2.0 2.3 2.5 3.0 Total Liabilities 475,526 595,784 706,820 842,311 Dividend Yield (%) 1.6 1.8 2.1 Investments 69,611 84,857 102,102 120,345 E: MOSL Estimates; *Adj. for Inv. in subsidaries, Prices adj. for Change (%) 49.5 21.9 20.3 17.9 other ventures Loans 376,523 481,846 578,215 693,858 Change (%) 50.4 28.0 20.0 20.0 Goodwill 11,638 9,668 9,468 9,468 Net Fixed Assets 4,469 4,165 4,248 4,333 Deferred Tax Assets 2,480 3,202 3,202 3,202 Net current Assets 10,804 12,047 9,584 11,106 Total Assets 475,526 595,784 706,820 842,311
August 27 - 31, 2012 79 8th Annual Global Investor Conference
Indusind Bank
Company description Key challenges IndusInd Bank (IIB) is one of India's new generation Strong growth in consumer finance division banks, established in 1994. The team, led by Managing particularly vehicle finance could result in higher Director Mr Romesh Sobti, has been instrumental in than expected delinquency and credit cost. improving the core operating performance of the bank The strong turnaround in IIB's operations is driven (RoA improved from 0.6% in FY09 to 1.6% in FY12). Focus by the change in top management. Attrition at the of the management is to achieve scale while senior level could impact performance of the bank. maintaining profitability. Key news flows / triggers to watch Key investment positives Faster than expected fall in interest rate could lead Capitalizing on its niche presence in vehicle to surprise on margin. financing (48% of overall loans) and strong Easing liquidity condition and pick-up in GDP growth corporate relationship, IIB has been able to deliver could allay concerns regarding slippages especially above-industry level loan growth. Over FY12-14, IIB on vehicle financing portfolio. is expected to grow at ~25% and gain market share, with focus being on core retail liabilities. 1QFY13 highlights; guidance for FY13, FY14 With ~50% of deposits wholesale in nature, IIB is Performance highlights of 1QFY13: Margins leveraged to systemic interest rates and liquidity. declined 7bp QoQ to 3.2% led by increase in cost of NIM is expected to improve in 2HFY13 and FY14 with funds (+35bp QoQ). Growth in loan (+6% QoQ, 31% (a) 50% of loan book fixed in nature, (b) increasing YoY) and SA deposits (+9% QoQ, 59% YoY) remains share of consumer finance, (c) expected benefit of strong. Fee income (+44% YoY) and asset quality fall in interest rates on wholesale deposits, and (GNPA up 5% QoQ) also remain impressive despite (d) increasing traction in CASA deposits. challenging macro environment. While asset quality remains strong, moderating Management guidance: Loan growth of 25-30% over economic growth coupled with high exposure in CV FY13/14, (b) CASA ratio of 35% by FY14 v/s 28% at segment remains a concern. However, superior end of 1QFY13, (c) Fee income growth to be faster margins, focused fee income strategy (1.8%, a key than balance sheet growth, and (d) credit cost driver for RoA) and control over C/I ratio will keep guidance of ~70bp for FY13. core operating profitability strong.
Stock info Quarterly Performance (INR Million) Bloomberg IIB IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 469 NII 3,900 4,192 4,307 4,644 4,841 17,042 21,44 CMP (INR) 333 Change (%) 31.9 27.1 18.6 19.7 24.1 23.8 25.8 Mcap (USD b) 2.8 Other Income 2,154 2,392 2,651 2,921 3,188 10,118 13,581 52-Wk Range (INR) 352 / 222 Opex 2,937 3,254 3,465 3,774 3,989 13,430 17,481 1, 6, 12 Rel Perf (%) -4 / 10 / 31 Operating Profit 3,117 3,330 3,492 3,791 4,040 13,730 17,543 Change (%) 35.2 27.2 19.9 27.2 29.6 26.9 27.8 Provisions 446 470 428 460 535 1,804 2,717 Shareholding pattern (%) PAT 1,802 1,931 2,060 2,234 2,363 8,026 10,007 Jun-12 Mar-12 Jun-11 Change (%) 52.0 45.0 33.9 30.1 31.1 39.0 24.7 Promoter 19.4 19.5 19.5 Key Operating metrics Dom. Inst. 8.7 7.9 8.1 NIM (%) 3.4 3.4 3.3 3.3 3.2 3.3 3.4 Foreign 49.4 50.6 51.0 Loan Gr. YoY (%) 31.4 28.5 29.7 34.0 31.2 34.0 25.0 Others 22.5 22.1 21.4 GNPA (%) 1.1 1.1 1.0 1.0 1.0 1.0 1.2 E: MOSL Estimates
80 August 27 - 31, 2012 8th Annual Global Investor Conference
Indusind Bank: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 35,894 53,592 69,126 80,467 Spreads Analysis (%) Interest Expense 22,129 36,549 47,684 52,749 Avg. Yield-Earning Assets 9.9 11.5 11.9 11.3 Net Interest Income 13,765 17,042 21,442 27,719 Avg. Yield on loans 12.1 13.8 14.3 13.4 Change (%) 55.3 23.8 25.8 29.3 Avg. Yield on Investments 6.1 7.7 7.7 7.4 Non Interest Income 7,137 10,118 13,581 17,404 Avg. Cost-Int. Bear. Liab. 6.2 8.0 8.4 7.6 Net Income 20,902 27,160 35,024 45,122 Avg. Cost of Deposits 6.0 8.0 8.5 7.4 Change (%) 45.2 29.9 29.0 28.8 Interest Spread 3.7 3.4 3.5 3.7 Operating Expenses 10,085 13,430 17,481 21,806 Net Interest Margin 3.8 3.6 3.7 3.9 Pre Provision Profits 10,817 13,730 17,543 23,316 Change (%) 53.7 26.9 27.8 32.9 Profitability Ratios (%) Provisions (excl tax) 2,019 1,804 2,717 4,136 RoE 19.3 19.2 20.2 21.8 PBT 8,798 11,927 14,825 19,179 RoA 1.4 1.6 1.6 1.7 Tax 3,025 3,900 4,818 6,233 Int. Expense/Int.Income 61.7 68.2 69.0 65.6 Tax Rate (%) 34.4 32.7 32.5 32.5 Fee Income/Net Income 30.1 33.6 33.7 33.4 PAT 5,773 8,026 10,007 12,946 Non Int. Inc./Net Income 34.1 37.3 38.8 38.6 Change (%) 64.8 39.0 24.7 29.4 Equity Dividend (Incl tax) 932 1,196 1,464 1,893 Efficiency Ratios (%) Core PPP* 9,764 12,680 15,763 20,986 Cost/Income* 50.3 51.3 52.6 51.0 Change (%) 67.6 29.9 24.3 33.1 Empl. Cost/Op. Exps. 37.9 36.1 36.7 36.7 *Core PPP is (NII+Fee income-Opex) Busi. per Empl. (INR m) 87.0 84.2 83.3 84.2 NP per Empl. (INR lac) 0.9 1.0 1.0 1.0 Balance Sheet (INR Million) * ex treasury and Recoveries from written off accounts Y/E March 2011 2012 2013E 2014E Equity Share Capital 4,660 4,677 4,677 4,677 Asset-Liability Profile (%) Reserves & Surplus 35,842 42,740 51,223 62,216 Loans/Deposit Ratio 76.1 82.8 82.8 82.8 Net Worth 40,502 47,417 55,900 66,893 CASA Ratio 27.2 27.3 29.4 31.1 Deposits 343,654 423,615 529,519 661,899 Investment/Deposit Ratio 39.4 34.4 32.5 30.7 Change (%) 28.7 23.3 25.0 25.0 G-Sec/Investment Ratio 74.0 81.7 80.1 81.6 of which CASA Dep 93,309 115,631 155,622 205,836 CAR 15.9 13.9 12.6 11.6 Change (%) 47.6 23.9 34.6 32.3 Tier 1 12.3 11.4 10.7 10.1 Borrowings 55,254 86,820 92,687 102,000 Other Liabilities & Prov. 16,948 18,108 20,131 24,247 Valuation Total Liabilities 456,358 575,961 698,237 855,040 Book Value (INR) 82.1 96.7 115.0 138.6 Current Assets 40,246 55,396 60,182 70,997 Change (%) 55.7 17.8 18.9 20.6 Investments 135,508 145,719 171,949 202,900 Price-BV (x) 3.4 2.9 2.4 Change (%) 30.3 7.5 18.0 18.0 Adjusted BV (INR) 81.1 95.4 113.0 135.8 Loans 261,656 350,640 438,299 547,874 Price-ABV (x) 3.5 2.9 2.5 Change (%) 27.3 34.0 25.0 25.0 EPS (INR) 12.4 17.2 21.4 27.7 Fixed Assets 5,965 6,568 6,642 6,812 Change (%) 45.3 38.5 24.7 29.4 Other Assets 12,983 17,638 21,165 26,456 Price-Earnings (x) 19.4 15.5 12.0 Total Assets 456,358 575,961 698,237 855,040 Dividend Per Share (INR) 2.0 2.2 2.7 3.5 Dividend Yield (%) 0.7 0.8 1.0 Asset Quality (%) GNPA (INR M) 2,659 3,471 5,124 8,483 NNPA (INR M) 728 947 1,378 2,044 GNPA Ratio 1.01 0.98 1.16 1.53 NNPA Ratio 0.28 0.27 0.31 0.37 PCR (Excl Tech. write off) 72.6 72.7 73.1 75.9 E: MOSL Estimates
August 27 - 31, 2012 81 8th Annual Global Investor Conference
Info Edge (India)
Company description property sites. (3) Jeevansathi ranks third in the Info Edge is among the leading internet companies in highly competitive online matrimonial space. India. It runs four major businesses: (1) Naukri.com, India's no. 1 job site, Key news flows / triggers to watch (2) Jeevansathi.com, India's fastest growing Reported hiring activity as per Naukri's Job Speak matrimonial portal, index was robust in the first month of the financial (3) 99acres.com, India's No.1 real estate portal, and year, growing 12% YoY. (4) Shiksha.com, an education portal. Key challenges The company also owns Quadrangle - an offline Slowdown in GDP growth could impact the executive search firm, and Naukri Gulf (its foray into company's business. the Middle East market). Info Edge also owns Brijj.com, Increasing threat from competition – Naukri is faced a professional networking site, and Allcheckdeals.com, up with Monster's Trovix platform and Jeevansathi an online real estate brokerage firm which is run as a operates in a crowded space where new entrants subsidiary company. are focusing on specific communities in India. The company, with a view to tap into the growing Indian Greater adoption of social networking sites (such internet market, also invests in early stage companies as LinkedIn and Facebook) as a medium of online and start-up ventures. job search.
Key investment positives 1QFY13 highlights; guidance for FY13, FY14 Healthy job market in the growing economy, along 1QFY13 revenue at INR1.1b was up 22% YoY and flat with factors such as IT/ITeS hiring and internet sequentially. EBITDA margin was 34.8%, down penetration directly aid the growth of singlemost 170bp YoY. PAT margin was 21.7%, down 50bp YoY. important segment Naukri. The company cited lower economic growth and a Leadership across key businesses: (1) Naukri is the more subdued environment leading to deceleration clear market leader with ~60% market share in the in the recruitment market, driving company's online jobs space. (2) 99acres.com enjoys the cautious outlook for FY13. highest traffic share amongst all the real estate
Stock info Quarterly Performance (INR Million) Bloomberg INFOE IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 109 Net Sales 867 911 920 1,073 1,060 3,223 3,771 CMP (INR) 356 Changes (%) 31.5 28.0 22.5 30.0 22.3 35.9 21.6 Mcap (USD b) 0.7 EBITDA 316 323 349 418 369 829 1,174 52-Wk Range (INR) 400 / 274 Changes (%) 54.7 50.8 26.0 49.0 16.6 41.1 41.6 1, 6, 12 Rel Perf (%) 4 / 10 / -4 EBITDA Margin (%) 36.5 35.4 37.9 38.9 34.8 25.7 31.1 Reported PAT 256 282 289 399 318 840 1,226 Adjusted PAT 256 282 289 402 318 840 1,226 Shareholding pattern (%) Changes YoY (%) 48.3 57.9 31.6 71.8 24.1 47.4 46.0 Jun-12 Mar-12 Jun-11 PAT Margin (%) 29.6 31.0 31.4 37.9 30.0 26.1 32.5 Promoter 53.5 53.6 54.1 Key Operating metrics Dom. Inst. 10.8 10.1 7.3 Resumes on Naukri (m) 26 27 28 29 30 25 29 Foreign 29.4 30.0 31.9 Unique Naukri cust. 22,900 23,500 23,500 25,000 25,000 42,000 46,000 Others 6.4 6.3 6.8 Avg Res. added daily 12,000 12,000 11,000 9,000 13,000 12,000 11,000 E: MOSL Estimates
82 August 27 - 31, 2012 8th Annual Global Investor Conference
Info Edge (India): Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2009 2010 2011 2012 Y/E March 2009 2010 2011 2012 Net Sales 2,458 2,371 3,223 3,919 Basic (INR) Other Income 279 307 329 509 EPS 5.2 4.7 5.7 9.3 Total Income 2,737 2,678 3,552 4,428 Book Value 29.5 34.1 39.9 48.3 Power & Fuel Cost 25 24 30 32 Employee Cost 899 882 1,232 1,434 Key Ratios Other Manufacturing Exp. 113 116 147 139 Current Ratio 2.3 3.9 2.0 1.2 Selling and Admn Expenses 692 651 803 864 Miscellaneous Expenses 67 111 182 276 Total Expenditure 1,796 1,783 2,394 2,745 Turnover Ratios EBITDA 662 588 829 1,174 Fixed Assets 4.9 4.3 4.3 4.2 Operating Profit 941 895 1,159 1,683 Debtors 70.0 41.6 28.2 34.1 Interest 17 20 23 22 Interest Cover Ratio 50.3 42.3 47.7 73.4 Gross Profit 924 875 1,136 1,662 PBIDTM (%) 38.3 37.7 36.0 43.0 Depreciation 71 65 80 83 PBITM (%) 35.4 35.0 33.5 40.8 Profit before Tax 853 810 1,056 1,578 PBDTM (%) 37.6 36.9 35.3 42.4 Tax 269 332 426 512 CPM (%) 26.6 23.5 22.8 28.9 Fringe Benefit Tax 9 0 0 0 APATM (%) 23.7 20.8 20.3 26.8 Deferred Tax -8 -15 -25 17 Net Profit 582 492 656 1,050 RoCE (%) 29.5 23.8 26.6 33.3 Minority Interest (after tax) 0 -34 23 30 RoNW (%) 19.8 14.1 16.2 21.8 Profit/Loss of Associate Co. -12 -6 -1 14 Payout (%) 3.5 4.2 6.3 10.6 PAT after MI & P/L Asso.Co. 570 521 631 1,033 Extraordinary Items 57 -23 30 51 Adjusted Net Profit 513 544 601 982 Cash Flow Statement (INR Million) Y/E March 2009 2010 2011 2012 Balance Sheet (INR Million) Cash and Cash Equivalents Y/E March 2009 2010 2011 2012 at Beginning of the year 485 3,221 2,791 2,076 Share Capital 273 273 546 546 Net Cash fr. Oper. Activities 198 376 1,038 1,008 Reserves Total 2,951 3,446 3,805 4,727 Net Cash Used in Equity Application Money 0 28 0 0 Investing Activities 2,563 -784 -1,728 -180 Total Shareholders Funds 3,224 3,747 4,351 5,273 Net Cash Used in Minority Interest 0 0 16 -25 Financing Activities -25 -22 -24 -49 Total Debt 4 6 3 3 Net Inc/(Dec) in Cash and Other Liabilities 0 0 1 1 Cash Equivalent 2,736 -430 -714 779 Total Liabilities 3,228 3,753 4,371 5,251 Cash and Cash Equivalents Gross Block 528 581 919 936 at End of the year 3,221 2,791 2,076 2,856 Less: Accumulated Depn. 226 287 332 389 Net Block 302 294 587 548 Key Operating Metrics (Nos) Capital Work in Progress 83 69 89 94 Resumes on Naukri - m 17 21 25 29 Investments 183 1,141 2,628 3,152 Unique Naukri customers 34,000 35,500 42,000 46,000 Current Assets, Loans & Advances Avg Resumes added daily 14,000 11,000 12,000 11,000 Sundry Debtors 35 80 149 81 Cash and Bank 3,221 2,791 1,319 2,216 Loans and Advances 180 240 122 154 Total Current Assets 3,436 3,110 1,590 2,451 Current Liabilities 734 812 1,305 1,618 Provisions 61 84 190 234 Total Current Liabilities 795 896 1,496 1,852 Net Current Assets 2,641 2,214 94 599 Deferred Tax Assets 19 34 59 42 Net Deferred Tax 19 34 59 42 Other Assets 0 0 914 817 Total Assets 3,228 3,753 4,371 5,251
August 27 - 31, 2012 83 8th Annual Global Investor Conference
Infosys
Company description Key challenges Infosys is India's second largest IT Services Company Continued pricing decline akin to that witnessed in with revenues of around USD6b and employing over 1QFY13 could lead to prolonged pain on the bottom- 151,000 people. Infosys defines designs and delivers IT line, despite offset coming in the form of healthy enabled business solutions that help many Global 2000 volume growth. companies. Appreciation in rupee could hamper profitability. Macro headwinds impact the company more due Infosys has a global footprint in 23 countries and to higher discretionary mix in its portfolio. development centers in India, China, Australia, the UK, Canada and Japan. Its service offerings span business Key news flows / triggers to watch and technology consulting, ADM, SI, product The company won 4 large deals, 1 with TCV of engineering, IT infrastructure services and BPO. The USD300m+, and 4 transformational deals during company obtains ~64% of its revenues from North 1QFY13. America, 22% from UK and ~2% from India. 35% of its Infosys had 8 client wins in products and platforms revenues come from BFSI, followed by 23% from Retail during the quarter. & Life Sciences, the key verticals. After the pricing cut in 1Q, trend in pricing and margin performance will be keenly watched. Key investment arguments Most profitable company among frontline Indian IT 1QFY13 highlights; guidance for FY13, FY14 companies, with a wide offering of services profile Volume growth in 1QFY13 was the only bright spot and deep domain knowledge. in what was a largely disappointing quarter on most The company witnessed a pricing decline and fronts – margins, pricing and revenues. simultaneously increased its volume guidance for Guidance of 'at least' 5% USD revenue growth in FY13. We believe: (1) Brand value enjoyed by Infosys FY13 was lower than 6% that we had expected at allows it to attract customers with even a moderate the lower end. Further, Infosys also discontinued cut in price, and (2) the company will be extremely the practice of giving quarterly guidance. selective in offering such price cuts; only the need We have moderated our FY14 volume growth to to hold on to bread-and-butter business in key 11.3% v/s 14.3% earlier, as management indicated accounts could have forced its hand at the cuts. macro stress could continue for 4-8 quarters.
Stock info Quarterly Performance (INR Million) Bloomberg INFO IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 574 Operating Income 74,850 80,990 92,980 88,520 96,160 337,340 393,740 CMP (INR) 2,351 Change - QoQ (%) 3.2 8.2 14.8 (4.8) 8.6 22.7 16.7 Mcap (USD b) 24.2 EBITDA 21,750 25,160 31,350 28,900 29,460 107,160 122,854 52-Wk Range (INR) 2977 / 2102 Change - QoQ (%) (6.1) 15.7 24.6 (7.8) 1.9 19.7 14.6 1, 6, 12 Rel Perf (%) 5 / -17 / -9 EBITDA Margin (%) 29.1 31.1 33.7 32.6 30.6 31.8 31.2 Reported PAT 17,220 19,060 23,720 23,160 22,890 83,160 94,560 Adjusted PAT 17,220 19,060 23,720 23,160 22,890 83,160 94,560 Shareholding pattern (%) Change - QoQ (%) (5.3) 10.7 24.4 (2.4) (1.2) 21.9 13.7 Jun-12 Mar-12 Jun-11 PAT Margin (%) 23.0 23.5 25.5 26.2 23.8 24.7 24.0 Promoter 16.0 16.0 16.0 Key Operating Metrics Dom. Inst. 18.3 16.6 9.8 Volume growth 3.2 4.4 3.0 (0.6) 2.8 10.8 9.6 Foreign 51.8 53.4 52.4 Headcount 133,560 141,822 145,088 149,994 151,151 149,994 162,880 Others 13.9 14.0 21.7 Utiz. (incl. trainees) 69.6 70.2 69.9 67.2 67.2 69.2 68.5 E: MOSL Estimates
84 August 27 - 31, 2012 8th Annual Global Investor Conference
Infosys: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Sales 275,010 337,340 393,740 426,266 Basic (INR) Change (%) 20.9 22.7 16.7 8.3 EPS 119.4 145.5 165.5 175.4 Software Develop. Exp. 150,620 188,710 225,152 249,068 Cash EPS 134.2 161.8 183.4 193.7 Selling and Mktg. Exp. 15,320 17,570 19,660 21,634 Book Value 454.1 585.0 632.4 760.8 Administration Exp. 19,510 23,900 26,074 27,753 DPS 60.3 47.0 70.0 40.0 EBITDA 89,560 107,160 122,854 127,810 Payout % (excl.div.tax) 50.5 32.3 42.3 22.8 % of Net Sales 32.6 31.8 31.2 30.0 Depreciation 8,540 9,370 10,451 10,631 Valuation (x) Interest 0 0 0 0 P/E 19.7 16.2 14.2 13.4 Other Income 12,110 19,040 19,432 21,979 Cash P/E 17.5 14.5 12.8 12.1 PBT 93,130 116,830 131,835 139,158 EV/EBITDA 13.3 10.6 9.1 8.3 Tax 24,900 33,670 37,368 38,964 EV/Sales 4.3 3.4 2.8 2.5 Rate (%) 26.7 28.8 28.3 28.0 Price/Book Value 5.2 4.0 3.7 3.1 Adjusted PAT 68,230 83,160 94,467 100,194 Dividend Yield (%) 2.6 2.0 3.0 1.7 Reported PAT 68,230 83,160 94,467 100,194 Change (%) 8.9 21.9 13.6 6.1 Profitability Ratios (%) RoE 27.8 28.0 27.1 25.1 Balance Sheet (INR Million) RoCE 33.1 32.9 32.3 29.4 Y/E March 2011 2012 2013E 2014E Share Capital 2,860 2,860 2,860 2,860 Turnover Ratios Reserves 256,900 331,750 358,885 432,338 Debtors (Days) 62 84 91 80 Net Worth 259,760 334,610 361,745 435,198 Fixed Asset Turnover (x) 5.6 6.6 7.2 7.3 Loans 0 0 0 0 Capital Employed 259,760 334,610 361,745 435,198 Cash Flow Statement (INR Million) Gross Block 85,010 91,740 106,100 120,100 Y/E March 2011 2012 2013E 2014E Less : Depreciation 32,660 36,210 46,741 57,372 CF from Operations 75,560 90,230 104,778 110,825 Net Block 52,350 55,530 59,359 62,728 Cash for Working Capital -14,300 -9,340 -1,873 -16,646 CWIP 5,250 10,340 10,490 10,490 Net Operating CF 61,260 80,890 102,906 94,179 Investments 1,440 3,770 25,650 25,650 Net Purchase of FA -12,590 -17,640 -14,430 -14,000 Curr. Assets 253,890 313,840 349,700 407,564 Net Purchase of Invest. 35,680 -2,330 -21,880 0 Debtors 46,530 77,550 97,817 93,428 Net Cash from Invest. 23,090 -19,970 -36,310 -14,000 Cash & Bank Balance 150,950 205,910 205,173 258,612 Loans & Advances 53,200 27,220 43,409 52,224 Proceeds from Equity 1,170 23,109 -20,630 0 Other Current Assets 3,210 3,160 3,300 3,300 Dividend Payments -40,130 -29,069 -46,795 -26,740 Current Liab. & Prov 53,170 48,870 83,454 71,233 Cash Flow from Fin. -38,960 -5,960 -67,425 -26,740 Current Liabilities 26,770 30,810 39,822 43,890 Net Cash Flow 45,390 54,960 -830 53,439 Provisions 26,400 18,060 43,632 27,343 Net Current Assets 200,720 264,970 266,246 336,331 Opening Cash Bal. 105,560 150,950 205,910 205,080 Application of Funds 259,760 334,610 361,745 435,198 Add: Net Cash 45,390 54,960 -830 53,439 Closing Cash Bal. 150,950 205,910 205,080 258,519 Key Operating Metrics Volume Growth (%) 18.0 6.2 21.5 10.8 Headcount 104,850 113,796 130,820 149,994 Utiliz. incl trainees (%) 68.6 68.1 72.0 69.2 E: MOSL Estimates
August 27 - 31, 2012 85 8th Annual Global Investor Conference
ING Vysya Bank
Company description Key challenges ING Vysya Bank (VYSB) had a balance sheet size of VYSB's RoA has improved from -0.3% in FY05 to 1.1% INR487b and franchise of 527 branches and 446 ATMs in FY12. For further improvement, fall in opex to across India as of June 2012. With a strong management average assets (improvement in productivity) is at the helm of affairs, VYSB has built a robust platform, imperative, as there is limited scope for positive delivering consistent performance. Improvement in key surprises on margins and credit cost. ratios reaffirms the bank's turnaround and the Over the past three quarters, bank has not added management's strong execution skills. any branch to its existing network, which may act as hurdle to growth in medium term. Key investment positives VYSB has been able to deliver healthy margins of Key news flows / triggers to watch 3%+ led by stable CASA ratio of 32-33% and higher Continuous positive surprise on asset quality share of SME (31% v/s 25% in FY10) and retail loans despite higher share of SME portfolio could lead to (~20%). Easing of liquidity conditions and lower cost earning upgrade. of funds hold key for better margin performance. Fee income growth improved in 1QFY13; Asset quality performance has been commendable sustainability of the same would be one of the key so far (GNPA/NNPA down from 3.2%/1.4% in 1QFY11 drivers of RoA going forward. to 2%/0.2% in 1QFY13. While slippages are expected to rise led by challenges in macro environment, 1QFY13 highlights; guidance for FY13, FY14 strong buffer built by boosting PCR (90 %+) would Performance highlights of 1QFY13: While slippages provide cushion to earning. increased QoQ, strong recoveries and upgrades With systems/processes in line with large private contained GNPA (up 4% QoQ). NIM stable at 3.3% banks, and niche expertise in SME, VYSB is well unlike historic trend of 1Q. Strong fee income placed to grow its loan book above industry rates. growth of 20% YoY led by traction across fee income Operating efficiency and improvement in core streams. Loan growth was strong at 23% YoY, CASA income helped VYSB improve cost to core income ratio declined 200bp QoQ to 32%. ratio from 71% (FY09) to 61% (FY12). With above- Management guidance for FY13: (a) Margin industry loan growth, and higher fee income, expect guidance of 3.2-3.3%, (b) Loan growth to be above gradual decline in cost to income ratio to continue. industry average, (c) CASA ratio to be in the current range of 32-34%.
Stock info Quarterly Performance (INR Million) Bloomberg VYSB IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 150 NII 2,620 3,036 3,236 3,192 3,433 12,084 14,324 CMP (INR) 392 Change (%) 10.1 19.4 31.6 18.9 31.0 20.1 18.5 Mcap (USD b) 1.1 Other Income 1,405 1,625 1,699 1,968 1,710 6,698 8,022 52-Wk Range (INR) 405 / 275 Opex 2,557 2,767 2,822 2,957 2,967 11,102 12,844 1, 6, 12 Rel Perf (%) 0 / 14 / 18 Operating Profit 1,468 1,894 2,113 2,203 2,175 7,679 9,502 Change (%) -1.2 2.8 32.5 53.9 48.1 20.9 23.7 Provisions 62 175 334 566 267 1,138 1,594 Shareholding pattern (%) PAT 940 1,154 1,195 1,274 1,301 4,563 5,377 Jun-12 Mar-12 Jun-11 Change (%) 36.1 53.3 44.0 39.5 38.4 43.2 17.8 Promoter 43.7 43.8 43.9 Key Operating metrics Dom. Inst. 13.9 13.7 12.8 NIM (%) 3.0 3.4 3.5 3.3 3.3 3.3 3.3 Foreign 26.9 26.9 27.4 Loan Growth YoY (%) 25.5 22.8 22.6 21.8 22.9 21.8 20.0 Others 15.5 15.6 15.9 GNPA (%) 2.2 2.0 2.0 1.9 2.0 1.9 2.1 E: MOSL Estimates
86 August 27 - 31, 2012 8th Annual Global Investor Conference
ING Vysya Bank: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 26,941 38,568 48,141 54,845 Spreads Analysis (%) Interest Expense 16,876 26,485 33,816 38,133 Avg. Yield-Earning Assets 7.9 9.5 10.0 9.5 Net Interest Income 10,064 12,084 14,324 16,713 Avg. Yield on loans 9.7 11.0 11.3 10.8 Change (%) 21.3 20.1 18.5 16.7 Avg. Yield on Investments 6.0 8.3 9.1 8.7 Non Interest Income 6,550 6,698 8,022 9,552 Avg. Cost-Int. Bear. Liab. 5.3 7.0 7.5 7.0 Net Income 16,614 18,781 22,346 26,265 Avg. Cost of Deposits 4.8 6.6 7.1 6.5 Change (%) 14.6 13.0 19.0 17.5 Interest Spread 2.6 2.5 2.4 2.5 Operating Expenses 10,260 11,102 12,844 14,730 Net Interest Margin 2.9 3.0 3.0 2.9 Pre Provision Profits 6,354 7,679 9,502 11,535 Change (%) -1.0 20.9 23.7 21.4 Profitability Ratios (%) Provisions (excl tax) 1,516 1,138 1,594 2,600 RoE 13.4 14.3 13.1 13.2 PBT 4,838 6,541 7,908 8,935 RoA 0.9 1.1 1.0 1.0 Tax 1,652 1,978 2,531 2,859 Int. Expense/Int.Income 62.6 68.7 70.2 69.5 Tax Rate (%) 34.2 30.2 32.0 32.0 Fee Income/Net Income 34.5 35.0 34.3 34.7 PAT 3,186 4,563 5,377 6,076 Non Int. Inc./Net Income 39.4 35.7 35.9 36.4 Change (%) 31.5 43.2 17.8 13.0 Adjusted PAT 3,186 4,563 5,377 6,076 Efficiency Ratios (%) Change (%) 43.5 43.2 17.8 13.0 Cost/Income* 67.2 60.9 59.7 58.4 Equity Dividend 363 600 699 790 Empl. Cost/Op. Exps. 59.0 58.6 60.8 62.6 Core PPP* 5,014 7,143 8,678 10,506 Busi. per Empl. (Rs m) 73.9 69.1 69.6 82.2 Change (%) 5.8 42.4 21.5 21.1 NP per Empl. (Rs lac) 0.5 0.5 0.5 0.6 *Core PPP is (NII+Fee income-Opex) * ex treasury Balance Sheet (INR Million) Asset-Liability Profile (%) Y/E March 2011 2012 2013E 2014E Loans/Deposit Ratio 78.2 81.6 80.3 79.0 Equity Share Capital 1,210 1,501 1,501 1,501 CASA Ratio 34.6 34.2 31.6 29.3 Reserves & Surplus 25,033 38,297 42,856 48,008 Investment/Deposit Ratio 36.6 36.1 33.2 30.8 Net Worth 26,243 39,798 44,357 49,509 G-Sec/Investment Ratio 74.4 70.5 78.4 81.3 Deposits 301,942 351,954 429,384 532,436 CAR 12.9 14.0 13.1 11.8 Change (%) 16.7 16.6 22.0 24.0 Tier 1 9.4 11.2 10.5 9.5 of which CASA Dep 104,586 120,473 135,723 156,081 Change (%) 24.1 15.2 12.7 15.0 Valuation Borrowings 41,469 56,965 58,810 62,140 Book Value (INR) 208.3 258.2 288.6 322.9 Other Liabilities & Prov. 20,485 21,288 23,502 25,987 Change (%) 12.4 24.0 11.8 11.9 Total Liabilities 390,140 470,005 556,053 670,072 Price-BV (x) 1.5 1.4 1.2 Current Assets 25,214 32,306 41,062 52,235 Adjusted BV (INR) 203.4 255.9 281.2 310.3 Investments 110,583 127,155 142,414 163,776 Price-ABV (x) 1.5 1.4 1.3 Change (%) 5.6 15.0 12.0 15.0 EPS (INR) 26.3 30.4 35.8 40.5 Loans 236,021 287,367 344,840 420,705 Change (%) 42.3 15.4 17.8 13.0 Change (%) 27.5 21.8 20.0 22.0 Price-Earnings (x) 12.9 10.9 9.7 Fixed Assets 5,028 5,008 5,024 4,966 Dividend Per Share (INR) 3.0 4.0 4.7 5.3 Other Assets 13,293 18,170 22,713 28,391 Dividend Yield (%) 1.0 1.2 1.3 Total Assets 390,140 470,005 556,053 670,072 E: MOSL Estimates Asset Quality (%) GNPA (INR m) 1,554 1,495 3,337 6,241 NNPA (INR m) 918 525 1,702 2,910 GNPA Ratio 0.66 0.52 0.96 1.47 NNPA Ratio 0.39 0.18 0.49 0.69 PCR (Excl Tech. write off) 40.9 64.9 49.0 53.4 PCR (Incl Tech. Write off) 83.4 90.7 77.2 72.0
August 27 - 31, 2012 87 8th Annual Global Investor Conference
IPCA Laboratories
Company description IPCA Laboratories is one of India's better managed mid- Key challenges sized pharma companies. It has presence in: The proposed new "Domestic Pharma Policy", may (1) domestic branded formulations (35% of sales) adversely impact earnings. (2) global branded and generic formulations (35%), and Needs to broaden its therapeutic coverage in India (3) global APIs (29%). to fully exploit the domestic market potential. Sustaining profitability despite being a late entrant IPCA's core business strategy is to leverage its strength in the US generic market will be challenging. in manufacturing API to develop vertically integrated and highly competitive formulations. Most of IPCA's Key news flows / triggers to watch formulations are backed by its own APIs. It is also one Approvals for and ramp-up of products from Indore of the key suppliers of anti-malarial drugs to WHO and SEZ; this is imperative to drive growth in the US. has scaled up this business significantly. Ability to drive growth in India despite the lower incidence of malaria. Key investment positives How IPCA manages to counter price erosion in UK. Strong capability in API manufacturing is at the core of IPCA's business success. The company has 1QFY13 highlights attained global leadership position in select APIs IPCA's 1QFY13 performance was slightly below where it is the lowest cost producer which gives estimates due to deferment of shipments in the the company vertical integration advantage. institutional business to next quarter. India It has outperformed the domestic industry growth formulations growth of 18.6% was a positive over the past 5 years on the back of its rising surprise, but the same may not be sustainable given presence in fast-growing chronic therapy segments. the lower incidence of infectious diseases as a We expect a significant ramp-up in IPCA's result of delayed monsoon. international formulations revenues led by 37% EBITDA grew 40% YoY to INR1.33b (below our CAGR for the US business and 25% CAGR for branded estimate of INR1.4b); EBITDA margin expanded formulations business. 300bp YoY to 21% (our estimate 21.9%) largely Expect 31% EPS CAGR for FY12-14, led by expected impacted by lower institutional segment revenues. ramp-up in the US and recovery of growth for the Adjusted PAT declined 30% YoY to INR430m due to domestic formulations business. INR580m of forex losses.
Stock info Quarterly Performance (INR Million) Bloomberg IPCA IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 126 Operating Income 5,299 6,235 6,148 5,611 6,344 23,587 27,855 CMP (INR) 403 Change (%) 26.8 20.3 31.8 13.5 19.7 24.3 18.1 Mcap (USD b) 0.9 EBITDA 952 1,580 1,513 1,117 1,329 5,135 6,318 52-Wk Range (INR) 425 / 230 Change (%) 33.6 33.9 66.2 16.4 39.7 36.5 23.0 1, 6, 12 Rel Perf (%) 4 / 30 / 21 EBITDA Margin (%) 18.0 25.3 24.6 19.9 21.0 21.8 22.7 Reported PAT 617 780 639 766 430 2,762 3,866 Adjusted PAT 617 780 639 766 430 2,762 3,866 Shareholding pattern (%) Change (%) 58.8 -17.1 0.0 16.9 -30.3 5.3 40.0 Jun-12 Mar-12 Jun-11 PAT Margin (%) 11.6 12.5 10.4 13.7 6.8 11.7 13.9 Promoter 45.9 46.0 46.1 Key Operating Metrics - Revenue Break-up Dom. Inst. 21.4 22.2 22.2 Dom. Formulations 1,890 2,292 1,876 1,477 2,242 7,534 8,664 Foreign 10.9 9.8 10.4 Intl Formulations 2,066 2,605 2,898 2,393 2,245 9,961 12,496 Others 21.9 22.0 21.4 Domestic APIs 407 356 333 343 393 1,439 1,439 Intl APIs 901 927 911 1,319 1,422 4,058 4,719 E: MOSL Estimates
88 August 27 - 31, 2012 8th Annual Global Investor Conference
IPCA Laboratories: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Revenues 18,969 23,587 27,855 32,257 EPS (INR) 20.9 21.9 30.6 37.3 Change (%) 21.4 24.3 18.1 15.8 Cash EPS 25.3 27.2 37.3 45.3 EBITDA 3,761 5,135 6,318 7,364 BV/Share 83.7 99.4 123.9 153.8 Margin (%) 19.8 21.8 22.7 22.8 Valuation (x) Depreciation 558 671 843 1,002 P/E 19.3 18.4 13.2 10.8 EBIT 3,203 4,464 5,475 6,362 Cash P/E 15.9 14.8 10.8 8.9 Int. and Finance Charges 314 413 426 426 P/BV 4.8 4.1 3.3 2.6 Other Income - Rec. 518 -408 105 180 EV/Sales 2.9 2.4 2.0 1.7 PBT after EO Expense 3,407 3,643 5,154 6,116 EV/EBITDA 14.9 10.9 8.8 7.5 Current Tax 770 881 1,031 1,284 Dividend Yield (%) 0.9 1.1 1.5 1.9 Deferred Tax 14 0 258 122 FCF per Share 3.9 8.5 9.5 16.9 Tax 784 881 1,289 1,407 Tax Rate (%) 23.0 24.2 25.0 23.0 Return Ratios (%) Reported PAT 2,623 2,762 3,866 4,709 RoE 27.4 24.0 27.4 26.9 Less: Minority Interest -5 0 0 0 RoCE 25.6 24.1 28.7 28.6 Net Profit 2,628 2,762 3,866 4,709 Adj PAT 2,628 2,762 3,866 4,709 Working Capital Ratios Asset Turnover (x) 1.9 1.8 1.8 1.8 Balance Sheet (INR Million) Fixed Asset Turnover (x) 2.8 2.9 2.7 2.7 Y/E March 2011 2012 2013E 2014E Debtor (Days) 87 54 69 69 Equity Share Capital 251 252 252 252 Inventory (Days) 90 104 89 91 Total Reserves 10,265 12,288 15,380 19,147 Leverage Ratio (x) Net Worth 10,516 12,540 15,633 19,400 Current Ratio 4.2 2.8 2.8 2.9 Deferred liabilities 807 932 1189 1312 Interest Cover Ratio 10.2 10.8 12.8 14.9 Total Loans 5,308 5,326 5,326 5,326 Debt/Equity 0.5 0.4 0.3 0.3 Capital Employed 16,625 18,798 22,148 26,038 Cash Flow Statement (INR Million) Gross Block 9,884 12,890 15,690 18,190 Y/E March 2011 2012 2013E 2014E Less: Accum. Deprn. 2,892 3,563 4,407 5,409 Oper.Profit/Loss before Tax 3,761 5,135 6,318 7,364 Net Fixed Assets 6,992 9,326 11,283 12,781 Interest/Dividends Recd. 518 -408 105 180 Capital WIP 1,132 1,132 1,132 1,132 Direct Taxes Paid -770 -757 -1,031 -1,284 Investments 408 341 341 341 (Inc)/Dec in WC -1,203 111 -1,396 -1,632 CF from Operations 2,307 4,082 3,997 4,627 Curr. Assets 10,586 12,475 14,746 17,979 Inventory 4,664 6,699 6,786 8,027 (inc)/dec in FA -1,821 -3,006 -2,800 -2,500 Account Receivables 4,637 3,491 5,278 6,107 (Pur)/Sale of Investments -83 68 0 0 Cash and Bank Balance 104 122 119 878 CF from Investments -1,904 -2,938 -2,800 -2,500 Loans & Advances 1,182 2,163 2,563 2,966 Issue of shares 1100 Curr. Liability & Prov. 2,493 4,475 5,353 6,195 (Inc)/Dec in Debt 762 25 0 0 Account Payables 2,073 4,099 4,825 5,584 Interest Paid -314 -413 -426 -426 Provisions 420 377 528 611 Dividend Paid -468 -554 -773 -942 Net Current Assets 8,093 7,999 9,393 11,784 Others -388 -185 0 0 Appl. of Funds 16,625 18,798 22,148 26,038 CF from Fin. Activity -407 -1,126 -1,199 -1,368
Revenue model (INR M) Inc/Dec of Cash -4 18 -3 760 Y/E March 2011 2012 2013E 2014E Add: Beginning Balance 108 104 122 119 Domestic formulation 6,964 7,534 8,664 10,050 Closing Balance 104 122 119 878 International formulation 6,917 9,961 12,496 14,789 APIs 4,778 5,497 6,157 6,773 Net Sales 18,659 22,992 27,318 31,613
August 27 - 31, 2012 89 8th Annual Global Investor Conference
ITC
Company description volume growth. Differential and rising VAT rates ITC, an associate of BAT (British American Tobacco), across states are also a key challenge. enjoys ~80% market share of India's organized cigarettes Higher than expected losses in Consumer business market. Over the years, ITC has diversified into FMCG, due to input cost pressure and new brand launches Hotels, Paper and Paperboard and agri businesses as it can delay the expected breakeven. looks to build a conglomerate and reduce dependence on cigarettes. Key news flows / triggers to watch News of various tax hikes in cigarettes has been a Key investment positives recent overhang on the stock and needs to be Dominant market share ~80% and strong pricing monitored. power in cigarettes business offers strong growth Extent of price increases and launch of 64mm potential due to rising affordability and ban on FDI variant in the cigarettes portfolio. (restricts potential MNC entrants). Increase in dividend payout from historical average Despite price hikes, ~1.5% cigarette volume growth of ~45% could be a key positive. in 1QFY13 reflects strong consumer preference for ITC's cigarette brands. 1QFY13 highlights; guidance for FY13, FY14 Significant improvement in margin profile of paper 1QFY13 cigarette volumes grew ~1.5% YoY and and agri divisions and steady reduction in Consumer realizations grew 13.5%, driving Net sales growth division losses have helped boost EBITDA margins of 15% to INR33b. by 280bp over the last 2 years. Consumer division losses fell to INR388m; margins Limited capex requirement and huge cash flow improved despite increased pace of new launches. generation (~4x capex requirement) can provide ITC has also started test marketing filter cigarettes upsides to dividend payouts in coming years. of length not exceeding 65mm in UP and Bihar. We model cigarettes volume growth of 2%/7% for Key challenges FY13/14, translating to 15% EBIT CAGR and 17% PAT Steep increase in taxes on cigarettes in the middle CAGR over FY12-14. of the year or in the next Union Budget can impact
Stock info Quarterly Performance (INR Million) Bloomberg ITC IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 FY13E Equity Shares (m) 7823 Operating Income 58,524 60,852 62,478 69,545 67,131 251,738 291,436 CMP (INR) 262 Change (%) 20.4 17.6 14.2 16.9 14.7 17.3 15.8 Mcap (USD b) 36.7 EBITDA 19,579 22,190 23,811 22,633 23,683 88,486 104,650 52-Wk Range (INR) 269 / 185 Change (%) 19.1 18.0 18.0 18.8 21.0 19.4 18.3 1, 6, 12 Rel Perf (%) -1 / 31 / 23 EBITDA Margin (%) 33.5 36.5 38.1 32.5 35.3 35.2 35.9 Reported PAT 13,327 15,143 17,010 16,143 16,021 61,624 71,726 Adjusted PAT 13,327 15,143 17,010 16,143 16,021 61,624 71,726 Shareholding pattern (%) Change (%) 24.5 21.5 22.5 26.0 20.2 23.6 16.4 Jun-12 Mar-12 Jun-11 PAT Margin (%) 22.8 24.9 27.2 23.2 23.9 24.5 24.6 Promoter 0.0 0.0 0.0 Key Operating metrics Dome. Inst. 34.1 34.3 35.9 Cigarette Foreign 49.4 49.1 46.6 Volume Growth (%) 8.0 7.5 5.0 5.0 1.5 6.4 2.0 Others 16.4 16.6 17.5 EBIT Growth (%) 20.8 18.6 20.3 19.5 20.5 20.1 15.2 E: MOSL Estimates
90 August 27 - 31, 2012 8th Annual Global Investor Conference
ITC: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 211,676 247,984 287,603 330,714 Basic (INR) Operational Income 2,914 3,754 3,833 4,176 EPS 6.4 8.0 9.3 10.9 Total Revenue 214,590 251,738 291,436 334,890 Cash EPS 7.3 8.9 10.3 12.1 Change (%) 16.7 17.3 15.8 14.9 BV/Share 20.6 24.3 28.7 33.9 Total Expenditure 140,472 163,252 186,786 212,236 DPS 4.5 3.5 4.2 4.9 EBITDA 74,118 88,486 104,650 122,653 Payout % 80.2 52.7 52.7 52.7 Margin (%) 35.0 35.7 36.4 37.1 Valuation (x) Depreciation 6,560 6,985 8,041 8,806 P/E 38.6 31.7 26.9 22.8 Int. and Fin. Charges 684 779 750 750 Cash P/E 34.1 28.3 24.2 20.6 Other Inc. - Recurring 5,798 8,253 7,717 8,960 EV/Sales 8.7 7.4 6.3 5.4 Profit before Taxes 72,673 88,975 103,576 122,057 EV/EBITDA 25.0 20.9 17.4 14.6 Margin (%) 34.3 35.9 36.0 36.9 P/BV 12.1 10.2 8.7 7.3 Tax 22,806 27,352 31,332 36,922 Dividend Yield (%) 1.8 1.4 1.7 2.0 Tax Rate (%) 31.4 30.7 30.8 30.8 Profit after Taxes 49,867 61,624 71,726 84,525 Return Ratios (%) Change (%) 28.9 23.6 16.4 17.8 RoE 31.3 32.7 32.3 32.2 Margin (%) 23.6 24.8 24.9 25.6 RoCE 43.5 45.7 45.4 45.7 Reported PAT 49,867 61,624 71,726 84,525 Working Capital Ratios Balance Sheet (INR Million) Debtor (Days) 15 15 16 16 Y/E March 2011 2012 2013E 2014E Asset Turnover (x) 1.3 1.3 1.3 1.2 Share Capital 7,738 7,738 7,738 7,738 Reserves 151,795 180,597 214,559 254,582 Leverage Ratio Net Worth 159,533 188,335 222,297 262,320 Debt/Equity (x) 0.0 0.0 0.0 0.0 Loans 992 992 992 992 Cash Flow Statement (INR Million) Deferred Liability 8,019 7,227 6,330 5,303 Y/E March 2011 2012 2013E 2014E Capital Employed 168,543 196,554 229,619 268,615 OP/(loss) before Tax 72,673 88,975 103,576 122,057 Gross Block 127,658 142,658 157,658 172,658 Int./Div. Received 5,798 8,253 7,717 8,960 Less: Accum. Depn. 44,208 51,483 59,524 68,329 Depreciation and Amort. 6,560 6,985 8,041 8,806 Net Fixed Assets 83,451 91,175 98,135 104,329 Interest Paid 684 779 750 750 Capital WIP 13,334 10,000 10,000 10,000 Direct Taxes Paid 22,806 27,352 31,850 37,533 Investments 55,547 67,973 92,073 124,392 Incr in WC 1,827 32,919 24,078 31,017 Diff in dep 607 -290 0 0 Curr. Assets, L&A 101,840 109,176 123,621 138,480 CF from Operations 50,092 27,925 48,722 54,103 Inventory 52,675 62,747 71,083 79,490 Account Receivables 9,076 11,647 13,395 15,403 Extraordinary Items 0123 Cash and Bank Balance 22,432 13,134 15,161 16,945 Incr Decr in FA 11,224 11,666 15,000 15,000 Others 17,656 21,648 23,982 26,642 Pur of Investments -1,722 12,427 24,100 32,319 Curr. Liab. and Prov. 85,628 81,770 94,210 108,587 CF from Invest. -9,502 -24,092 -39,098 -47,316 Account Payables 43,821 47,779 54,283 61,705 Issue of shares 5,220 0 0 0 Other Liabilities 7,371 6,617 7,648 8,845 Incr in Debt 0 0 0 -992 Provisions 34,436 27,374 32,278 38,037 Interest Income 5,798 8,253 7,717 8,960 Net Current Assets 16,212 27,406 29,411 29,894 Interest Paid 684 779 750 750 Application of Funds 168,543 196,554 229,619 268,615 Dividend Paid 38,182 34,435 27,373 32,277 Key assumptions/operating metrics Others -1,574 13,829 12,809 20,056 Cigarettes FY11 FY12 FY13E FY14E CF from Fin. Activity -29,421 -13,132 -7,597 -5,003 Volume Growth (%) -2.8 7.0 2.0 7.1 Incr of Cash 11,170 -9,298 2,027 1,784 VAT (%) 14.5 18.2 20.8 20.8 Add: Opening Balance 11,263 22,432 13,134 15,161 Net Realisation Gr (%) 16.6 10.4 10.5 7.4 Closing Balance 22,432 13,135 15,161 16,945 EBIT Growth (%) 16.8 20.1 15.2 15.5
August 27 - 31, 2012 91 8th Annual Global Investor Conference
Jaiprakash Associates
Company description Key challenges Jaiprakash Associates (JPA) is a diversified infrastructure JPA's earnings are lumpy in nature given commodity player with presence in Cement, Power, Roads, Real nature of cement business and project nature of Estate and Hospitality. The company is set to become EPC and Real Estate businesses. India's third largest cement player with target capacity Consolidated debt stands at INR467b as of March of ~36m tons and is among the top 10 private sector 2012, implying DER of 3.8x. power project developers currently (project pipeline Slowdown in real estate revenue bookings, of 13GW), and has access to ~3.7b sq ft of land bank in regulatory overhang on Cement / Power business. and around Noida, Uttar Pradesh. Key news flows / triggers to watch Key investment positives Possibility of disinvestment in Cement business and JPA plans to ramp up cement capacity to ~36m tons application of funds. by end-FY13, up from 13.5m tons in FY09. Commissioning of Bina power project and Of the 13GW of power projects under development, developments on Nigrie thermal project and status 1.8GW is operational while equipment awards have on Karcham Wangtoo PPA. been placed for 3.8GW, indicating good progress. It Ramp-up in real estate business both at standalone has also commissioned 1GW of Karcham Wangtoo and consolidated levels. hydro project. JPA is the EPC contractor for the Real Estate project 1QFY13 highlights; guidance for FY13, FY14 at Noida, own power projects, etc. This provides 1QFY13 EBITDA was in-line with estimate, but led good revenue visibility for E&C division. by mixed trends across business. Performance was JPA group has outlined a strategy for consolidation boosted by higher EBITDA margin and cement and de-leveraging. It plans to lower debt through realization, while RE bookings were lower. project cash flows, stake sale in Cement business, Expect consolidated cement sales of over 25m tons and divestment in Jaypee Infratech. in FY13E.
Stock info Quarterly Performance (INR Million) Bloomberg JPA IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 2,126 Operating Income 31,833 31,324 33,054 40,621 29,636 128,531 141,997 CMP (INR) 76 Change (%) 0.3 4.6 14.2 4.0 -0.9 Mcap (USD b) 2.9 EBITDA 7,728 7,482 8,160 10,194 7,713 34,397 35,101 52-Wk Range (INR) 89 / 50 Change (%) 20.4 9.9 3.1 31.7 19.1 1, 6, 12 Rel Perf (%) -5 / -7 / 26 EBITDA Margin (%) 24.3 23.9 24.7 25.1 26.0 26.8 Reported PAT 1,070 1,287 2,050 2,838 1,388 10,264 7,973 Adjusted PAT 1,072 1,287 2,034 2,789 1,379 10,203 7,973 Shareholding pattern (%) Change (%) 1.3 11.4 -12.9 -3.3 37.8 Jun-12 Mar-12 Jun-11 Key operating metrics Promoter 46.7 46.8 46.8 Cement div. EBIT 34,854 34,854 36,014 37,014 15,629 54,650 66,806 Dom. Inst. 13.6 13.7 11.6 EPC division EBIT 12,748 15,540 12,421 17,706 12,160 58,423 57,519 Foreign 20.6 20.6 20.4 RE division EBIT 3,469 2,018 3,078 5,604 1,651 14,170 15,000 Others 19.1 18.9 21.2 E: MOSL Estimates
92 August 27 - 31, 2012 8th Annual Global Investor Conference
Jaiprakash Associates: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 129,650 128,531 141,997 161,157 Basic (INR) Change (%) 28.5 -0.9 10.5 13.5 Adjusted EPS 3.5 4.8 3.7 4.8 EBITDA 28,889 34,397 35,101 39,140 Growth (%) -17.0 37.5 -21.9 29.0 % of Net Sales 22.3 26.8 24.7 24.3 Consolidated EPS 6.5 3.0 5.0 6.2 Depreciation 6,078 6,142 7,176 7,286 Growth (%) 355.1 -54.2 69.3 23.5 Interest 13,942 17,817 18,874 18,091 Cash EPS 6.3 7.7 7.1 8.3 Other Income 8,668 2,706 2,505 2,098 Book Value 44.2 47.9 45.2 48.9 PBT 17,537 13,143 11,556 15,861 DPS 0.7 1.0 0.7 1.0 Tax 5,867 2,880 3,582 5,576 Rate (%) 33.5 21.9 31.0 35.2 Payout (incl. Div. Tax.) 14.5 22.7 22.8 22.8 Reported PAT 11,670 10,264 7,973 10,286 Valuation (x) Extra-ord. Inc. (net of exp) 0 61 0 0 P/E (standalone) 15.8 20.2 15.6 Adjusted PAT 7,421 10,203 7,973 10,286 P/E (consolidated) 25.4 15.0 12.1 Change (%) -16.9 37.5 -21.9 29.0 Cash P/E 9.8 10.6 9.1 Consolidated PAT 13,839 6,336 10,725 13,241 Change (%) 355.1 -54.2 69.3 23.5 EV/EBITDA 9.0 9.0 8.0 EV/Sales 2.4 2.2 1.9 Balancesheet (INR Million) Price/Book Value 1.6 1.7 1.5 Y/E March 2011 2012 2013E 2014E Dividend Yield (%) 1.3 1.0 1.3 Share Capital 4,253 4,253 4,253 4,253 Reserves 89,721 97,658 91,814 99,754 Profitability Ratios (%) Net Worth 93,974 101,911 96,067 104,007 RoE 8.3 10.4 8.1 10.3 Loans 217,076 181,628 163,205 163,033 RoCE 10.6 10.0 10.7 12.3 Deffered Tax Liability 11,940 12,440 12,440 12,940 Capital Employed 322,990 295,979 271,712 279,980 Turnover Ratios Debtors (Days) 79 80 81 82 Gross Fixed Assets 147,964 160,589 163,089 165,589 Asset Turnover (x) 0.4 0.4 0.5 0.6 Less: Depreciation 28,395 34,537 41,713 48,999 Net Fixed Assets 119,569 126,052 121,376 116,590 Leverage Ratio Capital WIP 63,527 1,500 1,545 1,591 Debt/Equity (x) 2.3 1.8 1.7 1.6 Investments 64,838 80,461 83,940 86,966 Cash Flow Statement (INR Million) Curr. Assets 131,523 147,339 127,952 144,306 Y/E March 2011 2012 2013E 2014E Inventory 32,833 36,311 39,008 43,609 Debtors 28,106 29,313 31,512 36,205 PBT before EO Items 17,546 13,143 11,556 15,861 Cash & Bank Balance 24,625 33,010 6,548 10,209 Add : Depreciation 6,078 6,142 7,176 7,286 Loans & Advances 45,697 48,442 50,623 54,022 Interest 13,942 17,817 18,874 18,091 Other Current Assets 262 262 262 262 Less : Direct Taxes Paid 5,867 2,880 3,582 5,576 (Inc)/Dec in WC -16,762 -4,525 -3,347 -6,321 Current Liab. & Prov. 56,467 59,372 63,101 69,473 CF from Operations 14,936 29,698 30,676 29,341 Net Current Assets 75,057 87,966 64,851 74,833 Application of Funds 322,990 295,979 271,712 279,980 (Inc)/Dec in FA -44,070 49,402 -2,545 -2,546 EBIT mix (INR m) (Pur)/Sale of Investments -9,075 -15,623 -3,479 -3,027 CF from Investments -53,145 33,779 -6,024 -5,573 Y/E March 2011 2012 2013E 2014E Construction 9,264 16,054 13,517 11,779 (Inc)/Dec in Net Worth 1,688 500 -12,000 500 Cement 8,396 8,475 9,135 12,780 (Inc)/Dec in Debt 37,988 -35,448 -18,423 -172 Hospitality 152 36 220 253 Less : Interest Paid 13,942 17,817 18,874 18,091 BOT Dividend 1,036 1,950 1,000 1,000 Dividend Paid 1,692 2,326 1,818 2,345 Power 122 152 183 219 CF from Fin. Activity 24,042 -55,092 -51,115 -20,108 Real estate 8,708 5,625 6,375 7,920 Exceptional 2,496 - - - Inc/Dec of Cash -14,167 8,385 -26,463 3,661 Unallocated (3,819) (2,082) - - Add: Beginning Balance 38,792 24,625 33,010 6,548 Total 26,355 30,209 30,430 33,952 Closing Balance 24,625 33,010 6,548 10,209
August 27 - 31, 2012 93 8th Annual Global Investor Conference
Jindal Steel & Power
Company description Key challenges Jindal Steel & Power (JSP) currently has 3mtpa of Sluggish steel demand, cheaper imports and operational steel-making capacity at Raigarh. It has one enhanced capacity of steel majors due to recent of the best iron ore and coal resources in India, with expansions will put pressure on prices. Domestic assets spread over various mineral-rich countries. producers will have to resort to more aggressive pricing which will results in lower margins JSP offers the best insulation from iron ore and coking Expected return on new projects (i.e. Angul and coal prices among Indian steel producers, and is the Tamnar) has declined significantly due to repeated only power producer in India, most of whose projects delays and cost escalations. Moreover, increased are secured for coal from captive mines. regulatory vigil on mining will lead to higher input The company has rich iron ore and coal resources prices. overseas, mainly in Mozambique, South Africa and Indonesia. Key news flows / triggers to watch Utkal B1 coal mine is critical for value accretion in Key investment positives its Angul Steel and Power projects which are JSP has planned to increase its steel capacity 4x over expected to be commissioned by June 2013. the next four years. It is augmenting its existing 3mtpa capacity, by setting up a 1.6mtpa module at 1QFY13 highlights; guidance for FY13, FY14 Angul, which will use the coal gasification route. It JSP's 1QFY13 Adj Cons PAT grew 4.4% YoY to INR9.6b plans to add two more modules of 1.6mtpa each at (9% below our estimate) due to lower sales Angul and Raigarh, using this technology. At Patratu volumes in the steel business, higher costs in Jindal (Jharkhand), JSP has selected the blast furnace Power, and higher interest costs. Reported Cons PAT route for steel making. of INR3.85b included INR5.7b on account of Only 1/3rd of the 12mtpa steel capacity will be impairment in value of investment in Bolivia. exposed to coking coal imports. Production of steel and pellets remained strong, Jindal Power plans to increase capacity by 10x in 10 but sales volumes disappointed, as demand and years by adding 4,380MW of thermal power projects prices deteriorated sharply in June 2012. in Chhattisgarh and Jharkhand at a capex of USD5.3b The accumulated inventory is likely to yield lower and 6,100MW of hydro power projects in Arunachal profits in the next quarter because of lower steel Pradesh at a capex of USD8.1b. prices.
Stock info Quarterly Performance (INR Million) Bloomberg JSP IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 935 Operating Income 39,441 44,232 43,577 54,823 47,015 182,073 208,923 CMP (INR) 405 Change (%) 31.4 43.5 37.3 42.2 19.2 38.9 14.7 Mcap (USD b) 6.8 EBITDA 16,257 18,038 17,922 19,144 15,932 71,361 67,012 52-Wk Range (INR) 663 / 390 Change (%) 3.9 20.1 12.1 10.8 -2.0 11.6 -6.1 1, 6, 12 Rel Perf (%) -9 / -34 / -27 EBITDA Margin (%) 41.2 40.8 41.1 34.9 33.9 39.2 32.1 Reported PAT 9,330 8,918 10,161 11,615 3,855 40,025 31,229 Adjusted PAT 9,188 10,495 10,210 11,670 9,594 41,563 36,763 Shareholding pattern (%) Change (%) -2.4 19.1 9.1 17.3 4.4 10.7 -11.5 Jun-12 Mar-12 Jun-11 PAT Margin (%) 23.3 23.7 23.4 21.3 20.4 22.8 17.6 Promoter 59.0 58.9 58.4 Key operating metrics Dom. Inst. 7.3 6.9 6.5 Steel (000 tons) 457 598 591 737 561 2,385 2,465 Foreign 21.9 23.1 24.1 Pellets (000 tons) 347 526 464 691 395 2,028 1,934 Others 11.8 11.1 11.0 Jindal Power(M kwh)1,906 1,839 2,030 1,976 2,015 7,750 8,002 E: MOSL Estimates
94 August 27 - 31, 2012 8th Annual Global Investor Conference
Jindal Steel & Power: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios (Consolidated) Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net sales 131,116 182,073 208,923 221,316 Basic (INR) Change (%) 18.2 38.9 14.7 5.9 EPS 40.1 44.4 39.3 37.0 Total Expenses 67,190 110,713 141,911 146,212 Cash EPS 53.0 57.7 48.5 56.5 EBITDA 63,926 71,361 67,012 75,104 BV/Share 150.8 193.9 230.9 264.2 % of Net Sales 48.8 39.2 32.1 33.9 DPS 1.5 1.6 2.0 2.0 Depn. & Amortization 11,510 13,863 14,113 17,795 Payout (%) 3.8 3.7 5.2 5.5 EBIT 52,416 57,498 52,899 57,309 Valuation (x) Net Interest 3,356 5,059 6,981 12,563 P/E 9.0 10.2 10.9 Other income 820 1,432 1,183 1,355 Cash P/E 7.0 8.3 7.1 PBT before EO 49,880 53,871 47,101 46,100 P/BV 2.1 1.7 1.5 EO income -1,982 -5,741 0 EV/Sales 2.9 2.8 2.8 PBT after EO 49,880 51,888 41,360 46,100 EV/EBITDA 7.3 8.7 8.4 Tax 11,840 11,863 10,130 11,154 Dividend Yield (%) 0.4 0.5 0.5 Rate (%) 23.7 22.9 24.5 24.2 Reported PAT 38,040 40,025 31,229 34,946 Return Ratios (%) Minority interests 659 644 509 470 RoE 30.6 25.8 18.5 15.0 Share of Associates 158 200 301 158 RoCE (pre-tax) 21.6 18.5 13.8 12.0 Adjusted PAT 37,539 41,563 36,763 34,634 Change (%) 4.7 10.7 -11.5 -5.8 Working Capital Ratios Asset Turnover (x) 0.4 0.5 0.5 0.4 Balance Sheet (Consolidated) (INR Million) Debtor (Days) 32.1 28.5 31.1 30.8 Y/E March 2011 2012 2013E 2014E Inventory (Days) 21.2 17.7 17.2 17.1 Share Capital 934 934 934 934 Work.Cap.Turnover (Days) 27.0 16.5 19.3 18.6 Reserves 139,965 180,218 214,718 245,856 Payable (Days) 101.8 98.4 80.5 79.5 Net Worth 140,899 181,152 215,653 246,790 Minority Interest 2,335 2,985 3,526 4,047 Leverage Ratio (x) Total Loans 139,766 150,146 209,146 276,146 Current Ratio 1.6 1.4 1.6 1.8 Deferred Tax Liability 10,055 11,520 12,788 14,299 Interest Cover Ratio 15.6 11.4 7.6 4.6 Capital Employed 293,054 345,804 441,114 541,282 Debt/Equity 1.0 0.8 0.9 1.0 Gross Block 192,756 225,668 231,911 397,074 Cash Flow Statement (Consolidated) (INR Million) Less: Accum. Deprn. 44,321 58,120 72,239 90,034 Y/E March 2011 2012 2013E 2014E Net Fixed Assets 148,435 167,548 159,672 307,041 Pre-tax profit 49,880 51,888 41,360 46,100 Capital WIP 100,409 139,784 232,519 165,135 Depreciation 11,510 13,863 14,113 17,795 Good will 1,018 1,018 1,018 1,018 (Inc)/Dec in Wkg. Cap. -18,929 5,341 -10,244 -779 Investments 2,979 2,979 2,979 2,979 Tax paid -9,472 -9,491 -8,104 -8,909 Curr. Assets 107,863 114,640 122,076 144,389 Other operating activities 262 -250 -784 -2,104 Inventory 27,734 32,243 35,849 37,893 CF from Op. Activity 33,252 61,351 36,341 52,104 Account Receivables 11,537 14,204 17,827 18,691 Cash and Bank Balance 4,802 4,404 4,611 24,017 (Inc)/Dec in FA + CWIP -82,070 -72,287 -98,978 -97,779 loans & advances 63,790 63,790 63,790 63,790 (Pur)/Sale of Investments 206 0 0 0 Curr. Liability & Prov. 67,649 80,165 77,150 79,279 CF from Inv. Activity -81,864 -72,287 -98,978 -97,779 Account Payables 36,587 49,103 46,088 48,216 Provisions & Others 31,063 31,063 31,063 31,063 Equity raised/(repaid) 3000 Net Current Assets 40,214 34,475 44,926 65,111 Debt raised/(repaid) 53,723 10,380 59,000 67,000 Appl. of Funds 293,054 345,804 441,114 541,282 Dividend (incl. tax) -1,439 -1,535 -1,919 -1,919 JSP Operating Parameters Other financing activities 1,663 Steel (000 tons) 1,900 2,385 2,465 3,176 CF from Fin. Activity 52,287 10,508 57,081 65,081 Metalics (000 tons) 336 164 18 56 Pellets (000 tons) 565 2,028 1,934 1,538 (Inc)/Dec in Cash 3,674 -427 -5,556 19,406 CPP (M kwh) 1,066 1,446 2,550 3,359 Add: Opening Balance 1,128 4,802 4,404 4,611 Jindal Power (M kwh) 7,920 7,750 8,002 7,984 Closing Balance 4,802 4,404 -1,152 24,017 JSP Realization (INR/kwh) 4.2 3.9 3.7 3.6
August 27 - 31, 2012 95 8th Annual Global Investor Conference
JSW Energy
Company description Key challenges JSW Energy (JSWEL), a Sajjan Jindal group company, has Imported coal prices have been softening, but any a power generation project portfolio of 11.4GW. Of this, major rebound could impact earnings. 2.6GW is operational, 0.5GW is under construction INR depreciation in the past has been steep and is (expected to be commissioned in FY13), and the yet to see signs of easing out. remaining 8GW is under various stages of development Approval of Raj West tariff crucial to improve near and planning. The company is an early entrant in power term profitability of the project. trading business, and also has a JV with Toshiba for super critical steam turbines and generator. Key news flows / triggers to watch Higher merchant prices over FY13/14E. We expect Key investment positives merchant prices at INR4.0/unit. JSWEL's business model in the medium term is a Continued weakness in imported coal prices and combination of merchant power sales and spot coal rupee appreciation could be twin benefits. purchases. Of the 3.1GW operational capacity by Approval of lignite production expansion for FY13E, 44% of offtake will be on short-term (ST) sales Kapurdi mines from MoEF (Raj West project). and 66% of the fuel purchases will be on spot basis. Favorable tariff order on Raj West and 300MW PPA Global thermal coal indices are down ~35% since with MSEDCL. their peak in Dec-10, led by changing US energy dynamics, slowdown in demand from China, etc. 1QFY13 highlights; guidance for FY13, FY14 Even in INR terms, the indices are down by ~17% 1QFY13 performance was higher than estimates led despite rupee depreciation. JSWEL is a key by higher generation at 4.7BUs, and better gross beneficiary with ~1.4GW merchant capacity located margin at INR2.10/unit, v/s INR0.2/unit in 2QFY12. in high-deficit consumption regions. JSWEL has in 1QFY13, JSWEL synchronized Raj West's Unit-V already tied up sizable capacity under ST contract at and Unit-VI and is expecting project CoD in FY13. price range of INR4.5-5.0/unit. It expects to file for revised tariff order of Raj West JSWEL has lowest DER among private sector players in 3QFY13. at 1.76x as at June 2012. Higher operating cash flows Management expects merchant realization in the and no sizable commitment would ensure that range of INR4-4.25/unit, with an upward bias. equity dilution is not necessary in the near term.
Stock info Quarterly Performance (INR Million) Bloomberg JSW IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1,640 Operating Income 12,724 9,965 17,687 20,812 21,915 61,187 81,635 CMP (INR) 50 Change (%) 36.5 17.8 64.3 44.6 72.2 42.5 33.4 Mcap (USD b) 1.5 EBITDA 3,932 1,182 3,495 5,869 5,834 14,477 24,852 52-Wk Range (INR) 77 / 36 Change (%) -13.1 -63.6 -1.2 35.5 48.4 -7.4 71.7 1, 6, 12 Rel Perf (%) -7 / -28 / -16 EBITDA Margin (%) 31 12 20 28 27 24 30 Reported PAT 1,363 -1,089 -827 2,303 34 1,700 4,308 Adjusted PAT 1,363 -221 549 1,683 1,949 3,313 6,223 Change (%) -54.4 -114.3 -60.2 -18.3 43.0 -60.6 87.9 Shareholding pattern (%) PAT Margin (%) 10.7 -2.2 3.1 8.1 8.9 5.4 7.6 Jun-12 Mar-12 Jun-11 Key Operating metrics Promoter 76.7 76.7 76.7 Merc. Tar. (INR/Unit) 4.51 3.15 3.99 4.18 4.56 4.37 4.05 Domestic Instn 5.9 5.7 5.8 Fuel Cost (INR/Unit) 2.92 2.94 2.69 2.43 2.44 2.69 2.27 Foreign 9.2 10.3 10.5 Plant PLF (%) 71 74 81 92 92 72 80 Others 8.2 7.2 6.9 E: MOSL Estimates
96 August 27 - 31, 2012 8th Annual Global Investor Conference
JSW Energy: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 42,944 61,189 81,635 91,302 Basic (INR) Change (%) 82.3 42.5 33.4 11.8 Adjusted EPS 5.1 2.0 3.8 6.4 Operating Expenses 27,302 46,710 56,783 60,063 Growth (%) 12.5 -60.6 87.8 68.5 EBITDA 15,642 14,478 24,852 31,239 Cash EPS 6.5 4.1 7.1 11.8 % of Net Sales 36.4 23.7 30.4 34.2 Book Value 34.6 34.8 36.8 42.1 Depreciation 2,668 5,033 7,742 8,841 DPS 1.0 0.5 0.4 1.0 Interest 4,325 7,172 10,252 10,105 Payout (incl. Div. Tax.) 19.5 24.7 9.6 15.0 Other Income 1,332 1,466 1,656 1,156 Valuation (x) PBT 9,980 3,739 8,515 13,448 P/E 24.5 13.0 7.7 Tax 1,563 419 2,377 3,070 Cash P/E 12.1 6.9 4.2 Rate (%) 15.7 11.2 27.9 22.8 EV/EBITDA 11.4 7.5 5.6 PAT before Min. Int. 8,418 3,320 6,138 10,378 EV/Sales 2.7 2.3 1.9 Reported PAT 8,418 3,314 6,223 10,483 Price/Book Value 1.4 1.3 1.2 Change (%) 12.9 -60.6 87.8 68.5 Dividend Yield (%) 1.0 0.7 1.9 Adjusted PAT 8,418 3,314 6,223 10,483 Change (%) 12.5 -60.6 87.8 68.5 Profitability Ratios (%) Balance Sheet (INR Million) RoE 14.8 5.8 10.6 16.2 Y/E March 2011 2012 2013E 2014E RoCE 9.7 6.4 10.5 13.9 Share Capital 16,401 16,401 16,401 16,401 Leverage Ratio Reserves and Surplus 40,364 40,600 43,895 52,609 Debt/Equity (x) 1.5 1.5 1.8 1.4 Share Holder Funds 56,765 57,001 60,295 69,009 Minority 724 500 415 310 Cash Flow Statement (INR Million) LT Borrowings 84,709 87,172 106,585 100,455 Y/E March 2011 2012 2013E 2014E Deffered Tax Liabilities 1,562 1,292 1,292 1,292 PBT before EO Items 9,980 3,739 8,515 13,448 Other LT Liabilities 6 14 14 14 Add : Depreciation 2,668 5,033 7,742 8,841 LT Provisions 323 286 286 286 Interest 4,325 7,172 10,252 10,105 Non Current Liabilities 86,601 88,764 108,177 102,047 Less : Direct Taxes Paid -1,563 -419 -2,377 -3,070 Current Liabilities 31,959 46,723 10,899 9,580 (Inc)/Dec in WC -8,067 6,784 -27,664 -2,892 Total Equity & liabilities 176,048 192,988 179,786 180,946 CF from Operations 7,344 22,310 -3,533 26,432
Fixed Assets 134,903 146,446 145,987 142,263 (Inc)/Dec in FA 28,540 10,014 2,899 4,500 Non Current Investments 2,389 2,871 3,427 3,427 (Pur)/Sale of Investments -9,503 130 -1,544 0 LT Loan and Advances 11,552 12,525 12,000 12,000 CF from Investments 19,037 10,143 1,355 4,500 Non Current Assets 148,844 161,842 161,414 157,690 (Inc)/Dec in Net Worth 2,898 -2,155 0 0 Current Investments 2,453 2,100 2,100 2,100 (Inc)/Dec in Debt 17,675 -3,494 13,702 -6,130 Inventories 5,348 7,658 3,179 3,289 (Inc)/Dec in Deffered Trade Receivables 7,645 11,760 6,141 6,824 Tax Liability 527 1,698 -13 -2,169 Cash and Bank Balance 9,779 6,686 4,009 8,100 Less : Interest Paid -4,325 -7,172 -10,252 -10,105 ST Loan and Advances 1,509 2,824 2,824 2,824 Dividend Paid -1,906 -3,530 -603 -1,562 Other Current Assets 471 118 118 118 CF from Fin. Activity 14,868 -14,653 2,834 -19,966 Current Assets 27,204 31,146 18,372 23,256 Total Assets 176,048 192,988 179,786 180,946 Inc/Dec of Cash 3,730 -3,093 -2,677 3,154 Add: Beginning Balance 6,048 9,779 6,686 4,947 Key assumptions/operating metrics Closing Balance 9,779 6,686 4,009 8,101 Merchant Tariff (INR/Unit) 4.1 4.4 4.0 4.0 Fuel Cost (INR/Unit) 2.5 2.4 2.3 2.2 Installed Capacity (MW) 1,730 2,600 3,140 3,140 - PPA (MW) 780 1,380 1,380 1,380 - Merchant (MW) 950 1,220 1,760 1,760 Avg PLF (%) 59 60 72 77
August 27 - 31, 2012 97 8th Annual Global Investor Conference
JSW Steel
Company description additionally live with deteriorating quality of iron JSW Steel (JSTL) is currently the largest private sector ore from e-auction in Karnataka, which has steel manufacturer in terms of installed capacity in increased the coke rate, reduced the campaign life India. It has 10mtpa steel plant located in Vijaynagar, of equipment, and resulted in lower effective Karnataka. With the acquisition of Ispat Industries and capacity due to higher slag rate. Salem Steel, it controls 14mtpa capacity. Its Karnataka facility is located in proximity to rich iron ore reserves Key news flows / triggers to watch belt. It has investments in iron ore mining in Karnataka Timely restart of mining operations in Karnataka is and Chile. Its other overseas investments include plate critical for JSTL to meet its production target of and pipe mill operations and coal mines in the US. 8.5mtpa. Based on current stock and additional supply from NMDC it can only produce ~4.2mt in Key investment positives next 3 quarters. JSTL has demonstrated excellent project execution Supreme Court has favored restarting of Category skills over the past decade, growing its capacity 6x A&B iron ore mines in Karnataka and is likely to to 10mtpa via brownfield expansions at Vijaynagar. pass order regarding the same after going through It has the lowest conversion cost due to operational CEC's R&R report. efficiencies. Its strategic location near iron ore rich Bellary-Hospet belt helps it to keep iron ore 1QFY13 highlights; guidance for FY13, FY14 purchase costs low; however, the ban on iron ore JSTL's 1QFY13 adjusted standalone PAT increased mining at Bellary and subsequent non-availability 16% YoY to INR6.6b due to higher realization and of adequate quantity at lower costs has derailed lower tax rate. volume growth. Net Sales grew 28% YoY to INR90.4b driven by 4% Key challenges higher realization and 23% higher volumes. Sales Sluggish steel demand, cheaper imports and volume declined 9% QoQ to 2.19mt. enhanced capacity of steel majors due to recent EBITDA/ton increased 8% QoQ to USD154. Blended expansions will put pressure on prices. Domestic realization increased 4% QoQ to INR42,853 due to producers will have to resort to more aggressive better sales mix. pricing which will result in lower margins. CEC has approved R&R plan for 7 Category A mines Sourcing iron ore is still a challenge in view of delay and company expects these mines to be operational in reopening Karnataka mines. JSW Steel has to in August after certain approvals.
Stock info Quarterly Performance (INR Million) Bloomberg JSTL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 223 Operating Income 70,694 76,321 78,765 95,447 90,376 321,227 325,295 CMP (INR) 721 Change (%) 51.0 32.1 35.6 34.3 27.8 37.5 1.3 Mcap (USD b) 2.9 EBITDA 14,082 13,104 12,534 16,518 17,728 56,238 59,981 52-Wk Range (INR) 885 / 464 Change (%) 36.1 32.1 25.3 -0.1 25.9 17.7 6.7 1, 6, 12 Rel Perf (%) 4 / -12 / 8 EBITDA Margin (%) 19.9 17.2 15.9 17.3 19.6 17.5 18.4 Reported PAT 5,783 1,271 6,684 7,522 2,690 21,260 13,808 Adjusted PAT 5,713 5,993 9,592 5,592 6,632 26,890 17,540 Shareholding pattern (%) Change (%) 66.6 82.6 155.7 -32.3 16.1 36.5 -34.8 Jun-12 Mar-12 Jun-11 PAT Margin (%) 8.1 7.9 12.2 5.9 7.3 8.4 5.4 Promoter 38.6 38.5 38.3 Key operating metrics Dom. Inst. 4.7 4.7 4.8 Sales (mt) 1.7 1.9 1.9 2.3 2.1 7.8 8.1 Foreign 41.3 41.7 45.4 Realiz. (INR/ton) 41,245 40,553 41,281 41,319 42,853 41,109 39,961 Others 15.3 15.2 11.5 EBITDA/ton(USD/ton)184 152 129 143 154 150 138 E: MOSL Estimates
98 August 27 - 31, 2012 8th Annual Global Investor Conference
JSW Steel: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net sales 241,059 343,681 360,186 390,034 Basic (INR) Change (%) 27.2 42.6 4.8 8.3 EPS 75.2 66.5 50.7 49.4 Total Expenses 192,380 282,662 294,778 325,789 Cash EPS 144.3 121.7 148.8 160.6 EBITDA 48,679 61,019 65,408 64,245 BV/Share 740.8 750.7 764.8 804.1 % of Net Sales 20.2 17.8 18.2 16.5 DPS 12.3 7.5 7.5 7.5 Depn. & Amortization 15,597 19,332 22,059 22,587 Payout (%) 20.9 15.4 20.2 20.7 EBIT 33,082 41,687 43,349 41,658 Net Interest 10,603 14,273 18,618 20,560 Valuation (x) Other income 1,900 769 571 615 P/E 10.8 14.2 14.6 PBT before EO 24,379 28,183 25,302 21,713 Cash P/E 5.9 4.8 4.5 EO income -15,353 -5,948 P/BV 1.0 0.9 0.9 PBT after EO 24,379 12,830 19,354 21,713 EV/Sales 1.2 1.2 1.2 Tax 7,785 5,002 8,217 8,459 EV/EBITDA 7.0 6.8 7.1 Rate (%) 31.9 39.0 42.5 39.0 Dividend Yield (%) 1.0 1.0 1.0 Reported PAT 16,594 7,828 11,137 13,254 EV/ton 1,140 1,018 938 Minority interests -239 189 36 36 Return Ratios (%) Share of Associates 707 -2,262 -2,996 -2,000 RoE 12.3 8.9 6.7 6.3 Preference dividend 279 279 279 279 RoCE (pre-tax) 9.6 8.7 8.1 7.6 Adj. PAT (after MI & Asso) 16,783 14,844 11,321 11,011 Working Capital Ratios Balance Sheet (INR Million) Debtor (Days) 14 16 15 15 Y/E March 2011 2012 2013E 2014E Creditors(Days) 45 44 45 45 Share Capital 2,231 2,231 2,231 2,231 Reserves 163,062 165,265 168,400 177,175 Leverage Ratio (x) Net Worth 165,293 167,496 170,631 179,406 Current Ratio 2.9 3.4 2.9 2.9 Minority Interest 2,219 2,177 2,213 2,250 Interest Cover Ratio 3.1 2.9 2.3 2.0 Total Loans 237,431 298,513 304,461 324,461 Debt/Equity 1.3 1.6 1.7 1.7 Deferred Tax Liability 20,494 27,250 33,021 38,755 Capital Employed 425,437 495,435 510,327 544,872 Cash Flow Statement (Consolidated) (INR Million) Y/E March 2011 2012 2013E 2014E Gross Block 337,771 426,895 456,895 486,895 EBITDA 48,679 61,019 65,408 64,245 Less: Accum. Deprn. 68,732 88,775 110,834 133,421 (Inc)/Dec in Wkg. Cap. -13,137 -28,388 2,643 -2,453 Net Fixed Assets 269,039 338,121 346,061 353,474 Tax Paid -4,269 -4,113 -2,446 -2,725 Capital WIP 65,078 35,703 55,703 75,703 CF from Op. Activity 31,273 28,518 65,606 59,067 Investments 26,437 18,856 18,856 18,856 Curr. Assets 98,329 146,453 136,772 147,584 (Inc)/Dec in FA + CWIP -52,994 -59,750 -50,000 -50,000 Inventory 44,097 57,893 59,209 64,115 (Pur)/Sale of Investments -266 7,581 Account Receivables 9,334 15,394 14,802 16,029 Acquisition in subsidiaries-23,598 Cash and Bank Balance 23,170 32,653 22,248 26,926 Int. & Dividend Income 526 769 571 615 Others 21,729 40,514 40,514 40,514 CF from Inv. Activity -76,331 -51,400 -49,429 -49,385 Curr. Liability & Prov. 33,446 43,698 47,065 50,745 Net Current Assets 64,884 102,755 89,707 96,839 Equity raised/(repaid) 59,356 Appl. of Funds 425,437 495,435 510,327 544,872 Debt raised/(repaid) 4,008 61,082 5,948 20,000 Dividend (incl. tax) -2,397 -2,284 -2,237 -2,237 Operating Parameters Interest paid -10,007 -14,273 -18,618 -20,560 Forex Rate (INR/USD) 45.6 47.9 53.5 52.0 Other financing -281 -12,159 -11,676 -2,206 Coal(Coking Hard fob) 214 288 202 200 CF from Fin. Activity 50,679 32,366 -26,582 -5,003 Iron ore JSW (USD/ton) 60 65 59 60 (Inc)/Dec in Cash 5,621 9,484 -10,406 4,678 Steel - JSW Steel (USD/ton) 780 815 709 699 Add: opening Balance 3,030 23,170 32,653 22,248 Volumes (000 tons) 6,098 7,814 8,140 9,400 Margin Money & deb. bal. 14,518 EBITDA per ton (USD) 172 150 138 120 Closing Balance 23,170 32,653 22,248 26,926
August 27 - 31, 2012 99 8th Annual Global Investor Conference
Kotak Mahindra Bank
Company description Key challenges Kotak Mahindra group is one of India's largest financial Asset quality remains a key monitorable on the back conglomerates. Kotak Mahindra Bank (KMB) together of early warning signs of asset quality deterioration with its subsidiaries has a presence across spectrum of in some key products and continued policy paralysis. financial services – lending, broking, investment Moderating growth, especially in some of the high banking, life insurance, asset management, and yielding products, expected deterioration in asset proprietary investments. As on June 2012, KMB had 366 quality and higher base of FY12 (due to healthy branches and consolidated asset base of INR968b. recoveries and just 15bp of credit cost) could put pressure on lending business profitability. Key investment positives KMB's dependence on earnings from non lending Key news flows / triggers to watch businesses has reduced considerably over past few RBI has directed the bank to reduce promoter years. Share of profits from lending business has holding to 20% by March 2018 from ~45% currently. increased from 40-45% of total in FY07/08 to 80%+ KMB's strategy on the same will have to be watched. currently, which provides stability to earnings. Signals of improvement in the outlook for the Outlook for the lending business remains healthy capital market related businesses. as (1) Loan growth is likely to remain 20%+ in FY13/ 14 with focus on corporate and secured retail loans, 1QFY13 highlights; guidance for FY13, FY14 and (2) Margins are likely to remain superior than While lending business PAT grew 9% YoY, in line with the industry at 4.5%+. our expectations, sluggish capital market business KMB has demonstrated excellent asset quality affected overall profitability. performance in the current credit cycle. Higher share Asset quality deteriorated as one large corporate of secured products in the overall mix should also account slipped into NPA. Asset quality will remain augur well for asset quality. a key monitorable. Life insurance business has turned profitable and is Loan growth guidance for FY13 has been toned down unlikely to require any further capital infusion. With to 20%+ from 25-30% earlier. improvement in the outlook for capital market The management has maintained its margin related businesses, the share of profits from non guidance of 4.5%+ (4.7% in 1QFY13) even if the loan lending businesses should rise going forward. mix undergoes change.
Stock info KMB Group: Earnings Estimates (INR Million) Bloomberg KMB IN Business FY10 FY11 FY12 FY13E FY14E Equity Shares (m) 742 Kotak Mah. Bk.(Standalone) Banking Business 5,611 8,182 10,850 11,940 13,404 CMP (INR) 588 Kotak Mahindra Prime Auto loans, debt Mcap (USD b) 7.8 capital markets 1,664 3,179 3,849 4,057 4,571 52-Wk Range (INR) 612 / 411 Kotak Mahi. Investments Primarily LAS 347 240 153 185 194 1, 6, 12 Rel Perf (%) -4 / 5 / 27 Lending Business 7,622 11,600 14,852 16,182 18,170 International subsidiaries Asset mgt & Inv. Bkg. 799 509 -110 0 50 Kotak Mah. AMC&Trustee Co Mutual funds mgt. 725 173 220 260 278 Kotak Investment Advisors Alternate asset mgt. 398 327 360 375 425 Asset Mgt Business 1,921 1,009 470 635 753 Shareholding pattern (%) Kotak Securities Broking & distri. 2,601 1,819 1,260 1,044 1,052 Jun-12 Mar-12 Jun-11 Kotak Mah. Capital Co. Invest. Banking 239 519 60 222 250 Promoter 45.2 45.3 45.5 Capital Market Business 2,840 2,338 1,320 1,265 1,302 Dom. Inst. 4.5 4.7 5.4 Consol. PAT excl. Kotak Life 12,382 14,948 16,642 18,082 20,224 Foreign 34.3 33.9 31.7 YoY Growth (%) 89 21 11 9 12 Others 16.1 16.1 17.4 Kotak OM Life Insurance Life insurance 692 1,014 2,030 2,233 2,568 Cons. Adjust. -4 -294 -349 -150 -150 Consol. PAT Incl. Kotak Life 13,070 15,667 18,322 20,165 22,642 YoY Growth (%) 100 20 17 10 12
100 August 27 - 31, 2012 8th Annual Global Investor Conference
Kotak Mahindra Bank: Financials and valuation
Income Statement (Standalone) (INR Million) Ratios (Standalone) Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 41,898 61,802 76,212 89,659 Spreads Analysis (%) Interest Expense 20,922 36,677 45,039 52,648 Avg. Yield-Earning Assets 10.4 11.4 11.2 10.9 Net Interest Income 20,976 25,125 31,172 37,010 Avg. Yield on loans 12.8 14.2 13.5 13.0 Change (%) 12.9 19.8 24.1 18.7 Avg. Yield on Investments 6.5 6.8 7.4 7.4 Non Interest Income 7,805 9,773 11,040 13,209 Avg. Cost-Int. Bear. Liab. 5.9 7.6 7.3 6.9 Net Income 28,781 34,898 42,213 50,220 Avg. Cost of Deposits 5.6 7.4 7.1 6.6 Change (%) 15.8 21.3 21.0 19.0 Interest Spread 4.5 3.8 4.0 4.0 Operating Expenses 15,533 18,348 22,533 26,333 Net Interest Margin 5.2 4.6 4.6 4.5 Pre Provision Profits 13,248 16,550 19,680 23,886 Change (%) 2.1 24.9 18.9 21.4 Profitability Ratios (%) Provisions (excl tax) 1,371 551 2,121 4,174 Consolidated ROE 16.6 15.4 14.5 14.2 PBT 11,877 15,999 17,559 19,712 Standalone Core RoE 15.4 15.4 14.6 14.3 Tax 3,695 5,149 5,619 6,308 Standalone RoA 1.9 1.9 1.6 1.5 Tax Rate (%) 31.1 32.2 32.0 32.0 Int. Expense/Int.Income 49.9 59.3 59.1 58.7 Standalone PAT 8,182 10,850 11,940 13,404 Non Int. Inc./Net Income 27.1 28.0 26.2 26.3 Change (%) 45.8 32.6 10.0 12.3 Consolidated PAT 15,667 18,322 20,165 22,642 Asset-Liability Profile (%) Change (%) 19.9 16.9 10.1 12.3 Loans/Deposit Ratio 100.2 101.4 97.4 96.6 Equity Dividend (Incl tax) 462 517 590 662 Loans/(Dep.+Borrowings) 71.6 70.9 69.3 69.3 Core PPP (Standlone)* 11,083 14,445 17,180 20,936 CASA Ratio 30.0 32.2 31.5 32.5 Change (%) 6.8 30.3 18.9 21.9 Investment/Deposit Ratio 58.5 56.0 52.9 51.6 *Core PPP is (NII+Fee income-Opex) Invest/(Dep.+Borrowings) 41.8 39.1 37.6 37.0 Balance Sheet (Standalone) (INR Million) CAR 19.9 17.5 17.1 16.2 Tier 1 18.0 15.7 15.3 14.5 Y/E March 2011 2012 2013E 2014E Equity Share Capital 3,684 3,703 3,703 3,703 Valuation Reserves & Surplus 64,280 75,756 87,106 99,848 Book Value (INR) 92.2 107.3 122.6 139.8 Net Worth 67,965 79,459 90,809 103,552 BV Growth (%) 43.2 16.3 14.3 14.0 Deposits 292,610 385,365 489,414 601,979 AP/BV (x) 4.4 3.7 3.2 Change (%) 22.5 31.7 27.0 23.0 Consol BV (INR) 148.8 174.2 200.6 230.3 of which CASA Dep 87,905 124,024 154,102 195,524 BV Growth (%) 30.9 17.1 15.2 14.8 Change (%) 17.8 41.1 24.3 26.9 Price-Consol BV (x) 3.4 2.9 2.6 Borrowings 117,239 165,955 198,695 237,683 Adjusted BV (INR)* 86.5 100.9 114.2 130.2 Other Liabilities & Prov. 30,693 25,885 30,985 37,113 AP/ABV (x) 4.6 4.0 3.4 Total Liabilities 508,507 656,665 809,903 980,326 Adjusted Consol BV 147.4 172.1 196.4 224.7 Current Assets 24,710 26,346 45,504 54,406 Price-Consol ABV (x) 3.4 3.0 2.6 Investments 171,214 215,668 258,802 310,562 Standalone EPS (Rs) 10.5 14.2 15.5 17.4 Change (%) 36.8 26.0 20.0 20.0 EPS Growth (%) 36.4 35.3 9.7 12.0 Loans 293,293 390,792 476,767 581,655 Price-Earnings (x) 33.1 29.5 25.3 Change (%) 41.2 33.2 22.0 22.0 Consol EPS (INR) 21.3 24.7 27.2 30.6 Fixed Assets 4,256 4,500 4,632 4,665 Con. EPS Growth (%) 13.3 16.3 10.1 12.3 Other Assets 15,033 19,359 24,199 29,039 Price-Concol EPS (x) 23.8 21.6 19.2 Total Assets 508,507 656,665 809,903 980,326 Dividend Per Share (INR) 0.5 0.6 0.7 0.8 Asset Quality (Standalone, Excl. acquired NPA) (%) Dividend Yield (%) 0.1 0.1 0.1 GNPA (INR m) 3,618 4,778 8,131 10,984 E: MOSL Estimates NNPA (INR m) 1,461 2,243 4,497 5,874 GNPA Ratio 1.22 1.21 1.69 1.87 NNPA Ratio 0.50 0.57 0.94 1.01 PCR (Incl acquired NPA) 65.0 61.4 50.0 50.0 PCR (Excl acquired NPA) 59.6 53.0 44.7 46.5
August 27 - 31, 2012 101 8th Annual Global Investor Conference
Larsen & Toubro
Company description Key challenges L&T is India's largest engineering and construction Order intake is driven by shortgestation projects company. It is a conglomerate with interests in particularly from the infrastructure segment. Also, technology, engineering, construction, manufacturing key investments in manufacturing JVs and BOT and financial services. The company is also involved in projects are likely to be a drag on profits in the near various developmental projects on BOT basis in roads, term, impacting RoEs. ports, rail and power sectors. Exports contribute around Unfavorable political climate, logjams relating to ~18% of order intake. Large manufacturing capacities in clearances for projects, etc, are impediments for segments like power BTG, forging, ship-building, etc order intake growth, impacting earnings growth. are being commissioned. Key news flows / triggers to watch Key investment positives L&T has signed shareholders agreement with L&T has demonstrated strong adaptability, given Mazagon Dock, India's biggest naval shipyard to exposure to various segments and geographies; and manufacture defense submarines. has thus been able to weather the challenging L&T is targeting to monetize some its mature assets macro environment much better than peers. Order to unlock value. The company is also looking for backlog stands at INR1,531b implying BTB ratio of external funding in its developmental project 2.8x TTM. We believe L&T has carved out a portfolios. Attempts to correct the capital structure differentiated positioning given strong execution will act as a strong re-rating trigger. skills, diversified portfolio and balance sheet; and will benefit from likely pick-up in demand. 1QFY13 highlights; guidance for FY13, FY14 1QFY13 operating performance was in-line with Revenue growth is robust, with management estimates. Revenue grew 27% YoY in 1QFY13 to guiding for FY13 growth at 15-20%, on back of 21% INR120b while adj EBITDA margin declined 152bp growth in FY12. YoY. Adjusted PAT (excl dividend from subsidiaries) Margins have remained stable, given the strong risk grew just 2.9% YoY to INR7.1b. mitigation measures being practised. Order intake Working capital deteriorated at 15.3% of revenues is also expected to be steady with management v/s 11.9% YoY, due to increased support to vendors. guidance of 15-20% growth, despite a challenging Management has maintained its order intake and macro environment. revenue growth guidance of 15-20% YoY.
Stock info Quarterly Performance (INR Million) Bloomberg LT IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 613 Operating Income 94,826 112,452 139,836 184,609 119,554 531,705 618,981 CMP (INR) 1,453 Change (%) 21.1 21.4 23.5 21.0 26.1 21.1 16.4 Mcap (USD b) 16.0 EBITDA 11,265 11,741 13,641 25,608 10,869 62,826 71,418 52-Wk Range (INR) 1,720 / 971 Change (%) 12.1 16.7 10.2 9.3 (3.5) 11.4 13.7 1, 6, 12 Rel Perf (%) 2 / 4 / -17 EBITDA Margin (%) 11.9 10.4 9.8 13.9 9.1 11.8 11.5 Reported PAT 7,461 7,984 9,915 19,204 8,635 44,565 47,667 Adjusted PAT 7,461 7,984 11,275 18,654 10,023 44,825 49,180 Shareholding pattern (%) Change (%) 12.0 15.0 40.0 22.1 34.3 23.7 9.7 Jun-11 Mar-11 Jun-10 PAT Margin (%) 7.9 7.1 8.1 10.1 8.4 8.4 7.9 Promoter 0.0 0.0 0.0 Key Operating Matrics Dom. Inst. 38.4 36.6 36.6 Order intake (INR b) 161.9 161.0 171.3 211.6 196.0 705.7 740.7 Foreign 18.2 19.7 21.3 Order intake gr. (%) 3.6 (21.3) 28.2 (30.2) 21.1 (11.5) 4.9 Others 43.4 43.7 42.1 WCap.(% of sales) 10.3 12.6 13.0 11.8 15.3 12.0 15.9 E: MOSL Estimates
102 August 27 - 31, 2012 8th Annual Global Investor Conference
Larsen & Toubro: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Total Revenues 442,961 537,378 625,585 709,180 Basic (INR) Growth Rate (%) 18.6 21.3 16.4 13.4 Adjusted EPS 59.5 73.2 80.3 87.6 Excise Duty 3,902 5,673 6,604 7,486 Growth (%) 12.6 23.0 9.6 9.2 Net Revenues 439,059 531,705 618,981 701,694 Con. EPS (Fully Diluted) 69.7 78.0 84.9 92.3 Growth Rate (%) 18.6 21.1 16.4 13.4 Growth (%) 13.0 11.9 8.8 8.7 Manufacturing Expenses 334,681 410,202 481,510 545,530 Book Value 358.8 412.1 466.8 529.1 Staff Cost 28,301 36,635 41,031 45,134 Dividend Per Share 14.5 16.5 20.1 21.9 S G &A Expenses 19,778 22,230 25,023 28,367 Div. Payout (Incl. Div Tax ) % 28.4 25.3 29.5 28.9 EBITDA 56,299 62,639 71,418 82,663 Valuation (x) Change (%) 18.8 11.3 14.0 15.7 P/E (Standalone) 29.9 19.7 18.1 16.6 EBITDA Margin (%) 12.8 12.2 11.5 11.8 P/E (Consolidated) 25.6 18.5 17.1 15.7 Depreciation 5,905 6,817 8,079 9,288 EV/EBITDA 18.9 14.3 13.1 11.5 EBIT 50,394 55,822 63,339 73,375 EV/ Sales 2.4 1.7 1.5 1.3 Net Interest 6,193 6,661 9,200 9,800 Price / Book Value 5.0 3.5 3.1 2.7 Other Income 9,106 13,078 13,956 12,500 Dividend Yield 0.8 1.1 1.4 1.5 Non-recurring Other Income 2,369 305 0 0 Add: Trf to Rev. Res. 11 10 10 10 Return Ratio (%) Profit before Tax 55,686 62,554 68,104 76,085 RoE 16.6 17.8 17.2 16.6 Tax 19,436 18,538 20,091 22,445 RoCE 13.9 14.1 13.9 13.6 Effective Tax Rate (%) 34.9 29.6 29.5 29.5 Reported Profit 39,580 44,566 48,014 53,640 Turnover Ratios EO Adjustments 3,329 550 -383 0 Debtors (Days) 102.4 127.2 137.2 137.2 Adjusted Profit 36,250 44,016 48,397 53,640 Inventory (Days) 13.0 12.1 10.8 10.8 Cons. Profit (Adj) 42,416 47,730 51,950 56,483 Asset Turnover (x) 1.5 1.5 1.6 1.6 Growth (%) 14.3 12.5 8.8 8.7 Leverage Ratio Current Ratio (x) 1.3 1.3 1.5 1.5 Balance Sheet (INR Million) D/E (x) -0.1 0.0 0.2 0.2 Y/E March 2011 2012 2013E 2014E Equity Capital 1,218 1,224 1,224 1,224 Cash Flow Statement (INR Million) Reserves and Surplus 217,245 251,005 284,454 322,612 Y/E March 2011 2012 2013E 2014E Net Worth 218,463 252,229 285,678 323,836 PBT before EO Items 55,686 62,554 68,104 76,085 Debt 71,611 98,958 115,000 120,000 Add : Depreciation 6,003 7,005 8,079 9,288 Deferred Tax Liability 2,635 1,330 1,330 1,330 Interest 6,193 6,661 9,200 9,800 Capital Employed 292,708 352,517 402,008 445,166 Less : Direct Taxes Paid 19,436 18,538 20,091 22,445 (Inc)/Dec in WC -9,269 -34,431 -34,749 -21,612 Gross Fixed Assets 89,465 105,544 128,631 148,631 CF from Operations 39,177 23,250 30,544 51,116 Less: Depreciation 23,025 29,495 37,574 46,863 Add: Capital WIP 7,713 7,587 4,500 4,500 (Inc)/Dec in FA -16,429 -16,487 -20,000 -20,000 Net Fixed Assets 74,153 83,636 95,557 106,268 (Pur)/Sale of Investments 9,972 4,108 39,028 10,000 Investments 146,848 158,719 139,307 153,174 Investment in subs -19,766 -15,979 -19,616 -23,866 Inventory 15,772 17,766 18,569 21,051 Advances to subs -9,598 -4,703 -3,527 -2,569 Sundry Debtors 124,276 187,298 235,213 266,644 CF from Investments -35,822 -33,061 -4,115 -36,436 Cash & Bank 17,296 17,781 38,799 36,633 Loans & Advances 82,253 91,280 103,976 113,183 (Inc)/Dec in Net Worth 11,257 -429 -383 0 Other Current Assets 110,501 120,448 137,447 155,644 (Inc)/Dec in Debt 3,603 27,347 16,042 5,000 Current Assets 350,097 434,574 534,005 593,155 Less : Interest Paid 6,193 6,661 9,200 9,800 Current Liabilities 278,392 324,411 366,861 407,431 Dividend Paid 8,973 9,962 11,119 14,181 Net Current Assets 71,705 110,163 167,144 185,724 CF from Fin. Activity -306 10,295 -4,660 -18,981 Capital Deployed 292,706 352,518 402,008 445,166 Inc/Dec of Cash 3,048 483 21,769 -4,301 Add: Beginning Balance 14,319 17,296 17,781 38,799 Closing Balance 17,367 17,779 39,550 34,498
August 27 - 31, 2012 103 8th Annual Global Investor Conference
LIC Housing Finance
Company description Key challenges LIC Housing Finance (LICHF) is India's second largest Intensifying competition from banks / NBFCs to grab housing finance company. It offers individual housing market share in this secularly growing industry could loans and loans to developers as project finance. LICHF lead to rate war. operates through a network of 190 marketing offices Inability to grow the developer loan portfolio on and a large number of DSAs and home loan agents. It expected lines may not allow spreads to expand. also has a representative office in Dubai and Kuwait. Its AUM stands at INR656b as on June 2012. Key news flows / triggers to watch SBI has reduced interest rates on home loans Key investment positives offering the lowest rate on the street. If some of Despite moderation in economic growth, structural the other major private / PSU banks follow suit, it growth drivers for the Indian housing finance may intensify competition in this space. industry remain intact. This, coupled with LICHF's The NHB has waived off pre-payment penalty on strong foothold in tier II and tier III cities, would floating rate loans converted from teaser rate loans. help it achieve healthy growth going forward. We This may lead to increase in the repayment rates, model in ~24% loan CAGR over FY12-14. which will be monitored over next few quarters. LICHF had slowed down growth in its developer loan portfolio given uncertain macro environment. As a 1QFY13 highlights; guidance for FY13, FY14 result, the developer loan portfolio declined from LICHF's 1QFY13 performance was much below 11% of loans in FY10 to ~5% in FY12. Going forward, expectations driven by disappointment on margins LICHF intends to selectively grow this portfolio, front and higher provisioning expenses. which would help improve its spreads. Margins contracted 26bp sequentially on the back Spreads have bottomed out and should improve of sharp 36bp QoQ increase in cost of funds, while from current levels led by (1) decline in cost of the yield on loans remained flat. funds, (2) asset re-pricing benefits on the teaser For FY13, management has guided for INR220b (6% rate loans (partially in FY13 and partially in FY14), YoY growth) disbursements in the individual and (3) increase in share of developer loans. segment and INR20b in the developer segment. Asset quality is expected to remain healthy on the Management is targeting margins of 2.5-2.7% by back of the secured nature of loans and historically March 2013 (v/s 2.18% in 1QFY13) and spread of 1.6- lower default rates in the mortgages business. 1.7% (v/s 1.1% in 1QFY13).
Stock info Quarterly Performance (INR Million) Bloomberg LICHF IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 505 Net Interest Income 3,610 3,342 3,258 3,708 3,505 13,916 17,252 CMP (INR) 250 YoY Gr. (%) 22.6 9.5 -7.5 -11.8 -2.9 1.4 24.0 Mcap (USD b) 2.3 Operating Profit 3,789 3,354 3,262 3,464 3,479 13,870 16,963 52-Wk Range (INR) 290 / 196 YoY Gr. (%) 27.0 5.1 -33.3 -22.7 -8.2 -10.8 22.3 1, 6, 12 Rel Perf (%) -9 / -4 / 15 Provisions 334 2,047 -797 -24 436 1,561 1,103 PBT 3,454 1,307 4,059 3,488 3,043 12,309 15,860 Tax 889 323 1,003 952 766 3,167 4,362 Shareholding pattern (%) Profit after Tax 2,565 984 3,056 2,536 2,277 9,142 11,499 Jun-12 Mar-12 Jun-11 YoY Gr. (%) 21.0 -58.0 43.1 -19.4 -11.2 -6.2 25.8 Promoter 40.3 40.3 36.6 Key Operating Metrics Dom. Inst. 9.1 9.4 7.8 Loan Growth (%) 32.1 29.3 26.6 23.5 24.1 23.5 23.9 Foreign 37.5 37.1 40.4 NIM (%; Calc.) 2.78 2.45 2.27 2.44 2.18 2.44 2.44 Others 13.1 13.2 15.3 GNPA (%) 0.84 0.64 0.63 0.42 0.71 0.42 0.46 E: MOSL Estimates
104 August 27 - 31, 2012 8th Annual Global Investor Conference
LIC Housing Finance: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 44,697 59,827 74,315 90,512 Spreads Analysis (%) Interest Expense 30,977 45,911 57,063 68,048 Avg. Yield on loans 10.0 10.5 10.5 10.3 Net Interest Income 13,719 13,916 17,252 22,464 Avg. Yield on Earning Assets 9.8 10.3 10.4 10.2 Change (%) 54.7 1.4 24.0 30.2 Avg. Cost-Int. Bear. Liab. 7.8 9.1 9.0 8.5 Fee Income 1,501 1,322 1,486 1,870 Int. Spread on housing loans 2.3 1.4 1.5 1.8 Income from Investments 603 804 804 904 NIM on housing loans 3.1 2.4 2.4 2.6 Other Income 1,886 198 218 243 Net Income 17,710 16,240 19,760 25,481 Profitability Ratios (%) Change (%) 65.0 -8.3 21.7 28.9 Adj RoAE 27.2 20.3 18.8 21.3 Operating Expenses 2,162 2,371 2,798 3,351 Adj RoAA 2.4 1.8 1.7 1.8 Operating Income 15,548 13,870 16,963 22,130 Int. Expended/Int.Earned 69.3 76.7 76.8 75.2 Change (%) 76.3 -10.8 22.3 30.5 Other Inc./Net Income 10.7 1.2 1.1 1.0 Provisions/write offs 2,609 1,561 1,103 -618 PBT 12,939 12,309 15,860 22,748 Efficiency Ratios (%) Tax 3,197 3,167 4,362 6,256 Fees/Operating income 3.2 2.1 1.9 2.0 Tax Rate (%) 24.7 25.7 27.5 27.5 Op. Exps./Net Income 12.2 14.6 14.2 13.1 PAT 9,743 9,142 11,499 16,492 Empl. Cost/Op. Exps. 31.5 30.6 32.4 32.4 Change (%) 47.3 -6.2 25.8 43.4 Adjusted PAT 10,285 10,011 11,499 15,332 Valuation Change (%) 55.5 -2.7 14.9 33.3 Book Value (INR) 87.8 112.5 130.0 155.0 Proposed Dividend 1,932 2,112 2,691 3,859 Growth (%) 23.1 28.2 15.5 19.2 Price-BV (x) 2.2 1.9 1.6 Balance Sheet (INR Million) Adjusted BV (INR) 87.5 112.1 129.3 154.2 Y/E March 2011 2012 2013E 2014E Price-ABV (x) 2.2 1.9 1.6 Capital 950 1,010 1,010 1,010 EPS (INR) 20.5 18.1 22.8 32.7 Reserves & Surplus 40,741 55,812 64,620 77,253 Growth (%) 47.3 -11.7 25.8 43.4 Net Worth 41,691 56,822 65,630 78,263 Price-Earnings (x) 13.8 11.0 7.7 Borrowings 451,628 560,873 707,193 893,936 Adj. EPS (INR) 21.7 19.8 22.8 30.4 Change (%) 29.9 24.2 26.1 26.4 Growth (%) 55.5 -8.4 14.9 33.3 Total Liabilities 493,319 617,695 772,823 972,199 Price-Earnings (x) 12.6 11.0 8.2 Investments 14,032 13,750 15,125 16,638 Dividend Per Share 3.5 3.6 4.6 6.5 Change (%) 1.0 -2.0 10.0 10.0 Dividend Yield (%) 1.4 1.8 2.6 Loans 510,898 630,802 781,429 976,980 E: MOSL Estimates Change (%) 34.2 23.5 23.9 25.0 Net Fixed Assets 339 623 739 795 Net Current Assets -31,949 -27,481 -24,470 -22,213 Total Assets 493,319 617,695 772,823 972,199 E: MOSL Estimates
August 27 - 31, 2012 105 8th Annual Global Investor Conference
Lupin
Company description Key challenges Lupin (LPC) has successfully transitioned from a The proposed new "Domestic Pharma Policy", may domestic anti-TB company to a global generic company adversely impact earnings. with presence across therapeutic segments. US (36% of Potential generic competition for Suprax, a key sales), India (28% of sales), Japan (15% of sales) and profit contributor for LPC as of now. emerging markets (8% of sales) are its key markets. Key news flows / triggers to watch Key investment positives Ramp-up in approvals and subsequent market share Significant scale-up & internationalization of gain in the OC segment in the US. operations without dilution of return ratios has been Sustained launch of new products in US & India – LPC's key achievement over the last five years. We this is imperative to drive future topline growth. expect high return ratios to sustain, given the Government's progress on the implementation of company's efficient capital allocation strategy. the new Pharma Policy. LPC has a strong launch pipeline for the US with 120 ANDAs pending US FDA approval. It targets to 1QFY13 highlights commercialize these over the next 3-4 years. Performance was in-line with core topline growth It has filed for niche, high-margins opportunities of 33%, core EBITDA growth of 21% and flat Adj PAT like oral contraceptives (OC), ophthalmology which growth. Topline growth was led US and India will gradually start contributing meaningful formulations business and was partly boosted by revenues over the next 2 years. favorable currency. Increased traction in India formulations and Although Japan revenues grew 100%, adjusted for emerging markets should augur well. Irom acquisition and currency benefit, core organic Only Indian company to have a significant presence growth was ~11%. in Japan (through past acquisitions) which positions Core EBITDA margin declined 150bp YoY v/s our it rightly for exploiting the Japanese generic estimate of 40bp decline due to higher than opportunity. expected staff cost and other expenses. Aspires to become a USD3b company by FY15 Adj PAT growth was flat despite 21% EBITDA growth implying a topline CAGR of 25% over FY12-15. due to higher tax rate at 30%.
Stock info Quarterly Performance (INR Million) Bloomberg LPC IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 447 Operating Income 15,432 16,448 17,917 18,832 22,192 69,597 88,090 CMP (INR) 571 Oper. Inc. (ex one-offs)15,432 16,448 17,717 17,012 20,491 67,577 86,389 Mcap (USD b) 4.6 Change (%) 17.6 17.1 20.8 11.7 32.8 18.4 27.8 52-Wk Range (INR) 604 / 410 EBITDA 2,698 2,764 3,783 3,321 4,230 13,215 16,906 1, 6, 12 Rel Perf (%) -3 / 20 / 23 EBITDA (ex one-offs) 2,698 2,764 3,653 2,411 3,270 12,175 15,946 Change (%) 2.9 2.5 34.7 -8.2 21.2 14.2 31.0 EBITDA Margin (%) 17.5 16.8 20.6 14.2 16.0 18.0 18.5 Reported PAT 2,140 2,718 2,406 1,283 2,850 10,295 11,681 Adj. PAT (ex one-offs) 2,101 2,010 2,498 499 2,098 8,677 10,649 Shareholding pattern (%) Change (%) 7.0 -6.5 11.5 -77.6 -0.1 1.1 22.7 Jun-12 Mar-12 Jun-11 PAT Margin (%) 13.6 12.2 14.1 2.9 10.2 12.8 12.3 Promoter 46.9 46.9 47.0 Key Operating Metrics - Revenue Break-up Dome. Inst. 16.1 16.5 19.1 US 4,931 5,520 6,188 8,664 8,024 25,303 31,802 Foreign 28.2 27.7 23.9 Europe 415 461 644 455 473 1,975 2,410 Others 8.9 8.9 10.1 India 4,969 5,120 5,198 4,192 6,212 19,479 23,570 Japan 1,666 1,780 2,468 2,693 3,329 8,607 12,725 RoW 1,348 1,591 1,439 1,873 1,837 6,251 9,064 APIs 2,102 1,976 1,981 2,432 2,317 8,491 9,051
106 August 27 - 31, 2012 8th Annual Global Investor Conference
Lupin: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 57,068 69,597 88,090 101,091 Basic (INR) Change (%) 20.4 22.0 26.6 14.8 EPS (Fully Diluted) 19.3 19.4 23.8 31.0 EBITDA 10,659 13,215 16,906 20,382 Cash EPS (Fully Diluted) 23.2 24.5 30.1 38.2 Margin (%) 18.7 19.0 19.2 20.2 BV/Share 73.5 89.8 107.8 129.7 Depreciation 1,755 2,275 2,791 3,211 DPS 3.2 4.9 6.4 7.7 EBIT 8,903 10,940 14,115 17,170 Payout (%) 18.9 24.7 28.7 28.8 Int. and Finance Charges 325 355 451 451 Valuation (x) Other Income - Rec. 1,341 1,376 1,743 1,767 P/E (Fully Diluted) 29.6 29.4 23.9 18.4 PBT after EO item 9,920 11,961 15,407 18,486 Cash P/E (Fully Diluted) 24.6 23.3 19.0 15.0 Tax 1,169 3,086 3,852 4,437 P/BV 7.8 6.4 5.3 4.4 Tax Rate (%) 11.8 25.8 25.0 24.0 EV/Sales 4.6 3.8 3.0 2.6 Reported PAT 8,750 10,295 11,555 14,050 EV/EBITDA 24.6 20.2 15.7 13.0 PAT Adj for EO items 8,750 8,875 10,849 14,050 Dividend Yield (%) 0.6 0.9 1.1 1.4 Less: Minority Interest 168 199 200 220 Adj Net Profit 8,582 8,676 10,649 13,830 Return Ratios (%) Consolidated Balance Sheet (INR Million) RoE 29.3 23.8 24.1 26.1 Y/E March 2011 2012 2013E 2014E RoCE 25.1 24.6 26.6 27.6 Equity Share Capital 892 893 893 893 Working Capital Ratios Fully Diluted Equity Capital 889 893 893 893 Fixed Asset Turnover (x) 2.3 2.2 2.2 2.2 Other Reserves 31,918 39,236 47,269 57,054 Debtor (Days) 87 105 105 102 Total Reserves 31,918 39,236 47,269 57,054 Inventory (Days) 77 91 80 80 Net Worth 32,811 40,129 48,163 57,947 Wkg. Capital Turnover (Days) 131 136 124 133 Minority Interest 515 723 723 723 Deferred liabilities 1,411 1,442 1,442 1,442 Leverage Ratio Total Loans 11,624 15,542 15,542 15,542 Debt/Equity (x) 0.4 0.4 0.3 0.3 Capital Employed 46,361 57,836 65,869 75,654 Cash Flow Statement (INR Million) Net Fixed Assets 17,313 22,457 25,665 28,454 Y/E March 2011 2012 2013E 2014E Capital WIP 5,312 4,437 5,312 5,312 Oper. Profit/(Loss) before Tax10,659 13,215 16,906 20,382 Investments 32 28 28 28 Interest/Dividends Recd. 1,341 1,376 1,743 1,767 Goodwill & Intangibles 3,255 5,040 5,040 5,040 Direct Taxes Paid -1,193 -3,055 -3,852 -4,437 Curr. Assets 34,967 46,911 53,243 61,905 (Inc)/Dec in WC -2,401 -5,601 -3,181 -5,484 Inventory 12,000 17,327 19,380 22,240 CF from Op. incl EO Exp. 8,405 5,935 11,616 12,228 Account Receivables 12,558 17,318 20,261 23,251 Cash and Bank Balance 4,201 4,025 4,794 6,305 (inc)/dec in FA -4,996 -6,909 -6,875 -6,000 Others 6,208 8,241 8,809 10,109 (Pur)/Sale of Investments 233 4 0 0 Curr. Liability & Prov. 14,518 21,037 23,419 25,085 CF from Investments -4,763 -6,905 -6,875 -6,000 Account Payables 11,800 17,750 19,380 20,218 Change in Net Worth 300 -232 -200 -220 Provisions 2,718 3,287 4,040 4,867 Inc/(Dec) in Debt 226 3,917 0 0 Net Current Assets 20,449 25,874 29,824 36,820 Interest Paid -325 -355 -451 -451 Appl. of Funds 46,361 57,836 65,869 75,654 Dividend Paid -1,658 -2,538 -3,321 -4,045 Revenue model (INR M) CF from Fin. Activity -1,457 793 -3,972 -4,716 Y/E March 2011 2012 2013E 2014E Inc/Dec of Cash 2,186 -177 769 1,512 Formulations 48,485 61,615 79,570 92,228 Add: Beginning Balance 2,015 4,201 4,025 4,794 Regulated Mkts 28,229 35,885 46,937 52,615 Closing Balance 4,201 4,024 4,794 6,305 Emerging Mkts 4,393 6,251 9,064 11,330 India 15,863 19,479 23,570 28,284 APIs & Others 8,937 8,402 9,051 9,472 Gross Sales 57,422 70,017 88,622 101,701
August 27 - 31, 2012 107 8th Annual Global Investor Conference
Mahindra Finance
Company description Key challenges Mahindra Finance (MMFS) is one of India's leading non- Below-normal monsoon could adversely impact banking finance companies providing personalized growth and asset quality going forward. finance for utility vehicles, tractors, cars, commercial Proposed regulatory changes for NBFCs relating to vehicles, construction equipment, and refinance asset classification and provisioning norms to be focusing on the rural and semi-urban sector. brought at par with banks could lead to lower return ratios. As on June 2012, MMFS operated through a widespread network of 615 branches and had AUM of INR217b. Key news flows / triggers to watch Trajectory of monsoon will be watched closely given Key investment positives its correlation with MMFS' growth and asset quality. MMFS has achieved strong asset growth in past five RBI's final guidelines for NBFCs based on the years (24% CAGR during FY07-12) on the back of: recommendations by Usha Thorat Committee will (1) buoyant rural demand driven by strong rural cash determine the impact of regulatory changes on flows, and (2) its multi-product strategy which has MMFS' return ratios going forward. protected it from cyclical shocks. We expect AUM CAGR of ~25% over FY12-14. 1QFY13 highlights; guidance for FY13, FY14 MMFS delivered stellar asset quality performance MMFS' 1QFY13 performance was better than in FY12, with GNPAs at levels lowest in a decade. As expected led by (1) strong AUM growth (+5% QoQ; on March 2012, GNPAs stood at 3.0% and NNPAs at 38% YoY), (2) better than expected margin 0.7%. Provision cover remained healthy at 78%. performance, and (3) tight control over opex. Although poor monsoon remains a key risk to MMFS' Asset quality remained healthy and improved on a asset quality, diversified product mix and customer YoY basis. In percentage terms, GNPAs declined to profile should help partially mitigate the same. 3.8% from 4.6% in 1QFY12. Given its lower dependence on asset securitization For FY13, management has maintained its 25-30% for resource mobilization (less than 15% as on June disbursements growth target. 2012), MMFS remains relatively insulated from the If the 90-day asset classification norms are made current regulatory changes pertaining to applicable to AFCs, then GNPAs may increase by securitization and priority sector lending. INR2.5-3b.
Stock info Quarterly Performance (INR Million) Bloomberg MMFS IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 104 Net Oper. Income 3,443 4,061 4,264 5,166 4,916 16,743 22,688 CMP (INR) 783 YoY Gr. (%) 27.6 24.1 22.3 32.4 42.8 27.1 35.5 Mcap (USD b) 1.5 Operating Profit 2,074 2,539 2,797 3,563 3,248 10,823 15,148 52-Wk Range (INR) 805 / 590 YoY Gr. (%) 25.5 22.3 22.8 45.0 56.6 29.0 40.0 1, 6, 12 Rel Perf (%) 14 / 12 / 12 Provisions 561 523 494 142 854 1,570 2,982 PBT 1,513 2,016 2,303 3,421 2,395 9,254 12,167 Tax 491 661 756 1,144 784 3,051 4,015 Shareholding pattern (%) Profit after Tax 1,022 1,355 1,547 2,277 1,610 6,202 8,152 Jun-12 Mar-12 Jun-11 YoY Gr. (%) 37.7 16.3 33.5 45.4 57.6 33.9 31.4 Promoter 57.2 57.3 57.4 Key Operating Metrics Dom. Inst. 5.4 5.0 3.6 AUM Growth (%) 38.9 40.7 40.1 36.2 37.9 36.2 25.6 Foreign 32.7 34.1 34.7 Gross Spread (%) 10.0 10.2 10.2 10.7 9.5 10.7 NA Others 4.7 3.7 4.4 GNPA (%) 4.6 4.0 4.1 3.0 3.8 3.0 3.2 E: MOSL Estimates
108 August 27 - 31, 2012 8th Annual Global Investor Conference
Mahindra Finance: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 18,545 26,500 34,141 40,534 Spreads Analysis (%) Interest Expended 6,602 11,203 14,523 17,501 Yield on Portfolio 17.7 17.7 17.8 17.3 Net Interest Income 11,943 15,297 19,618 23,033 Cost of Borrowings 8.2 9.5 9.3 9.0 Change (%) 32.2 28.1 28.3 17.4 Interest Spread 9.5 8.2 8.5 8.3 Income from Securitisation 906 925 2,697 4,005 Net Int. Margin (on AUMs) 10.8 9.7 10.0 9.8 Other Income 324 521 372 422 Net Income 13,173 16,743 22,688 27,460 Profitability Ratios (%) Change (%) 23.4 27.1 35.5 21.0 RoE 22.0 22.8 25.1 24.6 Operating Expenses 4,783 5,920 7,540 9,101 RoA (on balance sheet) 4.6 4.3 4.3 4.1 Operating Income 8,390 10,823 15,148 18,360 RoA on AUM 3.7 3.5 3.6 3.5 Change (%) 13.1 29.0 40.0 21.2 Average Leverage (x) 4.8 5.3 5.8 6.0 Provisions and W/Offs 1,365 1,570 2,982 3,994 Average leverage on AUM (x) 5.9 6.4 6.9 7.1 PBT 7,024 9,253 12,166 14,366 Tax 2,393 3,051 4,015 4,741 Efficiency Ratios (%) Tax Rate (%) 34.1 33.0 33.0 33.0 Int. Expended/Int.Earned 35.6 42.3 42.5 43.2 PAT 4,631 6,201 8,151 9,625 Op. Exps./Net Income 36.3 35.4 33.2 33.1 Change (%) 34.5 33.9 31.4 18.1 Empl. Cost/Op. Exps. 31.7 33.7 34.4 34.8 Proposed Dividend (InclTax) 1,213 1,682 2,146 2,534 Secur. Inc./Net Income 6.9 5.5 11.9 14.6
Balance Sheet (INR Million) Asset-Liability Profile (%) Y/E March 2011 2012 2013E 2014E Loans/Borrowings Ratio 126.8 124.2 120.5 120.5 Equity Share Capital 1,025 1,027 1,027 1,027 Net NPAs to Adv. 0.6 0.7 0.7 0.7 Reserves & Surplus 23,876 28,496 34,502 41,593 Net Worth 24,901 29,523 35,528 42,620 Valuation Borrowings 96,750 139,611 174,394 214,515 Book Value (INR) 242.8 287.4 345.9 414.9 Change (%) 49.8 44.3 24.9 23.0 BV Growth (%) 34.9 18.3 20.4 20.0 Total Liabilities 121,651 169,134 209,922 257,134 Price-BV (x) 2.7 2.3 1.9 Investments 6,746 5,025 5,527 6,080 Adjusted BV (INR) 238.1 279.7 336.0 402.9 Change (%) 212.4 -25.5 10.0 10.0 Price-ABV (x) 2.8 2.3 1.9 Loans and Advances 122,673 173,449 210,113 258,451 OPS (INR) 81.9 105.4 147.5 178.8 Change (%) 42.0 41.4 21.1 23.0 OPS Growth (%) 5.9 28.7 40.0 21.2 Net Fixed Assets 818 989 925 830 Price-OP (x) 7.4 5.3 4.4 Net Current Assets -8,586 -10,342 -6,644 -8,227 EPS (INR) 45.2 60.4 79.4 93.7 Total Assets 121,651 169,121 209,922 257,134 EPS Growth (%) 26.0 33.6 31.4 18.1 E: MOSL Estimates Price-Earnings (x) 12.9 9.8 8.3 Dividend 10.0 14.0 17.9 21.1 Dividend Yield (%) 1.8 2.3 2.7 E: MOSL Estimates
August 27 - 31, 2012 109 8th Annual Global Investor Conference
Mahindra & Mahindra
Company description Key challenges M&M is India's market leader in UV (52% share) and Any additional duty on diesel vehicles would tractors (41% share). It also has presence in 2-wheeler, adversely impact M&M as its entire UV portfolio is 3-wheeler and CV segments. In 2011, it acquired 70% diesel based. stake in Ssangyong (South Korea) to expand its presence Maintaining market share in increasingly in global SUV markets. competitive UVs segment, with new entrants like Maruti, Renault, Ford etc. Apart from core auto business, it has subsidiaries/ Successful integration and turnaround of Ssangyong. associates in various businesses like IT, NBFC, Auto ancillaries, hospitality, infrastructure etc. Key news flows / triggers to watch Tractor volume momentum due to weak monsoon. Key investment positives Additional duty on diesel vehicles. Competitive dynamics in both UVs and tractors Response to new launches in UV segment by remain favorable, led by limited competition and competition. consolidated nature of the industry. It plans to launch 6-7 new products in auto segment, 1QFY13 highlights; guidance for FY13, FY14 including a mini-SUV, sub 4m Verito, Rexton 1QFY13 realization was up 7.4% QoQ (22% YoY) at (Ssangyong), new MPV and new electric vehicle- INR507,173/unit) driven by a) mix improvement NXR in FY13. In Farm Equipment, it will be launching (led by XUV5OO), b) price increase and c) weak INR. one new tractor along with 3-4 refreshes. This Incl MVML, EBITDA margin declined 30bp YoY to coupled with the full benefit of 12 launches in FY12, 13.9% (+180bp QoQ); Auto segment PBIT margin would also help support volumes. improved 50bp QoQ (-70bp YoY) to 11.2%, whereas Expect margins to improve 20bp in FY13 (incl MVML) tractor business PBIT margin was stable QoQ at on account of better product mix within auto 15.7% (down 30bp YoY). PAT grew 26% YoY to INR7.8b segment led by ramp up of XUV5OO and operating (-3% QoQ). leverage due to ramp-up at Chakan plant. M&M lowered tractor industry's FY13 growth M&M's investments in its subsidiary and associate guidance to ~2% (v/s 5-6% earlier). However, it companies add substantially to its valuations. Value maintained guidance for UV volumes at 12-14%, unlocking in these companies would act as catalyst driven by XUV5OO, Bolero and new launches. for M&M's stock.
Stock info Quarterly Performance (INR Million) Bloomberg MM IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 614 Net Op. Income 67,537 72,931 82,156 91,188 88,785 313,811 379,655 CMP (INR) 767 Change (%) 33.9 33.0 31.5 33.2 21.0 Mcap (USD b) 8.4 EBITDA 9,658 10,022 10,903 11,029 12,350 41,613 51,064 52-Wk Range (INR) 875 / 622 EBITDA Margins (%)14.3 13.7 13.3 12.1 13.9 13.3 13.5 1, 6, 12 Rel Perf (%) 5 / 6 / 1 Change (%) 12.5 14.9 27.9 14.9 22.7 Adj PAT 6,183 7,917 6,770 8,030 7,785 28,888 33,089 Change (%) 11.3 19.4 25.9 12.4 14.5 Shareholding pattern (%) Key Operating Metrics Jun-12 Mar-12 Jun-11 Volumes (nos) 159,197 170,701 183,228 195,478 182,149 704,935 780,899 Promoter 25.5 25.3 24.9 Change (%) 25.1 29.2 23.3 21.8 14.4 24.2 10.8 Dom. Inst. 19.9 20.7 22.6 Realiz. (INR/car) 424,238 427,241 448,379 466,486 487,431 445,163 486,177 Foreign 37.1 35.9 33.8 Change (%) 8.6 9.2 14.9 7.3 9.2 Others 17.5 18.2 18.8 Auto - PBIT Mar. (%) 11.9 11.2 10.1 10.7 11.2 10.9 FES - PBIT Mar. (%) 16.0 15.3 15.6 15.7 15.7 15.7 E: MOSL Estimates
110 August 27 - 31, 2012 8th Annual Global Investor Conference
Mahindra & Mahindra: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Total Income 234,603 318,535 396,738 446,643 Basic (INR) Change (%) 26.2 35.8 24.6 12.6 Fully diluted EPS 43 46.7 51.8 54 EBITDA 34,543 37,707 45,693 49,223 FD EPS (incl MVML) 43 48.3 55.3 61.2 Margins (%) 14.7 11.8 11.5 11 Consolidated EPS 48 51.2 62.7 82.2 Margins (%, incl MVML) 15.3 13.3 13.5 13.5 Cash EPS 50.9 57.2 65 69.8 Depreciation 4,139 5,761 7,259 8,774 Book Value per Share 175.6 206.4 245.3 284.2 Int. & Finance Charges 725 1,628 2,063 2,063 DPS 11.5 12.5 14 16 Other Income 4,342 4,658 5,280 5,902 Payout (Incl. Div. Tax) % 30.2 29.9 31.1 34.1 Profit before Tax 35,196 36,059 41,651 44,288 Valuation (x) Eff. Tax Rate (%) 24.4 20.2 25.5 27 P/E 17.4 15.5 13.5 12.2 Adj. Profit after Tax 25,732 27,924 31,030 32,331 Consolidated P/E 15.6 14.6 11.9 9.1 Change (%) 27.3 8.5 11.1 4.2 Cash P/E 14.7 13.1 11.5 10.7 Adj. PAT (incl MVML) 25,732 28,888 33,089 36,608 EV/EBITDA 12.7 11.7 9.6 8.9 Balance Sheet (INR Million) EV/Sales 1.9 1.4 1.1 1 Y/E March 2011 2012 2013E 2014E Price to Book Value 4.3 3.6 3 2.6 Share Capital 2,936 2,945 2,945 2,945 Dividend Yield (%) 1.5 1.7 1.9 2.1 Net Worth 103,134 121,585 144,494 167,400 Profitability Ratios (%) Deferred tax 3,544 5,271 5,271 5,271 RoE 25 23 21.5 19.3 Loans 23,211 31,738 31,738 31,738 RoCE 26.8 23.1 24.1 22.7 Capital Employed 129,889 158,595 181,504 204,410 Turnover Ratios Net Fixed Assets 29,207 40,808 48,549 54,775 Debtors (Days) 20 23 24 24 Capital WIP 9,859 10,000 10,000 10,000 Inventory (Days) 27 27 27 27 Investments 89,256 103,105 105,950 110,950 Creditors (Days) 63 56 61 61 Curr.Assets, L & Adv. 67,076 85,082 123,381 146,682 Asset Turnover (x) 1.8 2 2.2 2.2 Inventory 16,942 23,584 29,348 33,039 Leverage Ratio Sundry Debtors 12,603 19,884 26,087 29,368 Debt/Equity (x) 0.2 0.3 0.2 0.2 Cash & Bank Bal. 6,146 11,884 27,510 39,464 Loans & Advances 27,061 24,077 34,782 39,158 Cash Flow Statement (INR Million) Current Liab. & Prov. 65,509 80,399 106,376 117,998 Y/E March 2011 2012 2013E 2014E Sundry Creditors 39,527 47,962 65,217 73,421 OP/(Loss) before Tax 31,311 31,946 38,434 40,449 Net Current Assets 1,566 4,683 17,005 28,685 Int./Dividends Received 2,370 4,658 5,280 5,902 Application of Funds 129,889 158,595 181,504 204,410 Depreciation & Amort. 4,139 5,761 7,259 8,774 Direct Taxes Paid -7,725 -5,543 -10,621 -11,958 Key assumptions/operating metrics (Inc)/Dec in Wkg. Capital 2,074 2,622 3,304 273 Y/E March 2011 2012 2013E 2014E CF from Oper.Activity 32,168 39,444 43,655 43,441 Volumes ('000 units) 568 705 781 859 Growth (%) 24.3 24.2 10.8 10 (Inc)/Dec in FA+CWIP -12,070 -17,503 -15,000 -15,000 Auto (% of total) 62 67 70 71 (Pur)/Sale of Invest. -27,627 -13,848 -2,846 -5,000 FES (% of total) 38 33 30 29 CF from Inv. Activity -39,697 -31,351 -17,846 -20,000 Realizations (INR/car) 413,232 451,865 508,052 520,109 Change in Net Worth 87 -1,723 1,528 1,602 Growth (%) 1.5 9.3 12.4 2.4 Inc/(Dec) in Debt 3,311 8,527 0 0 RM Cost (% of sales) 69.3 73.8 74.8 75.3 Interest Paid -1,016 -1,628 -2,063 -2,063 FCF (CFO-Capex) 20,098 21,941 28,655 28,441 Dividends Paid -6,223 -7,363 -8,247 -9,425 Net Debt 7,479 2,700 -15,772 -32,725 CF from Fin. Activity -3,842 -2,186 -8,782 -9,885 Subs contb. to Cons PAT(%) 10.5 5.8 11.9 25.6 Inc/(Dec) in Cash -11,371 5,907 17,028 13,555 Add: Beginning Balance 17,432 6,146 11,884 27,510 Closing Balance 6,061 12,054 28,912 41,066
August 27 - 31, 2012 111 8th Annual Global Investor Conference
Marico
Company description Key challenges Marico is market leader in branded Coconut Oil (~52% Inflation in copra has always impacted margins and market share) and has 23% share in other Hair Oils and profitability. niche position in Edible Oils. The company's Beauty and Improving growth trends in international markets Wellness focus is emphasized through Kaya skin clinics of Middle East and Egypt and managing margin and products. pressures in Bangladesh are key challenges.
Marico derives ~25% of its revenues from overseas Key news flows / triggers to watch operations with strong position in Bangladesh, and Trend in domestic volume growth and ability to presence in Middle East, South Africa, Egypt and South maintain and/or increase market share in value- Asia. added Hair Oils. Movement in copra prices (~40% of RM). Marico recently acquired Paras in India and entered Revenue growth and profitability of international personal products space. business and recently acquired Paras. Performance of new domestic launches (Saffola Key investment positives Oats, Saffola Arise, Parachute extensions) Domestic business is on a strong footing with the company posting a 16% domestic volume growth in 1QFY13 highlights; guidance for FY13, FY14 1QFY13 led by strong growth in the Hair Oil and Domestic volumes grew 16% – Parachute rigids up Edible Oil portfolio despite sharp price increases. 18%, hair oils 25% and Saffola 12%. The management expects sustainable volume Gross margin expanded 660bp to 49.4% due to lower growth of 9-10% growth in its largest brand, copra prices; however, 300bp increase in ad spends Parachute. curtailed EBITDA margin expansion to 260bp. Improvement in same clinic growth in Kaya, if Kaya reported 12% SSS growth; 1QFY13 losses at sustained, will enable faster break even. INR73m; product share increased to 25%. The growth momentum in Marico's key brands is Management guided sustainable volume growth of impressive; we like its aggressive strategy to grow 9-10% in coconut oils, 15-17% in Hair Oil and 15% in the value-added Hair Oils across geographies. Saffola.
Stock info Quarterly Performance (INR Million) MRCO IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 FY13E Equity Shares (m) 645 Operating Income 10,414 9,745 10,578 9,177 12,672 39,968 47,179 CMP (INR) 192 Change (%) 31.8 25.6 29.4 22.9 21.7 27.9 18.0 Mcap (USD b) 2.2 EBITDA 1,251 1,167 1,217 1,100 1,848 4,741 6,386 52-Wk Range (INR) 200 / 134 Change (%) 18.6 17.7 22.1 38.8 47.7 15.9 34.7 1, 6, 12 Rel Perf (%) 1 / 23 / 16 EBITDA Margin (%) 12.0 12.0 11.5 12.0 14.6 11.9 13.5 Reported PAT 850 783 841 697 1,238 3,189 4,361 Adjusted PAT 850 783 841 714 1,238 3,189 4,361 Shareholding pattern (%) Change (%) 15.3 9.4 21.0 -0.6 45.7 34.2 36.8 Jun-12 Mar-12 Jun-11 PAT Margin (%) 8.2 8.0 8.0 7.8 9.8 8.0 9.2 Promoter 59.8 62.7 62.9 Key Operating metrics Dom. Inst. 3.6 4.5 4.2 Parachute Rigid 10.0 10.0 13.0 11.0 18.0 Foreign 29.4 25.9 26.4 Saffola 15.0 11.0 15.0 3.3 12.0 Others 7.2 6.9 6.5 Hair Oils 32.0 26.0 20.0 17.5 25.0 E: MOSL Estimates
112 August 27 - 31, 2012 8th Annual Global Investor Conference
Marico: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 31,283 39,968 47,179 54,963 Basic (INR) Change (%) 17.6 27.8 18.0 16.5 EPS 4.7 5.2 6.8 8.5 Gross Profit 15,104 18,981 22,709 26,688 Cash EPS 5.8 6.1 8.1 10.0 Margin (%) 48.3 47.5 48.1 48.6 BV/Share 14.9 18.6 31.3 38.8 Operating Expenses 11,006 14,240 16,323 18,915 DPS 0.7 0.7 0.8 0.8 EBITDA 4,098 4,741 6,386 7,772 Payout % 13.9 13.5 11.1 9.5 Margin (%) 13.1 11.9 13.5 14.1 Valuation (x) Depreciation 708 725 858 975 P/E 36.4 27.9 22.4 Int. and Fin. Charges 393 424 461 406 Cash P/E 30.8 23.3 19.0 Other Income - Recurring 279 429 537 594 EV/Sales 3.0 2.6 2.2 Profit before Taxes 3,275 4,021 5,605 6,985 EV/EBITDA 25.1 19.5 15.4 Margin (%) 10.5 10.1 11.9 12.7 P/BV 12.7 10.2 6.0 4.9 Current Tax (excl MAT Ent) 850 782 1,121 1,397 Dividend Yield (%) 0.3 0.4 0.4 0.4 Tax Rate (%) 25.9 19.5 21.0 21.0 Minority Interest -50 -50 -66 -76 Return Ratios (%) Profit after Taxes 2,918 3,189 4,361 5,442 RoE 31.9 28.0 21.6 21.8 Change (%) 20.9 9.3 36.8 24.8 RoCE 29.7 30.5 29.7 30.6 Adjusted PAT 2,864 3,189 4,361 5,442 Working Capital Ratios Balance Sheet (INR Million) Debtor (Days) 22 17 17 17 Y/E March 2011 2012 2013E 2014E Asset Turnover (x) 1.8 2.1 1.8 1.8 Share Capital 614 614 644 644 Reserves 8,540 10,790 19,528 24,368 Leverage Ratio Net Worth 9,155 11,404 20,172 25,011 Debt/Equity (x) 0.8 0.7 0.3 0.2 Loans 7,718 7,657 6,000 5,500 Capital Employed 17,092 19,310 26,172 30,511 Cash Flow Statement (INR Million) Y/E March 2011 2012 2013E 2014E Gross Fixed Assets 6,177 7,177 8,477 9,777 OP/(loss) before Tax 4,098 4,741 6,386 7,772 Intangibles 1,438 1,342 8,647 8,552 Int./Div. Received 279 429 537 594 Less: Accum. Depn. -3,366 -4,085 -4,944 -5,919 Interest Paid -393 -424 -461 -406 Net Fixed Assets 4,250 5,019 12,181 12,410 Direct Taxes Paid -850 -782 -1,121 -1,397 Capital WIP 648 1,234 1,500 1,500 (Incr)/Decr in WC -1,178 659 -678 -122 Goodwill 3,976 3,955 3,976 3,976 CF from Operations 1,955 4,623 4,664 6,442 Investments 890 2,956 1,970 5,006 (Incr)/Decr in FA -1,842 -1,491 -8,871 -1,205 Curr. Assets, L&A 12,203 12,699 13,973 16,258 (Pur)/Sale of Investments -63 -2,067 987 -3,036 Inventory 6,011 7,202 8,256 9,069 CF from Invest. -1,905 -3,558 -7,884 -4,241 Account Receivables 1,880 1,816 2,170 2,528 Cash and Bank Balance 2,131 1,686 1,420 2,399 (Incr)/Decr in Debt 3,260 -61 -1,657 -500 Others 2,181 1,995 2,127 2,261 Dividend Paid -472 -503 -565 -603 Curr. Liab. and Prov. 5,175 6,776 7,638 8,821 Others -1,822 -946 5,176 -119 Net Current Assets 7,028 5,923 6,335 7,436 CF from Fin. Activity 966 -1,510 2,954 -1,222 Deferred Tax Liability 301 223 210 183 Application of Funds 17,092 19,310 26,172 30,511 Incr/Decr of Cash 1,016 -445 -266 979 Key assumptions/operating metrics Add: Opening Balance 1,115 2,131 1,686 1,420 Growth (%) Closing Balance 2,131 1,686 1,420 2,399 Coconut Oil 7.0 8.8 7.0 7.0 Saffola 16.0 15.0 15.0 15.0 Hair Oil 23.0 24.0 16.0 16.0 E: MOSL Estimates
August 27 - 31, 2012 113 8th Annual Global Investor Conference
Maruti Suzuki
Company description Key challenges Maruti Suzuki (MSIL) is the largest 4-wheeler passenger Being net importer, Maruti's earnings are highly vehicle manufacturer in India, with 1.2m units. It sensitive to JPY/INR movement. For every 5% dominates the small cars segment with ~48% market change in JPY/INR, Maruti's EBITDA margin changes share. It is also emerging as the global export hub of by ~100bp and EPS by ~13%. small cars for Suzuki, with world strategic model A-Star Maintaining cordial industrial relations, considering exclusively produced in India. It has recently launched multiple disruptions at Manesar plant since Jun-11, Ertiga to gain foothold in the fast-growing UV segment. including recent episode of violence. It has two plants are in Haryana – Gurgaon and Manesar. Key news flows / triggers to watch Key investment positives Resumption of operation at Manesar plant, where operations are disrupted since 18-Jul-2012 due to Some of the key headwinds which impacted FY12 violence at the plant. performance are peaking out. While reduction in Reduction in interest rates to boost car demand. interest rates and stable fuel prices augur well for Demand pick-up for petrol-driven small cars. demand, stable competition and soft commodity Increasing localization and exports to reduce forex prices would ease pressure on profitability. exposure over FY13-15. EBITDA margins have bottomed out in 2HCY11 impacted by adverse mix, forex and negative operating leverage. Expect EBITDA margin to 1QFY13 highlights; guidance for FY13, FY14 1QFY13 realization improved ~12% QoQ (~21% YoY) improve 20bp from 7.1% in FY12 to 7.3% in FY13 and to INR355,839/unit, led by better mix, higher export 8.8% (ex SPIL) in FY14, driven by price hikes, better realizations and Ertiga CKD exports. mix, operating leverage & higher localization. EBITDA margin was flat QoQ (-230bp YoY) at 7.3%, Maruti merged with Suzuki Powertrain India. Although we expect the merger to be EPS neutral, as benefit of higher realizations (140bp) was offset given aggressive depreciation policy of SPIL, it by adverse Fx impact on RM (60bp) and royalty would be cash EPS accretive by ~13%. (100bp), and negative operating leverage. It has not entered into any further hedges and now With long term demand drivers and MSIL's competitive advantage intact, coupled with peak has ~30% of USD/JPY exposure hedged for rest of competitive intensity behind us, we expect MSIL's FY13, and 36% natural hedge on USD/INR. Lower other income diluted benefit of lower tax market share to remain stable at ~36% of PV industry (higher R&D), leading to in-line PAT at INR4.24b. over next 2-3 years.
Stock info Quarterly Performance (INR Million) Bloomberg MSIL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 289 Net Op. Revenues 84,541 78,316 77,316 117,270 107,782 355,871 436,687 CMP (INR) 1,177 Change (%) 1.7 -14.4 -18.6 17.2 27.5 -2.8 22.7 Mcap (USD b) 6.1 EBITDA 8,104 4,942 4,034 8,585 7,863 25,129 31,944 52-Wk Range (INR) 1428 / 906 EBITDA Margins (%) 9.6 6.3 5.2 7.3 7.3 7.1 7.3 1, 6, 12 Rel Perf (%) -5 / -8 / -6 Change (%) -5.5 -48.5 -55.3 -15.3 -3.0 -30.9 27.1 Adjusted PAT 5,492 2,404 2,056 6,398 4,238 16,351 19,906 Change (%) 7.2 -59.8 -63.6 1.4 -22.8 -29.2 21.7 Shareholding pattern (%) Key Operating metrics Jun-12 Mar-12 Jun-11 Total Vols ('000 nos) 281 252 239 360 296 1,134 1,217 Promoter 54.2 54.2 54.2 Change (%) -0.6 -19.6 -27.6 4.9 5.1 -10.8 7.4 Dom. Inst. 16.4 15.8 18.0 Realiz. (INR/car) 293,279 298,741 314,247 318,770 355,839 306,131 350,367 Foreign 20.4 21.5 18.8 Change (%) 3.2 4.8 12.0 11.7 21.3 7.7 14.5 Others 9.0 8.5 9.0 RM Cost (% of Sales) 78.0 78.6 79.1 79.6 77.8 78.9 78.4 E: MOSL Estimates
114 August 27 - 31, 2012 8th Annual Global Investor Conference
Maruti Suzuki: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E* 2014E* Y/E March 2011 2012 2013E* 2014E* Total Op. Income 369,199 355,871 436,687 515,512 Basic (INR) Change (%) 24.6 -3.6 22.7 18.1 Adjusted EPS 79.9 56.6 73.2 101.3 Total Cost 333,363 330,742 398,149 462,561 EPS Growth (%) -7.8 -29.2 29.4 38.3 EBITDA 35,837 25,129 38,539 52,950 Consol EPS 82.4 58.2 74.2 102.6 EBITDA (%) 9.7 7.1 8.8 10.3 Cash EPS 115 96 132.6 170.9 Depreciation 10,135 11,384 17,925 21,032 Book Value per Share 479.8 525.7 635.1 723.5 Interest 244 552 1,186 1,254 DPS 7.5 7.5 10 11 Other Income 5,665 8,269 8,224 8,550 Div. payout (%) 11 13.3 13.7 10.9 PBT 31,088 21,462 27,652 39,215 Effective tax Rate (%) 26.4 23.8 20 22 Valuation (x) Adj. PAT 23,101 16,351 22,121 30,587 Consol. P/E 14.4 20.3 15.9 11.5 Change (%) -7.8 -29.2 35.3 38.3 Cash P/E 10.3 12.3 8.9 6.9 EV/EBITDA 7.5 10.7 7.1 4.8 Balance Sheet (INR Million) EV/Sales 0.7 0.8 0.6 0.5 Y/E March 2011 2012 2013E * 2014E * Price to Book Value 2.5 2.3 1.9 1.6 Share Capital 1,445 1,445 1,510 1,510 Dividend Yield (%) 0.6 0.6 0.8 0.9 Net Worth 138,675 151,873 191,860 218,559 Loans 3,093 11,749 17,910 17,910 Profitability Ratios (%) Deferred Tax Liability 1,644 3,023 3,023 3,023 RoE 16.5 10.8 11.5 14 Capital Employed 143,412 166,646 212,793 239,492 RoCE 22.1 13.2 13.6 16.9
Net Fixed Assets 55,294 61,321 99,730 108,698 Leverage Ratio Capital WIP 14,286 20,000 15,000 15,000 Debt/Equity (x) 0.0 0.1 0.1 0.1 Investments 51,067 61,473 61,473 61,473 Cash Flow Statement (INR Million) Curr.Assets, Loans 63,563 80,227 99,338 125,662 Y/E March 2011 2012 2013E* 2014E* Inventory 14,150 17,965 19,142 22,598 OP/(Loss) before Tax 26,437 13,745 20,614 31,918 Sundry Debtors 8,933 9,377 13,160 15,536 Int./Div. Received 3,595 8,269 8,224 8,550 Cash/ Bank Bal. 25,085 24,362 38,511 59,004 Depreciation 10,135 11,384 17,925 21,032 Current Liab. & Prov. 40,798 56,376 62,748 71,341 Direct Taxes Paid -10,240 -3,731 -5,530 -8,627 Sundry Creditors 35,540 49,391 54,177 61,088 (Inc)/Dec in WC 4,171 -1,810 1,411 2,762 Net Current Assets 22,765 23,851 36,590 54,321 CF from Oper.Activity 34,098 27,857 42,643 55,636 Appl. of Funds 143,412 166,646 212,793 239,492 (Inc)/Dec in FA -24,114 -23,125 -51,334 -30,000 Key assumptions/operating metrics (Pur)/Sale of Invest. 21,253 -10,406 0 0 Y/E March 2011 2012 2013E 2014E CF from Inv. Activity -2,861 -33,531 -51,334 -30,000 Volumes (‘000 units) 1271 1133.7 1217 1412.1 Growth (%) 24.8 -10.8 7.4 16 Change in Networth 0 -986 20,886 -565 Realizations (INR/car) 290,478 313,904 358,810 365,066 Inc/(Dec) in Debt -5,123 8,656 6,161 0 Growth (%) -0.1 8.1 14.3 1.7 Interest Paid -278 -552 -1,186 -1,254 RM Cost (% of sales) 78.1 78.9 76.9 76.2 Dividends Paid -1,733 -2,167 -3,021 -3,323 JPY/INR 0.54 0.61 0.68 0.65 CF from Fin. Activity -7,134 4,951 22,840 -5,142 FCF (CFO-Capex) 9,984 4,732 -8,691 25,636 Net Debt -69,098 -68,503 -80,441 -100,934 Inc/(Dec) in Cash 24,103 -723 14,149 20,494 ‘* including SPIL (Suzuki Powertrain India Ltd) Add: Op. Balance 982 25,085 24,362 38,511 Closing Balance 25,085 24,362 38,511 59,004
August 27 - 31, 2012 115 8th Annual Global Investor Conference
McLeod Russel
Company description Key challenges Mcleod Russel is the world's largest tea producer and Government denying acquisitions of tea gardens in plantation company. It produces approximately 100m India, is a growth challenge for the company. kg of high quality tea a year from its tea estates in Assam, Managing labor costs is a key operational challenge. West Bengal, Vietnam, Uganda and Rwanda. Key news flows / triggers to watch As India's largest tea exporter, it maintains strong Production during the peak season Q2 and Q3. connections with buyers in Europe, the Middle East and Crop loss in North India coupled with growth in North America. Modern blending facility provides its consumption resulting in higher tea prices. clients with both unique as well as bespoke bulk Rationalization of labor costs can increase blended teas. profitability. Key investment positives Increasing consumption of tea, particularly in 1QFY13 highlights; guidance for FY13, FY14 developing countries with increasing per capita Tea realizations for the company improved by INR income, along with constrained supply of land to 33/kg (22%) to INR181/kg in 1QFY13 due to India grow tea, should result in a secular upward trend in losing 2.7m kg of tea production in May and June. tea prices. McLeod Russel itself lost production loss of 2.7m kg Due to adverse weather conditions, even near-term in 1QFY13. tea prices are expected to remain high, thus Sales volume for the company declined from 9.7m increasing McLeod's profitability. kg in 1QFY12 to 7.9m kg in Q1FY13.
Stock info Quarterly Performance (INR Million) Bloomberg MCLR IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 Equity Shares (m) 109 Operating Income 1,453 4,057 3,913 2,526 1,435 11,948 CMP (INR) 323 Change (%) 18.6 12.3 6.7 13.6 -1.2 11.3 Mcap (USD b) 0.6 EBITDA 537 2,371 1,383 -1,030 355 3,261 52-Wk Range (INR) 345 / 166 Change (%) 76.8 11.5 -6.7 82.0 -34.0 -2.5 1, 6, 12 Rel Perf (%) -2 / 56 / 37 EBITDA Margin (%) 37.0 58.4 35.4 -40.8 24.7 27.3 Reported PAT 373 2,232 1,171 -1,574 193 2,203 Shareholding pattern (%) Adjusted PAT 373 2,232 1,171 -1,477 193 2,299 Jun-12 Mar-12 Jun-11 Change (%) 98.0 12.3 -13.5 20.2 -48.3 0.0 Promoter 45.7 45.7 45.7 PAT Margin (%) 25.7 55.0 29.9 -58.5 13.5 19.2 Dome. Inst. 5.4 5.9 7.1 Foreign 33.4 32.9 32.0 Others 15.4 15.6 15.2
116 August 27 - 31, 2012 8th Annual Global Investor Conference
McLeod Russel: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2009 2010 2011 2012 Y/E March 2009 2010 2011 2012 Net Sales 8,265 11,062 12,692 14,453 EPS (INR) 7.3 20.4 21.7 25.3 Other Income 345 349 323 411 Book Value (INR) 57.0 73.2 87.0 108.4 Stock Adjustments 45 -19 103 73 Total Income 8,655 11,392 13,118 14,937 Key Ratios Total Expenditure 6,486 7,722 9,191 10,719 Debt-Equity Ratio 0.7 0.6 0.3 0.1 Operating Profit 2,170 3,670 3,927 4,218 Long Term Debt-Equity Ratio 0.4 0.4 0.3 0.1 Interest 831 296 417 567 Current Ratio 0.5 0.7 0.6 0.6 Gross Profit 1,339 3,374 3,510 3,650 Depreciation 327 323 382 370 Turnover Ratios Profit Before Tax 1,012 3,051 3,128 3,281 Fixed Assets 0.6 0.7 0.7 0.8 Tax 104 664 608 329 Inventory 14.6 14.8 14.4 13.1 Fringe Benefit Tax 22 - - - Debtors 30.8 41.8 53.3 57.8 Net Profit 856 2,337 2,492 2,943 Interest Cover Ratio 2.2 11.3 8.5 6.8 Minority Interest (after tax) - -5 -0 30 PBIDTM (%) 26.2 33.2 30.9 29.2 P/L of Associate Company -22 -33 -28 -33 PBITM (%) 22.2 30.3 27.9 26.6 PAT after MI & P/L Asso.Co. 835 2,309 2,465 2,879 PBDTM (%) 16.2 30.5 27.7 25.3 Extraordinary Items -8 -10 14 -54 CPM (%) 14.3 24.1 22.6 22.9 Adjusted PAT 843 2,319 2,450 2,934 APATM (%) 10.3 21.1 19.6 20.4 ROCE (%) 17.8 29.8 29.9 30.4 Balance Sheet (Consolidated) (INR Million) RONW (%) 14.4 32.8 28.4 27.4 Y/E March 2009 2010 2011 2012 Payout (%) 26.7 19.3 22.8 23.5 Share Capital 547 547 547 547 Reserves Total 11,424 13,154 14,618 16,919 Cash Flow Statement (INR Million) Total Shareholders Funds 11,971 13,701 15,165 17,467 Y/E March 2009 2010 2011 2012 Minority Interest 0 0 0 117 Cash and Cash Equivalents Secured Loans 3,873 3,880 1,406 940 at Beginning of the year 197 388 348 223 Unsecured Loans 300 140 0 0 Net Cash from Operating Total Debt 4,173 4,021 1,406 940 Activities 2,027 2,867 2,273 2,636 Total Liabilities 16,144 17,722 17,286 19,242 Net Cash Used in Investing Activities -653 -2,370 -564 -968 Gross Block 20,578 22,710 22,850 24,520 Net Cash Used in Financing Less: Accumulated Dep 4,156 5,075 4,983 5,519 Activities -1,184 -359 -1,834 -1,557 Less: Impairment of Assets 0 0 402 402 Net Inc/(Dec) in Cash and Cash Equivalent 191 138 -125 111 Net Block 16,422 17,635 17,465 18,600 Cash and Cash Equivalents Capital Work in Progress 168 166 203 354 at End of the year 388 526 223 334 Investments 198 350 336 190 Inventories 694 800 968 1,248 Sundry Debtors 256 273 204 297 Cash and Bank 388 526 310 334 Loans and Advances 1,410 2,015 1,250 1,696 Total Current Assets 2,748 3,614 2,731 3,575 Current Liabilities 1,377 1,434 3,217 3,391 Provisions 1,490 1,892 1,064 1,209 Total Current Liabilities 2,867 3,327 4,282 4,601 Net Current Assets -119 287 -1,550 -1,026 Deferred Tax Assets 189 168 108 117 Deferred Tax Liability 714 884 831 887 Net Deferred Tax -525 -716 -723 -769 Other Assets 0 0 1,555 1,894 Total Assets 16,144 17,722 17,286 19,242
August 27 - 31, 2012 117 8th Annual Global Investor Conference
MCX
Company description Key challenges Multi Commodity Exchange of India Ltd (MCX) is a state- Low volatility in commodity prices hurt the volumes of-the-art electronic commodity futures exchange with on the exchange, which has been the case in the last permanent recognition from the Government of India couple of quarters. Given high operating leverage, to facilitate online trading, and clearing and settlement it impacts bottom-line harder. operations for commodity futures. Upward revision in share of transaction fees charged by FTIL for technical services will be negative for Having started operations in November 2003, today, margins. MCX holds a market share of over 86% (as on March 31, 2012) of Indian commodity futures market. It has more Key news flows / triggers to watch than 2,170 registered members operating through over FCRA Bill was postponed to yet another parliament 346,000 spread over 1,577 cities and towns. MCX was session in the future, after increased hopes of the the 3rd largest commodity exchange in the world, in bill being tabled for discussion in the monsoon terms of the number of contracts traded in CY2011, session. largest in Silver and Gold, second largest in natural gas. MCX-SX was cleared to become a full-fledged stock MCX offers 49 commodities across various segments exchange. such as bullion, ferrous and non-ferrous metals, energy, and a number of agri-commodities on its platform. 1QFY13 highlights; guidance for FY13, FY14 Key investment positives MCX reported 1QFY13 revenue at INR1.23b, +5.2% Commodities exchange in India is a nascent YoY. EBIT was INR689m, +5.3% YoY. EBIT margin was industry, less than a decade old; total value of 56%, +10bp YoY and +170bp QoQ. PAT was INR647m, commodity futures traded has grown at 51% CAGR +4.4% YoY. over FY09-12. In 1QFY13, total transacted volume on the exchange MCX has a near monopolistic market share and was INR36.4t, up 8.4% YoY and 0.6% QoQ. In FY12, competitive edge lent by strong technological the volumes had jumped in 2Q, increasing by 42% backbone, which is supplied by parent FTIL, is hard QoQ, before cooling off in subsequent quarters. to emulate. However, at least in the month of July, volumes have Passage of FCRA bill will facilitate a surge in been softer, implying possible YoY decline in traded volumes. volume, and hence, transaction revenue in 2QFY13. Potential value unlocking from MCX-SX.
Stock info Quarterly Performance (INR Million) Bloomberg MCX IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 51 Net Sales 1,169 1,558 1,296 1,239 1,230 3,689 5,262 CMP (INR) 1,153 Changes - QoQ (%) 10.4 33.3 (16.9) (4.4) (0.7) 28.4 42.6 Mcap (USD b) 1.1 EBITDA 718 1,068 820 740 756 1,918 3,346 52-Wk Range (INR) 1,426 / 838 Changes (%) 21.0 48.7 (23.2) (9.7) 2.1 35.5 74.4 1, 6, 12 Rel Perf (%) -/-/- EBIDTA Margin (%) 61.4 68.5 63.3 59.7 61.5 52.0 63.6 Reported PAT 620 894 688 660 647 1,728 2,862 Adjusted PAT 620 894 688 770 647 1,728 2,862 Shareholding pattern (%) Changes QoQ (%) 12.9 44.2 (23.1) 11.9 (15.9) (20.3) 65.6 Jun-12 Mar-12 Jun-11 PAT Margin (%) 53.1 57.4 53.1 62.2 52.6 46.8 54.4 Promoter 26.0 26.0 - Key Operating Metrics Dom. Inst. 23.5 22.4 - Volumes (INR b) 33,583 47,808 38,415 36,164 36,395 98,415 155,971 Foreign 31.6 33.3 - Chg. in Vol. QoQ (%) 13.8 42.4 -19.6 -5.9 0.6 53.9 58.5 Others 18.9 18.3 - E: MOSL Estimates
118 August 27 - 31, 2012 8th Annual Global Investor Conference
MCX: Financials and valuation
Income Statement (Standalone) (INR Million) Ratios Y/E March 2008 2009 2010 2011 Y/E March 2008 2009 2010 2011 Net Sales 1,737 2,125 2,874 3,689 EPS (INR) 12.9 18.9 26.6 33.1 Other Income 1,005 1,534 2,062 784 Book Value (INR) 45.7 60.6 85.4 166.4 Total Income 2,742 3,659 4,936 4,473 Key Ratios Power & Fuel Cost 14 33 34 25 Current Ratio 0.5 0.6 0.8 0.8 Employee Cost 253 231 203 254 Other Manufact. Expenses 47 144 129 132 Turnover Ratios Selling & Admin. Expenses 868 822 970 1,248 Fixed Assets 1.5 1.1 1.1 1.3 Miscellaneous Expenses 73 125 123 113 Debtors 11.1 10.2 10.0 9.3 Total Expenditure 1,254 1,355 1,458 1,772 Interest Cover Ratio 4,099 663 4,395 12,274
Operating Profit 1,488 2,304 3,477 2,701 PBIDTM (%) 54.1 65.6 69.8 73.2 Interest 0 2 0 0 PBITM (%) 47.2 56.2 61.2 66.5 Gross Profit 1,488 2,302 3,477 2,701 PBDTM (%) 54.1 65.5 69.8 73.2 Depreciation 120 200 247 247 CPM (%) 43.2 51.3 50.4 53.5 Profit Before Tax 1,368 2,102 3,230 2,455 APATM (%) 36.3 41.9 41.8 46.9 Tax 315 453 1,004 706 Fringe Benefit tax 11 6 - - RoCE (%) 25.2 28.0 29.5 31.8 Deferred Tax (11) 63 19 21 RoNW (%) 19.4 20.9 20.2 22.4 Reported Net Profit 1,053 1,580 2,206 1,728 Payout (%) 23.2 13.3 9.4 15.1 Extraordinary Items 422 688 1,006 30 Adjusted Net Profit 631 893 1,201 1,698 Cash Flow Statement (INR Million) Y/E March 2009 2010 2011 Balance Sheet (INR Million) Cash Flow Summary Y/E March 2008 2009 2010 2011 Cash and Cash Equivalents at Share Capital 392 408 408 510 Beginning of the year 167 1,764 484 Reserves Total 3,191 4,534 6,562 7,975 Net Cash from Operating Activities 2,853 -912 2,700 Total Shareholders Funds 3,587 4,942 6,970 8,485 Net Cash in Investing Activities -1,371 -129 -2,328 Total Liabilities 3,587 4,942 6,970 8,485 Net Cash in Financing Activities 116 -239 -238 Net Inc/(Dec) in Cash and Cash Gross Block 1,292 2,595 2,679 2,917 Equivalent 1,598 -1,280 134 Less : Accumulated Dep. 325 509 754 964 Cash and Cash Equivalents at End of the year 1,764 484 618 Net Block 967 2,086 1,925 1,953 Capital Work in Progress 505 3 3 1 Investments 5,249 4,698 6,172 8,236 Sundry Debtors 148 269 304 489 Cash and Bank 1,047 4,058 2,700 3,310 Loans and Advances 588 550 1,186 1,010 Total Current Assets 1,783 4,877 4,190 4,808 Current Liabilities 4,831 6,366 4,916 6,017 Provisions 67 269 298 368 Total Current Liabilities 4,897 6,635 5,214 6,385 Net Current Assets (3,114) (1,758) (1,024) (1,577) Deferred Tax Assets - 36 51 36 Deferred Tax Liability 20 124 157 163 Net Deferred Tax (20) (87) (106) (127) Total Assets 3,587 4,942 6,970 8,485
August 27 - 31, 2012 119 8th Annual Global Investor Conference
Motherson Sumi Systems
Company description Key challenges Motherson Sumi Systems Limited (MSSL) is the flagship Maintaining growth momentum in slowing global company of the Samvardhana Motherson Group and is car volumes, especially since over 75% of revenues a joint venture between Samvardhana Motherson comes from global customers. Group & Sumitomo Wiring Systems (Japan). It is a full Successfully integrating and deriving synergies from system solution provider for the automotive industry. Peguform acquisition. Post acquisition of VisioCorp and Peguform, it has a very strong foothold in global automotive supply chain. Key news flows / triggers to watch SMR (subsidiary) is one of the largest manufacturers of SMR's Hungary plant expected to ramp up exterior rearview mirrors in the world, whereas significantly from 3QFY13. Peguform is one of the largest manufacturers of IP Equity fund raising to reduce net debt of INR44b. modules, door trims and bumpers in Europe. 1QFY13 highlights; guidance for FY13, FY14 Key investment positives Consolidated Net sales stood at INR63.9b (+178% Post Peguform acquisition, MSSL is one of the top YoY, -0.6% QoQ). Standalone revenues at INR10.6b suppliers to passenger car OEMs globally. (+41% YoY, -12 % QoQ); SMR revenues at EUR232m MSSL's revenue per car is set to increase both in (+15% YoY, -3.5% QoQ) and SMP revenues at India and abroad due to (1) rising contribution of EUR474m (-7.1% QoQ). high-price rear-view mirrors in passenger cars in Consolidated EBITDA (adjusted for forex) was India, (2) becoming a full system supplier after INR4.5b. EBITDA margin was 7.1% (-100bp YoY, +40bp acquisition of Peguform, and (3) increase in QoQ), with standalone EBITDA margin at 16.6%, SMR requirement of wiring harnesses due to rising at 5.8% and SMPL at 4.2%. features in a car. Adj PAT was INR2.1b (+287% YoY, +107% QoQ). Strong order book for Samvardhana Motherson Expect capex of INR7-8b for FY13. Peguform (SMP) and Samvardhana Motherson MSSL is targeting revenues of USD5b (v/s USD3b in Reflectec (SMR) would be key performance driver. FY12), with ~70% revenues from global customers Ramp-up in recently added capacities and and 40% RoCE and dividend payout. commissioning of ongoing expansion would drive revenues and profitability. Synergies of Peguform acquisition would further drive margins.
Stock info Quarterly Performance (INR Million) Bloomberg MSS IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 Equity Shares (m) 392 Net Sales 22,716 22,901 37,723 63,682 62,772 147,022 CMP (INR) 185 Changes (%) 22.2 19.5 81.1 174.8 176.3 79.8 Mcap (USD b) 1.3 EBITDA 1,700 792 237 4,631 1,436 7,360 52-Wk Range (INR) 217 / 129 Changes (%) 21.5 -52.6 -86.8 93.0 -15.5 1.2 1, 6, 12 Rel Perf (%) 4 / 4 / -19 EBITDA Margin (%) 7.5 3.5 0.6 7.3 2.3 5.0 Reported PAT 673 24 -1,020 2,287 -422 1,964 Adjusted PAT 653 243 42 1,929 81 2,867 Shareholding pattern (%) Changes YoY (%) 9.6 -71.8 -96.0 38.9 -87.5 -26.6 Jun-12 Mar-12 Jun-11 PAT Margin (%) 2.87 1.06 0.11 3.03 0.13 1.95 Promoter 65.6 65.2 65.2 Dom. Inst. 9.9 10.2 9.0 Foreign 12.4 12.1 11.6 Others 12.2 12.5 14.2
120 August 27 - 31, 2012 8th Annual Global Investor Conference
Motherson Sumi Systems: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios Y/E March 2009 2010 2011 2012 Y/E March 2009 2010 2011 2012 Net Sales 25,956 67,022 81,756 147,766 EPS (INR) 4.9 6.6 9.9 6.7 EBITDA 2,393 3,269 6,930 8,925 EPS growth (%) 3.3 34.2 49.8 -32.5 EBITDA Margins (%) 9.2 4.9 8.5 6.0 Cash EPS (INR) 8.0 13.6 16.3 16.5 Interest 383 635 576 1,649 Book Value (INR) 22.0 31.1 41.5 48.2 Depreciation 1,091 2,601 2,465 3,796 DPS (INR) 1.35 1.75 2.75 2.25 Other Income 1,640 3,394 2,423 1,445 Payout (%) 22.6 30.5 25.3 34.0 PBT 2,559 3,428 6,312 4,925 Eff. Tax rate (%) 13.6 31.8 29.8 43.7 Valuation (x) Adjusted Net Profit 1,752 2,477 3,838 2,596 P/E 36.1 26.9 18.0 26.6 Cash P/E 22.3 13.1 10.9 10.8 EV/EBITDA 28.8 21.7 11.2 12.0 Balance Sheet (INR Million) EV/Sales 2.7 1.1 0.9 0.7 Y/E March 2009 2010 2011 2012 Price to Book Value 8.1 5.7 4.3 3.7 Share Capital 356 375 388 388 Dividend Yield (%) 0.8 1.0 1.5 1.3 Total Shareholders Funds 7,831 11,649 16,087 18,717 Minority Interest 2,000 2,027 2,276 5,027 Turnover Ratios Total Debt 8,951 8,179 12,635 43,921 Fixed Assets 1.6 3.9 4.0 3.1 Total Liabilities 18,782 21,855 30,998 67,665 Inventory (days) 85.9 36.8 46.3 55.6 Debtors (days) 86.2 41.9 42.7 74.4 Net Block 13,487 14,548 17,657 46,922 Creditors (days) 174.2 71.1 72.7 118.3 CWIP 1,764 1,808 4,601 4,458 Investments 547 471 453 938 Profitability Ratios (%) RoCE (%) 20.1 20.0 26.1 13.3 Current Assets, Loans & Advances RoNW (%) 26.6 25.4 27.7 14.9 Inventories 6,112 6,752 10,376 22,496 Sundry Debtors 6,132 7,688 9,557 30,127 Leverage Ratio Cash and Bank 2,766 3,431 3,565 4,557 Debt-Equity Ratio 1.1 0.7 0.8 2.3 Loans and Advances 3,825 3,101 4,433 8,765 Total Current Assets 18,835 20,971 27,930 65,945 Cash Flow Statement (INR Million) Y/E March 2009 2010 2011 2012 Less : Current Liabilities and Provisions Cash and Cash Equivalents Current Liabilities 12,385 13,060 16,291 47,879 at Beginning of the year 954 2,766 3,431 3,480 Total Current Liabilities 15,971 15,921 19,633 51,391 Net Cash from Operating Net Current Assets 2,865 5,051 8,296 14,554 Activities 2,499 4,083 4,193 5,887 Net Deferred Tax -145 -40 -10 -602 Net Cash Used in Total Assets 18,782 21,855 30,998 67,665 Investing Activities -3,662 -3,729 -8,055 -20,698 Net Cash Used in Financing Activities 2,948 312 4,010 13,800 Net Inc/(Dec) in Cash and Cash Equivalent 1,785 666 148 -1,011 Cash and Cash Equivalents at End of the year 2,738 3,432 3,578 4,426
August 27 - 31, 2012 121 8th Annual Global Investor Conference
NTPC
Company description delays could limit upfront earnings growth. NTPC is the largest power generator in India contributing Lower demand/backdown from SEBs may impact to ~30% of the country's total generation. It has an the company's generation incentives. installed capacity of 39.2GW, and it aims to add 14GW in Delay in restoration of coal mine may impact NTPC's the 12th Plan (FY13-17) v/s ~9GW added in 11th Plan diversification policy of coal sourcing. period. It has also ventured into related areas like coal mining, distribution, transmission, and gas exploration. Key news flows / triggers to watch Restoration of 3 coal blocks with 2b tons of coal Key investment positives reserves by Ministry of Coal. NTPC has presented NTPC plans to commission 14GW of capacity in 12th its case with the progress report of mines. plan (11.9GW remaining). Similar capacity is planned News flow on equipment order award for for 13th plan at 14.7GW, of which 4.8GW is under supercritical units (800MW) is to be watched. construction and balance under project award. This Generation incentives contribute 20-25% to NTPC provides high visibility of earnings growth. earnings thus generation growth is crucial. NTPC's PAF (Plant Availability Factor) has been consistently above 90%, while lower demand has 1QFY13 highlights; guidance for FY13, FY14 impacted PLF. Base RoE recovery is linked to PAF NTPC's 1QFY13 performance was robust led by and is thus assured. higher generation and partly helped by other Strong operating cash flow and cash equivalent of operating/financial other income. It reported INR178b (FY12) would support its expansion plans highest generation growth since 1QFY10 at 8% YoY. and thus, growth will not be equity dilutive. NTPC reiterated capacity addition target of 4.2GW Higher generation growth led by improved domestic in FY13 and 14GW in 12th Plan. coal supply and demand by DISCOMs would drive In order to secure payments from SEBs post October core earnings, incentives. 2016, NTPC has signed supplementary agreements Key challenges with them for first right on escrow account/ NTPC has witnessed meaningful delays in capacity receivables. commissioning/project awards in past. Continued
Stock info Quarterly Performance (INR Million) Bloomberg NTPC IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 8,245 Operating Income 141,715 153,775 153,333 162,639 159,600 611,462 727,246 CMP (INR) 168 Change (%) 9.5 4.2 13.6 4.8 12.6 7.8 18.9 Mcap (USD b) 24.9 EBITDA 28,662 32,387 28,564 41,127 36,306 131,437 157,102 52-Wk Range (INR) 190 / 139 Change (%) 2.2 -2.2 -22.1 12.9 26.7 -2.1 19.5 1, 6, 12 Rel Perf (%) 3 / -7 / -9 EBITDA Margin (%) 20.2 21.1 18.6 25.3 22.7 21.5 21.6 Reported PAT 20,758 24,240 21,304 25,934 24,987 92,238 92,261 Adjusted PAT 19,015 14,797 20,692 22,958 23,888 79,720 91,162 Shareholding pattern (%) Change (%) 13.0 -8.4 -1.1 -10.6 25.6 0.2 14.4 Jun-12 Mar-12 Jun-11 PAT Margin (%) 13.4 9.6 13.5 14.1 15.0 13.0 12.5 Promoter 84.5 84.5 84.5 Key Operating Metrics Dom. Inst. 7.8 7.7 8.3 Instal. Cap. (MW) 34,854 34,854 36,014 37,014 39,174 37,014 41,174 Foreign 4.0 4.1 3.6 Qtly. addition (MW) 660 - 1,160 1,000 2,160 2,820 4,160 Others 3.7 3.8 3.6 Coal plant PAF (%) 89.9 83.4 85.3 94.7 88.4 88.4 88.0 E: MOSL Estimates
122 August 27 - 31, 2012 8th Annual Global Investor Conference
NTPC: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Gross Sales 548,740 611,462 717,532 797,084 EPS (Adjusted) 9.7 10.1 11.9 14.2 Net Sales 548,740 611,462 717,532 797,084 Cash EPS 12.7 13.5 16.2 19.7 Change (%) 18.5 11.4 17.3 11.1 BV/Share 82.3 88.9 95.5 103.5 Total Expenditure 422,892 480,025 559,540 595,564 DPS 4.2 4.0 4.5 5.4 % of Sales 77.1 78.5 78.0 74.7 Payout (%) 44.2 41.3 44.2 44.2 EBITDA 125,848 140,511 162,992 206,770 Valuation (x) Margin (%) 22.9 23.0 22.7 25.9 P/E 17.4 16.7 14.1 11.8 Depreciation 24,857 27,904 35,922 44,807 Cash P/E 13.3 12.5 10.3 8.5 EBIT 100,992 112,607 127,070 161,963 P/BV 2.0 1.9 1.8 1.6 Interest 21,491 17,116 23,060 33,365 EV/Sales 3.0 2.8 2.5 2.4 Other Income - Rec. 40,995 27,784 25,598 27,627 EV/EBITDA 12.6 11.6 10.9 9.0 Profit before Tax 120,496 123,275 129,608 156,225 Dividend Yield (%) 2.5 2.4 2.7 3.2 Current Tax 29,470 31,024 31,628 38,964 Tax Rate (%) 24.5 25.2 24.4 24.9 Return Ratios (%) Reported PAT 91,025 92,236 97,978 117,259 RoE 12.2 11.8 12.9 14.3 EO Exp/(Inc) 11,445 9,018 0 0 RoCE 13.3 11.9 11.5 12.7 Adjusted PAT 79,580 83,218 97,978 117,259 Margin (%) 14.5 13.6 13.7 14.7 Working Capital Ratios Fixed Asset Turnover (x) 0.8 0.7 0.6 0.6 Balance Sheet Asset Turnover (x) 0.5 0.5 0.5 0.5 Y/E March 2011 2012 2013E 2014E Debtor (Days) 53 35 60 55 Equity Share Capital 82,455 82,455 82,455 82,455 Inventory (Days) 24 22 25 25 Total Reserves 596,468 650,457 705,170 770,648 Net Worth 678,923 732,912 787,624 853,103 Leverage Ratio (x) Deferred liabilities 3028 6369 6369 6369 Current Ratio 2.7 2.5 2.1 2.4 Total Loans 439,803 483,558 629,148 695,661 Interest Cover Ratio 4.7 6.6 5.5 4.9 Capital Employed 1,121,754 1,222,839 1,423,141 1,555,133 Debt/Equity 0.6 0.7 0.8 0.8
Gross Block 727,552 815,680 1,120,924 1,286,514 Cash Flow Statement (INR Million) Less: Accum. Deprn. 335,192 363,096 399,018 443,825 Y/E March 2011 2012 2013E 2014E Net Fixed Assets 392,360 452,584 721,905 842,689 OP/(Loss) before Tax 120,496 123,275 129,608 156,225 Capital WIP 382,706 418,278 363,154 355,496 Interest 21,491 17,116 23,060 33,365 Investments 123,448 95,839 106,008 96,561 Depreciation 24,857 27,904 35,922 44,807 Curr. Assets 353,968 441,677 447,913 448,892 Direct Taxes Paid -29,470 -31,024 -31,628 -38,964 Inventory 36,391 37,029 49,146 54,595 (Inc)/Dec in WC -5,405 -24,181 49,592 -42,377 Account Receivables 79,243 58,325 117,951 120,109 CF from Operations 131,969 113,089 206,555 153,056 Cash and Bank Balance 161,853 177,686 196,098 182,034 CF fr. Oper. incl EO Exp. 131,969 113,089 206,555 153,056 Others 76,481 168,637 84,718 92,155 (inc)/dec in FA -120,714 -123,700 -250,120 -157,933 Curr. Liability & Prov. 130,729 178,423 215,839 188,506 (Pur)/Sale of Investments -24,623 -27,609 10,169 -9,447 Net Current Assets 223,239 263,253 232,074 260,386 CF from Investments -145,336 -151,310 -239,951 -167,379 Appl. of Funds 1,121,753 1,229,955 1,423,141 1,555,133 (Inc)/Dec in Debt 53,912 44,491 152,774 66,513 Key assumptions/operating metrics Dividend Paid -29,438 -27,886 -31,687 -37,923 Y/E March 2011 2012 2013E 2014E Interest -21,491 -17,116 -23,060 -33,365 Installed Capacity (MW) 34,194 37,014 41,174 44,384 Others 27,642 6,891 -1,464 5,227 - Own 30,830 32,650 36,310 38,270 CF from Fin. Activity 30,625 6,380 96,564 451 -JV 3,364 4,364 4,864 6,114 Coal Plant PAF (%) 92 90 89 89 Inc/Dec of Cash 17,258 -31,840 63,168 -13,872 Coal Plant PLF (%) 88 85 85 85 Add: Beginning Balance 144,595 161,853 177,686 196,098 Closing Balance 161,853 130,012 240,854 182,226
August 27 - 31, 2012 123 8th Annual Global Investor Conference
ONGC
Company description of the discovered fields. ONGC, a Fortune 500 company, is India's largest Key challenges exploration and production (E&P) player. With over 300 Ad-hocism in subsidy sharing. discoveries, it has established in-place reserves of Acquisition of overseas assets at high valuations 6.9btoe (billion tons of oil equivalent), with ultimate against stiff competition from China. reserves of 2.4btoe. It currently accounts for ~68% of Slowdown in deep water development due to India's domestic oil and gas production. Through its technological barriers. 100% subsidiary ONGC Videsh Limited (OVL), it has equity investments in E&P blocks in 16 countries. Downstream presence is marked through its subsidiary, Key news flows / triggers to watch Clarity on production from Sudan and Syria for OVL. MRPL (71.6% stake). Subsidy rationalization by the government and de- Key investment positives controlling of diesel prices. Await clarity on subsidy rationalization; gas price Discoveries in its NELP blocks and acquisition of hike a long term trigger: Rationalization of subsidy overseas assets. would result in increased earnings predictability for the company leading to higher valuation multiples. 1QFY13 highlights; guidance for FY13, FY14 Large NELP acreage to provide long-term growth: In 1QFY13, ONGC subsidy share was INR123.4b and ONGC has more than 50% of allotted NELP its share in upstream stood at 82% (v/s 80.8% in exploration acreage. Of this, around 66% acreage is FY12). We model FY13/14 upstream subsidy sharing in high potential deep water. As bulk of this acreage at 40% and ONGC share at 81%. is yet to be explored, we believe there is huge Net realization was at USD46.6/bbl, up 5% QoQ but potential for hydrocarbon discoveries. down 3% YoY. Increased capex, IOR/EOR projects to provide ONGC has made a demand to MoPNG for calculating production growth: Impressive RRR>1 for last 6 its share of subsidy-based crude production rather years. Production is likely to be flat in short-term, than on crude plus condensate. however we expect volume growth in long term ONGC expects incremental production of 24kbpd led by IOR/EOR, marginal fields and monetization by 2015 from its new oil pool discovery in D-1 field.
Stock info Quarterly Performance (INR Billion) Bloomberg ONGC IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 8,555 Operating Income 162 226 181 188 201 758 804 CMP (INR) 282 Change (%) 18.5 24.3 -2.5 22.2 24.0 15.1 6.2 Mcap (USD b) 43.2 EBITDA 93 142 107 111 110 451 423 52-Wk Range (INR) 304 / 240 Change (%) 15.3 27.7 -5.8 52.3 19.1 19.8 -6.3 1, 6, 12 Rel Perf (%) -4 / 3 / -3 EBITDA Margin (%) 57.2 62.6 58.8 58.8 55.0 59.6 52.6 Reported PAT 41 86 67 56 61 251 210 Adjusted PAT 41 86 46 56 61 230 210 Change (%) 11.8 60.4 -20.2 119.4 48.4 32.0 -8.6 PAT Margin (%) 25.3 38.2 25.6 30.0 30.3 30.4 26.2 Shareholding pattern (%) Key Metrics (USD/bbl) Jun-12 Mar-12 Jun-11 Fx rate (INR/USD) 45 46 51 50 54 48 54 Promoter 69.2 69.2 74.1 Gross Oil Realiz. 121 117 112 122 110 118 108 Dome. Inst. 11.7 11.6 7.4 Subsidy 73 33 67 77 63 63 60 Foreign 5.3 5.4 4.9 Net Oil Realization 48 84 45 44 47 55 47 Others 13.8 13.8 13.6 Subsidy (INR b) 120 57 125 142 123 445 477 E: MOSL Estimates
124 August 27 - 31, 2012 8th Annual Global Investor Conference
ONGC: Financials and valuation
Income Statement (INR Billion) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 1,176 1,464 1,585 1,684 Basic (INR) Growth (%) 15.6 24.4 8.3 6.3 EPS 24.5 30.4 28.3 32.1 Government Levies 192 231 273 305 Cash EPS 49.6 58.2 55.5 63.0 Other Operating Costs 483 655 785 765 Book Value 133.9 155.4 171.7 192.1 Total Operating Costs 676 886 1,057 1071 DPS 9.0 9.8 10.2 10.0 EBIDTA 500 578 527.2 614 Payout (incl. div tax) 56.2 37.4 42.2 36.4 % of Net Sales 42.5 39.5 33.3 36.4 Valuation (x) Debt Charges 4488 P/E 9.3 10.0 8.8 D,D&A 206 234 226 255 Cash P/E 4.8 5.1 4.5 Other Income 69 58 65 63 EV / EBITDA 3.6 3.9 3.2 Prov, wrtie-offs prior period 16 -31 0 0 EV / Sales 1.4 1.3 1.2 PBT 343 428 358 413 Price / Book Value 1.8 1.6 1.5 Tax 115 144 113 135 Dividend Yield (%) 3.5 3.6 3.5 Rate (%) 33.5 33.6 31.5 32.6 EV/BOE (USD, 1P basis) 6.3 5.6 5.6 PAT 228 284 245 279 Adj PAT 213 263 245 279 Profitability Ratios (%) Growth (%) 8.1 23.3 -6.9 13.8 RoE 19.5 21.0 17.3 17.6 Minority int., assoc profits 4334RoCE 18.8 20.1 16.7 17.1 Net Profit post MI 210 260 242 275 Turnover Ratios Balance Sheet (INR Billion) Debtors (No. of Days) 26.2 25.0 21.9 20.5 Y/E March 2011 2012 2013E 2014E Fixed Asset Turnover (x) 2.4 2.5 2.3 2.2 Share Capital 43 43 43 43 Reserves 1,103 1,287 1,426 1,601 Leverage Ratio Net Worth 1,145 1,329 1,469 1,644 Net Debt / Equity (x) -0.2 -0.3 -0.2 -0.3 Debt 63 100 101 101 Deferred Tax 112 115 123 132 Cash Flow Statement (INR Billion) Liability for Abandonment 199 202 205 208 Y/E March 2011 2012 2013E 2014E Capital Employed 1,539 1,769 1,923 2,115 OP/(Loss) before Tax 343 428 358 413 DD & A 114 167 185 205 Net Fixed Assets 542 626 729 787 Other op. expenses 4000 Producing Properties 572 557 588 621 Direct Taxes Paid -105 -140 -106 -125 Pre-producing Properties 102 113 144 168 (Inc)/Dec in Wkg. Capital 70 -30 8 -7 Investments (incl. mkt. sec.) 34 33 33 33 CF from Op. Activity 425 425 445 487 Goodwill 90 85 80 75 Cash & Bank Balances 287 415 417 492 (Inc)/Dec in FA & CWIP -277 -237 -342 -312 Inventories 86 84 85 94 (Pur)/Sale of Investments 33 1 0 0 Sundry debtors 98 103 88 102 CF from Inv. Activity -244 -237 -342 -312 Loans & Advances 110 116 122 128 Total Curr. Assets 590 727 720 825 Issue of Shares 4000 Current Liabilities 340 302 301 324 Inc / (Dec) in Debt 0 37 0.4 0.4 Provisions 51 69 69 69 Dividends Paid (incl.tax) -118 -97 -102 -100 Total current liabilities 391 370 370 393 Interest paid -4 0 0 0 Net Curr. Assets 198 356 350 432 CF from Fin. Activity -118 -60 -102 -100 Total assets 1,539 1,769 1,923 2,115 Key assumptions/operating metrics Inc / ( Dec) in Cash 63 128 1 75 Exchange rate (USD/INR) 45.7 47.9 53.5 52.0 Add: Opening Balance 224 287 415 417 Subsidy (INRb) 249 445 477 353 Closing Balance 287 415 417 492 Oil production (mmt) 27.3 26.9 27.7 29.6 Gas production (bcm) 25.3 25.5 26.5 26.1 Net realization (USD/bbl) 54 55 47 60
August 27 - 31, 2012 125 8th Annual Global Investor Conference
Oil India
Company description Key challenges Oil India (OIL), established in 1959, is a 'Navratna' state- Upstream subsidy sharing of ~40% could become owned company, engaged in exploration, the new normal, if the crude oil prices remain high development, production and transportation of crude and the OMCs prevented from raising retail prices oil and natural gas in India. OIL has 2P reserves of of fuels. 944mmboe, ~94% of these located in the north-east. It Oil India's producing assets are concentrated in owns common carrier cross-country pipeline of 1,157km Assam and are present in tough terrains. Hence, for crude oil, and 660km for products, and the 192km highly susceptible to supply disruption. natural gas pipeline to Numaligarh refinery. Key news flows / triggers to watch Key investment positives Subsidy rationalization by the government and de- Valuations attractive; steady production growth; gas controlling of diesel prices. price hike a long term trigger: Oil India trades at 50- Likely acquisition of overseas E&P assets given the 70% discount to global peers on EV/BOE (1P basis). high cash balance. Further; despite subsidy, OIL's net realization and PAT grew at 9% and 18% CAGR since FY05. On the 1QFY13 highlights; guidance for FY13, FY14 operational front, we expect 1.4% oil and 4.5% gas In 1QFY13, OIL subsidy share stood at INR20.2b and production CAGR over FY12-14. its share in upstream subsidy stood at 13.4% (similar Healthy oil/gas reserve ratio; RRR>1 consistently: to FY12). OIL's reserve mix is favorable with oil contributing 1QFY13 net realization at USD53.9/bbl down 10% 62% of its 2P reserves and 1P reserves being only at YoY but up 38% QoQ. 53% of 2P reserves, indicating a large scope for Oil India will start drilling in NELP blocks in Mizoram increase in 1P. and KG onshore. Cash deployment - a near-term trigger: Expect Oil India is targeting to acquire overseas producing announcement of overseas acquisition in near term. assets. As on Mar 2012, OIL had cash balance of INR109b (48% of assets, 38% of current market cap).
Stock info Quarterly Performance (INR Billion) Bloomberg OINL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 601 Operating Income 23 33 25 17 23 98 93 CMP (INR) 479 Change (%) 50.2 37.8 4.5 -14.8 2.0 0.0 -4.7 Mcap (USD b) 5.2 EBITDA 12 16 13 5 11 47 43 52-Wk Range (INR) 556 / 431 Change (%) 67.8 19.9 -3.4 -50.0 -12.2 5.5 290.0 1, 6, 12 Rel Perf (%) -4 / -6 / -14 EBITDA Margin (%) 54.5 49.5 53.5 28.0 47.0 47.9 45.9 Reported PAT 8 11 10 4 9 34 34 Adjusted PAT 8 11 10 4 9 34 34 Change (%) 69.5 24.3 1.2 -20.9 9.5 15.6 262.7 Shareholding pattern (%) PAT Margin (%) 37.1 34.8 40.6 25.9 39.9 35.3 36.2 Jun-12 Mar-12 Jun-11 Key Metrics Promoter 78.4 78.4 78.4 Fx rate (INR/USD) 45 46 51 50 54 48 54 Dom. Inst. 5.2 5.0 5.3 Gross Oil Realiz. 116 112 110 120 110 115 105 Foreign 1.7 1.9 2.1 Subsidy 57 26 53 81 56 54 53 Others 14.7 14.7 14.1 Net Oil Realization 60 86 57 39 54 60 52 Subsidy (INR b) 18 8 19 29 20 74 79 E: MOSL Estimates
126 August 27 - 31, 2012 8th Annual Global Investor Conference
Oil India: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 83,034 97,741 93,122 106,611 Basic (INR) Change (%) 5.0 17.7 -4.7 14.5 EPS (Adj) 48.0 57.3 56.1 64.7 Change in Stocks -76 -88 29 0 Cash EPS 56.0 65.9 65.2 74.3 Production Costs 13,789 23,074 18,880 20,196 Book Value 259.5 294.9 329.4 370.7 Statutory Levies 24,423 27,904 31,466 34,045 DPS 15.0 19.0 19.0 20.0 EBITDA 44,898 46,851 42,747 52,370 Payout (incl. Div. Tax.) 36.4 38.4 38.4 36.1 % of Net Sales 54.1 47.9 45.9 49.1 D,D&A 12,669 15,263 14,421 14,298 Valuation (x) Interest 139 105 8 8 P/E 9.9 8.3 8.5 7.4 Other Income 12,458 19,536 21,361 19,189 Cash P/E 8.5 7.2 7.3 6.4 Prior period & other adj. 1,421 0 0 0 EV / EBITDA 4.0 3.8 4.2 3.4 PBT 43,127 51,019 49,678 57,253 EV/Sales 2.2 1.8 1.9 1.7 Tax 14,255 16,549 15,952 18,384 EV / BOE (1P Reserves) 7.8 7.4 6.7 6.8 Rate (%) 33.1 32.4 32.1 32.1 Price / Book Value 1.8 1.6 1.4 1.3 PAT 28,872 34,469 33,727 38,869 Dividend Yield (%) 3.1 4.0 4.0 4.2 Change (%) 10.6 19.4 -2.2 15.2 Profitability Ratios (%) Balance Sheet (INR Million) RoE 19.7 20.7 18.0 18.5 Y/E March 2011 2012 2013E 2014E RoCE 27.3 27.7 24.8 25.5 Share Cap.(incl sh.suspense)2,405 6,011 6,011 6,011 Turnover Ratios Reserves 153,614 171,235 192,006 216,849 Debtors (No. of Days) 11 11 11 11 Net Worth 156,019 177,247 198,017 222,860 Fixed Asset Turnover (x) 3322 Total Loans 10,268 101 101 101 Deferred Tax 11,491 10,768 11,816 13,024 Leverage Ratio Well Abandonment 1,645 1,645 1,645 1,645 Net Debt / Equity (x) -0.7 -0.6 -0.5 -0.5 Capital Employed 179,422 189,760 211,579 237,630 * At price of INR1,050/share Gross Fixed Assets 33,203 37,403 40,903 44,403 Less: Depreciation 23,306 24,815 26,565 28,529 Cash Flow Statement (INR Million) Net Fixed Assets 9,897 12,588 14,338 15,874 Y/E March 2011 2012 2013E 2014E Capital WIP 4,484 4,484 4,484 4,484 OP/(Loss) before Tax 43,132 51,019 49,678 57,253 Producing/pre-producing 41,343 50,911 72,931 98,289 Depreciation 4,790 5,142 5,454 5,786 Investments 8,904 14,520 14,520 14,520 Interest /Other Income -7,886 105 8 8 Inventory 5,004 5,377 5,517 5,944 Direct Taxes Paid -13,819 -17,272 -14,904 -17,176 Debtors 2,495 2,988 2,806 3,213 (Inc)/Dec in Wkg. Capital 4,034 -2,659 1,528 767 Cash & Bank Balance 117,693 107,497 107,073 106,998 Other op activities 288 2,600 5,775 5,320 Loans & Adv. and Other CA 22,819 22,819 22,819 22,819 CF from Op. Activity 30,540 38,933 47,540 51,959
Liabilities 20,996 19,203 20,690 22,291 (Inc)/Dec in FA & CWIP -9,518 -20,000 -35,000 -38,000 Provisions 12,220 12,220 12,220 12,220 (Pur)/Sale of Investments 4,692 -5,616 0 0 Net Current Assets 114,794 107,258 105,306 104,463 Other In activities 6,343 0 0 0 Application of Funds 179,422 189,760 211,579 237,630 CF from Inv. Activity 1,517 -25,616 -35,000 -38,000 Key assumptions/operating metrics Y/E March 2011 2012 2013E 2014E Inc / (Dec) in Debt 9,893 -10,167 0 0 Exchange rate (INR/USD) 45.6 47.9 53.5 52.0 Interest paid -153 -105 -8 -8 Subsidy (INR b) 32.9 73.5 78.8 58.4 Dividends Paid -9,533 -13,241 -12,956 -14,026 Oil production (mmt) 3.6 3.8 3.9 4.0 CF from Fin. Activity 206 -23,513 -12,964 -14,035 Gas production (bcm) 2.4 2.6 2.7 2.9 Gross realization (USD/bbl) 86 115 105 100 Inc / ( Dec) in Cash 32,264 -10,196 -424 -76 Subsidy (USD/bbl) 28 55 53 39 Add: Opening Balance 85,429 117,693 107,497 107,073 Net realization (USD/bbl) 59 60 53 61 Closing Balance 117,693 107,497 107,073 106,998
August 27 - 31, 2012 127 8th Annual Global Investor Conference
Phoenix Mills
Company description Key challenges Phoenix Mills is a pioneer in the development of large High leverage with net DER of 0.86x. Any delay in scale, mixed-format retail development in India. It is a monetization of residential/commercial projects unique, low-risk play on the booming domestic could defer de-leveraging plan consumption story with no retail-specific risks. The exit of PE investors at Market City SPVs, although the company does not carry obligations Through its subsidiaries and associate companies it is to provide an exit to these investors. undertaking 40 retail/hospitality projects, totaling Retail demand supply dynamics at tier II cities ~50msf across India. It owns one of the most successful malls in India, High Street Phoenix (HSP) in Parel, Key news flows / triggers to watch Mumbai. With the commencement of Market City Leasing momentum and operational ramp up at projects and Shangri-la hotel, we expect rental income Market City SPVs. from retail to increase from INR2.5b in FY12 to INR3.9b De-leveraging. in FY14. Value unlocking from Phase IV at HSP, where increase in FSI could lend further upside. Key investment positives Deep understanding of retail business, strong 1QFY13 highlights; guidance for FY13, FY14 relationship with marquee international/domestic Consumptions and footfalls at Market City Pune in brands, financing partners to execute asset-heavy 1QFY13 increased 2.6x since commencement in projects, strategic partner to tap tier II markets 1QFY12. Consumptions improved from INR308m in Single-asset company to pan-India positioning with 3QFY12 to INR608m in 1QFY13 at Bangalore. several assets commencing operations, taking Bringing certain change to earlier plan of buying operational assets from 2.5msf (FY11) to 5.8msf/ out Kshitij's stake in Chennai Market City alone, 8.9msf/10.7msf in FY12/13/14 respectively PHNX board has approved a proposal to buy out the Asset-heavy model offering a play on India's stake jointly with Sharyans Resources. PNHX will booming domestic consumption and retailing story hold 50.01%/50% in Classic Mall/Classic Housing post – rental income CAGR of 25% over FY12-14. completion of the transaction. Monetization of residential and commercial land The management expects no increase in leverage parcels at Market City SPVs offer healthy cash flow on account of construction expenditure, but the visibility to address liquidity risk. same could increase on acquisitions, if any.
Stock info Quarterly Performance (INR Million) Bloomberg PHNX IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 145 Operating Income 535 474 505 600 626 3,666 4,365 CMP (INR) 180 Change (%) 32.4 6.9 12.0 28.3 17.0 74.4 19.1 Mcap (USD b) 0.5 EBITDA 331 333 373 363 394 2,114 2,543 52-Wk Range (INR) 228 / 149 Change (%) 12.6 5.1 14.0 13.2 19.3 50.4 20.3 1, 6, 12 Rel Perf (%) -5 / -12 / -21 EBITDA Margin (%) 62 70 74 61 63 57.7 58.3 Reported PAT 272 239 269 273 306 1,056 1,141 Adjusted PAT 272 239 269 273 306 1,056 1,141 Shareholding pattern (%) Change (%) 49.1 8.0 13.1 0.6 12.4 25.5 8.0 Jun-12 Mar-12 Jun-11 PAT Margin (%) 50.9 50.4 53.3 45.5 48.9 28.8 26.1 Promoter 65.9 65.9 65.9 E: MOSL Estimates Dome. Inst. 4.6 5.0 5.4 Foreign 23.6 23.2 22.5 Others 5.9 5.9 6.2
128 August 27 - 31, 2012 8th Annual Global Investor Conference
Phoenix Mills: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 2,102 3,666 4,365 7,511 Basic (INR) EBITDA 1,406 2,114 2,543 4,018 Adjusted EPS 5.8 7.3 7.9 14.5 % of Net Sales 66.9 57.7 58.3 53.5 Growth (%) 36.5 25.5 8.0 84.3 Depreciation 314 563 802 1,051 Cash EPS 7.9 9.9 11.9 17.8 Interest 228 944 1,097 1,475 Book Value 115.3 118.1 123.6 135.8 Other Income 287 446 581 622 DPS 0.9 2.0 2.0 2.0 PBT 1,151 1,053 1,225 2,114 Payout (incl. Div. Tax.) 17.3 32.1 29.7 16.1 Tax 321 189 306 592 Rate (%) 27.9 18.0 25.0 28.0 Valuation (x) Reported PAT 830 864 1,141 2,103 P/E 25.2 23.4 12.7 Adjusted PAT 842 1,056 1,141 2,103 Cash P/E 18.7 15.5 10.4 Change (%) 36.5 25.5 8.0 84.3 EV/EBITDA 20.1 16.4 10.1 Balance Sheet (INR Million) EV/Sales 11.6 9.6 5.4 Price/Book Value 1.6 1.5 1.4 Y/E March 2011 2012 2013E 2014E Equity Capital 290 290 290 290 Profitability Ratios (%) Reserves 16,410 16,816 17,618 19,382 RoE 5.0 6.2 6.4 10.7 Net Worth 16,700 17,105 17,908 19,671 RoCE 5.2 6.1 6.2 9.3 Loans 9,628 16,748 16,248 15,748 Deffered Tax Liability -9 -247 -247 -247 Leverage Ratio Minority Interest 1,965 3,566 3,823 4,118 Debt/Equity (x) 0.5 0.9 0.8 0.8 Capital Employed 28,284 37,173 37,731 39,290 Gross Fixed Assets 8,880 13,383 17,696 19,228 Cash Flow Statement (INR Million) Less: Depreciation 948 1,503 2,304 3,355 Y/E March 2011 2012 2013E 2014E Net Fixed Assets 7,932 11,880 15,392 15,873 PBT before EO Items 1,151 1,053 1,225 2,114 Capital WIP 10,997 13,591 11,390 11,607 Add : Depreciation 314 563 802 1,051 Investments 4,787 4,869 4,869 4,869 Interest 228 944 1,097 1,475 Curr. Assets 8,833 13,058 13,711 15,879 Less : Direct Taxes Paid 321 189 306 592 Inventory 1,182 2,516 2,768 3,183 CF from Operations -500 2,085 4,161 4,947 Debtors 961 618 680 748 Cash & Bank Balance 816 1,000 1,112 1,997 (Inc)/Dec in FA -2,785 -7,105 -2,112 -1,748 Inventory 1,182 2,516 2,768 3,183 (Pur)/Sale of Investments 814 -83 0 0 Loans and Advances 4,388 6,045 6,385 6,768 CF from Investments -1,971 -7,188 -2,112 -1,748 Current Liab. & Prov. 3,083 3,710 4,864 5,755 Creditors 2,723 3,297 4,451 5,342 (Inc)/Dec in Net Worth -30 -550 0 0 Provisions 360 413 413 413 (Inc)/Dec in Debt 3,020 7,120 -500 -500 Net Current Assets 4,568 6,832 6,079 6,941 Less : Interest Paid 228 944 1,097 1,475 Application of Funds 28,284 37,173 37,731 39,290 Dividend Paid 146 339 339 339 CF from Fin. Activity 2,617 5,287 -1,936 -2,314 Key assumptions/operating metrics Stake (%) Rental Income 2011 2012 2013E 2014E Inc/Dec of Cash 145 184 113 885 100% HSP 1.80 1.96 2.19 2.30 Add: Beginning Balance 671 816 1,000 1,112 Standalone 1.80 1.96 2.19 2.30 Closing Balance 816 1,000 1,112 1,997 59% Pune 0.26 0.43 0.48 24% Kurla 0.07 0.25 0.32 46% Bangalore 0.09 0.21 0.25 31% Chennai 0.00 0.07 0.23 Market cities 0.00 0.41 0.97 1.29 47-74 BARE 0.05 0.07 0.15 0.15 EWDPL 0.08 0.15 0.18 Treasure&Phoenix United 0.05 0.15 0.29 0.33 Grand total 1.85 2.52 3.45 3.92 53% Sangrila Hotel 0.00 0.23 1.02 Total rental 1.85 2.52 3.68 4.94
August 27 - 31, 2012 129 8th Annual Global Investor Conference
Pidilite Industries
Company description another INR2b in Synthetic Elastomers project, Pidilite Industries has been instrumental in evolution although the pilot has been a success, risks of branded adhesives in the Indian market, a segment regarding completion and success still abound. which is commoditized globally. It has strong brands Pidilite's international operations have been losing like Fevicol, M-Seal, Dr Fixit, Hobby Ideas and Fevicryl. money due to lack of scale in most of the Sales mix includes Adhesives (49%), Construction subsidiaries. We believe it would require at-least a chemicals (19%), Art material (10%) and Industrial couple of years for these subs to turn profitable. chemicals (22%). Key news flows / triggers to watch Key investment positives Price trend of VAM and Packaging, decline in costs Pidilite is a play on growth opportunity in both can boost margins. consumer and industrial demand in India. It has Increase in housing and infra spends, as it can boost products which cater to woodwork, home and the growth rates further. office, construction, waterproofing and repairs etc. Successful commissioning of Elastomers project. Pidilite has strong pricing power as its consumer and Bazaar segment has EBIT margins of 26%. 1QFY13 highlights; guidance for FY13, FY14 Pidilite has launched a host of innovative products Consumer & Bazaar sales were up 21.6% led by in waterproofing, construction chemicals and repair strong momentum in volume growth and pricing. work which will enable sustain high growth (20% EBIT Margins in this segment were up 125bp. CAGR from past 5 years) Industrial chemical sales increased 11.5%, while Pidilite's margins can recover sooner than expected margins declined 270bp. if crude prices tend lower; VAM (Vinyl Acetate Brazil - sales declined by 14% yoy - pressure on Monomer), its key input, is a crude derivative. margin continues to be there, losses jumped from Key challenges 5mn in 1QFY12 to 44mn in 1QFY13. Pidilite has invested INR3.3b and will be putting in We expect 22% CAGR in earnings over FY12-14E.
Stock info Quarterly Performance (INR Million) Bloomberg PIDI IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 FY13E Equity Shares (m) 508 Operating Income 7,680 7,103 6,918 6,519 9,125 23,670 33,820 CMP (INR) 180 Change (%) 21.5 20.5 16.5 15.6 18.8 159.4 20.1 Mcap (USD b) 1.6 EBITDA 1,521 1,302 1,207 958 1,907 4,692 6,353 52-Wk Range (INR) 188 / 134 Change (%) -2.2 4.8 1.9 17.8 25.4 146.0 28.3 1, 6, 12 Rel Perf (%) 8 / 25 / 2 EBITDA Margin (%) 19.8 18.3 17.4 14.7 20.9 19.8 18.8 Reported PAT 1,077 815 593 710 1,334 0 0 Adjusted PAT 1,078 864 790 749 1,333 3,297 4,329 Shareholding pattern (%) Change (%) 0.1 2.2 -6.5 41.6 23.6 147.4 21.7 Jun-12 Mar-12 Jun-11 PAT Margin (%) 14.0 12.2 11.4 11.5 14.6 13.9 12.8 Promoter 70.8 70.8 70.7 Key Operating metrics Dome. Inst. 4.9 5.8 7.4 Consumer & Bazaar 22.8 23.2 22.6 22.3 21.6 Foreign 12.9 12.4 11.0 Industrial Products 18.4 17.6 -2.1 5.0 11.5 Others 11.5 11.0 10.9 E: MOSL Estimates
130 August 27 - 31, 2012 8th Annual Global Investor Conference
Pidilite Industries: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 23,806 28,164 33,820 40,398 Basic (INR) Change (%) 21.8 18.3 20.1 19.4 EPS 6.6 7.0 8.3 10.1 Raw Materials 12472 15674 18457 22153 Cash EPS 10.4 10.7 13.2 15.8 Gross Profit 11334 12490 15363 18245 BV/Share 22.5 26.6 34.0 40.6 Margin (%) 47.6 44.3 45.4 45.2 DPS 1.8 2.0 2.5 3.0 Operating Expenses 6506 7540 9011 10568 Payout % 31.3 36.0 35.4 34.7 EBITDA 4,828 4,950 6,353 7,677 Margin (%) 20.3 17.6 18.8 19.0 Valuation (x) Depreciation 444 479 548 612 P/E 24.9 23.4 19.9 16.2 Int. and Fin. Charges 268 245 149 112 Cash P/E 15.7 15.3 12.5 10.4 Other Income 150 428 235 313 EV/Sales 3.4 2.8 2.4 1.9 Profit before Taxes 4,266 4,653 5,890 7,267 EV/EBITDA 16.8 16.1 12.5 10.1 Margin (%) 17.9 16.5 17.4 18.0 P/BV 7.3 6.2 4.8 4.0 Tax 936 1,096 1,561 1,962 Dividend Yield (%) 1.1 1.2 1.5 1.8 Tax Rate (%) 21.9 23.6 26.5 27.0 Adj PAT 3330 3557 4329 5305 Return Ratios (%) Change (%) 13.4 6.8 21.7 22.5 RoE 29.2 26.3 24.3 24.9 Margin (%) 14.0 12.6 12.8 13.1 RoCE 30.9 29.1 30.7 32.7 Exceptional/Prior Period inc 250 151 0 0 Reported PAT 3,080 3,407 4,329 5,305 Working Capital Ratios Debtor (Days) 44 45 45 45 Balance Sheet (INR Million) Creditor (Days) 80 82 79 78 Y/E March 2011 2012 2013E 2014E Asset Turnover (x) 3.6 3.8 3.9 4.0 Share Capital 506 508 524 524 Reserves 10,889 13,000 17,309 20,773 Leverage Ratio Net Worth 11,395 13,507 17,833 21,298 Debt/Equity (x) 0.3 0.2 0.1 0.0 Loans 2,867 2,918 1,405 806 Deferred Liability 410 435 461 486 Cash Flow Statement (INR Million) Capital Employed 14,672 16,860 19,699 22,590 Y/E March 2011 2012 2013E 2014E PBT before Extra Ord 4,266 4,653 5,890 7,267 Gross Block 8,720 9,420 10,520 11,720 Add: Depreciation 444 479 548 612 Less: Accum. Depn. 4,310 4,800 5,348 5,960 Net Fixed Assets 4,410 4,620 5,172 5,760 Interest Paid 268 245 149 112 Capital WIP 3,331 3,600 3,700 3,850 Less: Taxes Paid 936 1,096 1,561 1,962 Investments 4,656 5,841 7,259 8,661 (Incr)/Decr in WC -372 -392 -685 -653 CF from Operations 3,670 3,890 4,342 5,375 Curr. Assets, L&A 7,596 9,367 11,287 13,416 Extra ordinary items -250 -151 0 0 Inventory 3,544 4,472 5,506 6,579 CFO after extraordinary 3,420 3,739 4,342 5,375 Account Receivables 2,866 3,469 4,130 4,934 Cash and Bank Balance 273 405 489 587 Incr in FA -1,236 -959 -1,200 -1,350 Others 913 1,020 1,162 1,315 Pur of Investments 452 -1,185 -1,419 -1,402 Curr. Liab. and Prov. 5,321 6,568 7,719 9,096 CF from Invest. -784 -2,143 -2,619 -2,752 Account Payables 4,137 5,199 5,975 7,013 Provisions 1,184 1,369 1,744 2,083 Change in Networth -2,105 -2,453 -1,507 -3,649 Net Current Assets 2,275 2,799 3,568 4,319 Incr in Debt -1,347 50 -1,512 -599 Application of Funds 14,672 16,860 19,699 22,590 Dividend Paid 1,029 1,184 1,529 1,834 Interest Paid -268 -245 -149 -112 CF from Fin. Activity -2,691 -1,464 -1,640 -2,525 Key assumptions/operating metrics - Growth (%) Y/E March 2011 2012 2013E 2014E Incr/Decr of Cash -55 132 83 99 Consumer & Bazaar Products 22.3 21.4 20.4 20.8 Add: Opening Balance 328 273 405 489 Ind & Speciality chemicals 22.3 14.1 14.7 14.8 Closing Balance 273 405 489 587
August 27 - 31, 2012 131 8th Annual Global Investor Conference
Power Grid
Company description Key challenges Power Grid Corporatation (PGCIL) is a central Meaningful delay in project execution owing to transmission utility (CTU) with a Navratna status, which delay in obtaining right of way. owns and operates most of India's inter-state and inter- Continued delays in generation projects may slow regional transmission network. In addition to its down the growth momentum for PGCIL. regulated business, PGCIL also provides consultancy Weak financials of SEBs could elongate cash flow services in the transmission space and has laid down cycle, receivables. optical fibre network for leasing to telecom companies. Key news flows / triggers to watch Key investment positives PGCIL is upbeat on meeting capex target of Management has guided for capex worth INR1t in INR1,000b in 12th plan and thus capex of INR200b 12th plan which is ~2x the Eleventh Plan capex, and pa is crucial to watch for. thus a key driver of earnings for PGCIL. Capitalization has been strong for the company CERC has approved setting up of nine high speed aided by higher capacity addition. Fuel supply has transmission corridors (HSTCs) at a cost of INR750b been at risk in the interim and thus (PGCIL scope at INR660b), significantly improving implementations of FSAs to be monitored for business visibility for PGCIL. incremental capacity addition on IPPs side. PGCIL's RAB is set to increase from ~INR178b as at March 2012 to INR283b by FY14E (CAGR of 26%), as 1QFY13 highlights; guidance for FY13, FY14 projects of ~INR350b are commissioned and PGCIL 1QFY13 capitalization stood higher at INR41b capitalized in this period. This will lead to v/s INR8b YoY. corresponding increase in regulatory returns. Management is keen to lower CWIP in FY13 Short term open access, consultancy division and (INR155b as at Mar-12); it is targeting capitalization telecom business are new additional of income, of at least INR200b, v/s targeted capex of INR200b which aids core earnings, improve reported RoE. (INR50b capitalization till July-12) Inter-State transmission opportunity in 13th plan is PGCIL maintained its 12th Plan capex target of pegged at INR1.35t, where PGCIL would have to INR1t+ and guided to manage equity commitment compete on CBT basis. It has already demonstrated without any dilution, if need by taking lower DER. its capability in CBT regime winning 2 projects.
Stock info Quarterly Performance (INR Million) Bloomberg PWGR IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 4630 Operating Income 22,025 22,644 24,666 31,019 28,883 100,353 131,748 CMP (INR) 118 Change (%) 10.2 6.5 20.2 40.3 31.1 19.6 31.3 Mcap (USD b) 9.8 EBITDA 18,455 18,978 21,027 26,038 24,646 83,824 112,739 52-Wk Range (INR) 122 / 94 Change (%) 9.8 6.3 21.7 40.2 33.6 18.9 34.5 1, 6, 12 Rel Perf (%) 1 / 9 / 9 EBITDA Margin (%) 83.8 83.8 85.2 83.9 85.3 83.5 85.6 Reported PAT 7,053 7,087 8,092 10,317 8,705 32,550 39,758 Adjusted PAT 7,022 7,601 7,743 10,832 9,065 33,199 39,758 Shareholding pattern (%) Change (%) 18.9 27.1 28.1 44.7 29.1 30.7 19.8 Jun-12 Mar-12 Jun-11 PAT Margin (%) 31.9 33.6 31.4 34.9 31.4 33.1 30.2 Promoter 69.4 69.4 69.4 Key Operating metrics (INR b) Dom. Inst. 7.8 8.0 7.7 Capitalization 8 33 22 78 41 141 170 Foreign 13.1 13.0 13.6 Capex 19 27 41 91 30 178 190 Others 9.7 9.5 9.3 RAB 138 148 154 178 190 178 229 E: MOSL Estimates
132 August 27 - 31, 2012 8th Annual Global Investor Conference
Power Grid: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 83,887 100,353 131,748 159,616 Basic (INR) Change (%) 17.7 19.6 31.3 21.2 Consolidated EPS 5.5 7.2 8.7 10.5 Cost of Goods Sold 7,459 8,430 9,694 11,148 Growth (%) 0.3 30.7 20.8 21.3 Staff Cost 5,915 8,100 9,315 10,712 Cash EPS 10.2 12.7 16.1 19.8 EBITDA 70,513 83,824 112,739 137,756 Book Value 46.1 50.7 56.2 63.1 % of Net Sales 84.1 83.5 85.6 86.3 DPS 1.8 2.2 2.6 3.2 Depreciation 21,994 25,725 34,652 42,965 Eq. Div.Payout (incl. Div. Tax.) 34.9 35.6 35.3 35.0 Interest 17,339 19,432 25,900 29,313 Other Income 7,111 7,497 3,274 2,382 Valuation PBT 38,247 45,976 55,462 67,861 P/E 21.4 16.4 13.6 11.2 Tax 11,278 13,427 15,704 19,215 Cash P/E 11.5 9.2 7.3 5.9 Rate (%) 29.5 29.2 28.3 28.3 EV/EBITDA 13.0 12.4 10.3 9.4 Reported PAT 26,969 32,550 39,758 48,646 EV/Sales 10.9 10.4 8.8 8.1 Extra-ordinary items -1,569 649 360 0 Price/Book Value 2.5 2.3 2.1 1.9 Adjusted PAT 25,400 33,199 40,118 48,646 Dividend Yield (%) 1.5 1.8 2.2 2.7 Change (%) 10.3 30.7 20.8 21.3 Profitability Ratios (%) RoE 13.6 14.8 16.2 17.6 Balance Sheet (INR Million) RoCE 9.3 9.0 9.4 9.6 Y/E March 2011 2012 2013E 2014E Equity Share Capital 46,297 46,297 46,297 46,297 Turnover Ratios Reserves 167,373 188,319 214,056 245,700 Debtors (Days) 138 85 75 75 Net Worth 213,646 234,593 260,329 291,973 Asset Turnover (x) 0.2 0.2 0.2 0.2 Loans 408,828 520,004 631,085 748,341 Leverage Ratio Deferred tax liability 11,467 16,009 21,575 28,385 Debt/Equity (x) 1.7 2.1 2.4 2.6 Advance against dep 21,761 21,761 21,761 21,761 Grant in Aid 1,713 1,713 1,713 1,713 Cash Flow Statement (INR Million) Capital Employed 657,415 794,080 936,463 1,092,173 Y/E March 2011 2012 2013E 2014E Gross Fixed Assets 503,518 644,518 814,518 994,518 PBT before EO Items 38,291 46,163 55,462 67,861 Less: Depreciation 131,278 157,003 191,655 234,620 Add : Depreciation 21,994 25,725 34,652 42,965 Net Fixed Assets 372,240 487,514 622,862 759,898 Interest 17,339 19,432 25,900 29,313 Capital WIP 266,246 314,789 334,789 364,789 Less : Direct Taxes Paid 11,278 13,427 15,704 19,215 Investments 13,651 11,846 10,041 8,237 (Inc)/Dec in WC -5,910 9,881 909 2,063 Curr. Assets 105,171 118,485 122,330 131,355 CF from Operations 60,436 87,775 101,218 122,986 Inventory 3,815 4,674 6,136 7,434 EO Income -44 -187 0 0 Debtors 31,621 23,370 27,072 32,798 CF frm Oper. incl. EO Items 60,392 87,588 101,218 122,986 Cash & Bank Balance 36,801 21,333 11,082 3,625 (Inc)/Dec in FA -135,645 -189,543 -190,000 -210,000 Other Current Assets 4,995 5,744 6,606 7,597 (Pur)/Sale of Investments 882 1,805 1,804 1,804 Loans & Advances 27,940 63,364 71,434 79,902 CF from Investments -134,764 -187,738 -188,196 -208,196 Current Liab. & Prov. 99,893 138,555 153,560 172,106 Net Current Assets 5,279 -20,069 -31,230 -40,751 (Inc)/Dec in Net Worth 36,719 0 0 0 Application of Funds 657,415 794,080 936,463 1,092,173 (Inc)/Dec in Debt 68,441 115,718 116,646 124,066 Less : Interest Paid 17,339 19,432 25,900 29,313 Key assumptions/operating metrics (INR b) Dividend Paid 9,426 11,603 14,021 17,002 CF from Fin. Activity 78,396 84,683 76,726 77,752 Y/E March 2011 2012 2013E 2014E Capex 137 178 190 210 Inc/Dec of Cash 4,024 -15,467 -10,252 -7,457 Capitalization 74 141 170 180 Add: Beginning Balance 32,776 36,801 21,333 11,082 Regulated Equity 136 178 229 283 Closing Balance 36,801 21,333 11,082 3,625
August 27 - 31, 2012 133 8th Annual Global Investor Conference
Reliance Communications
Company description auction is expected to set the base price for all RCom is an integrated telecom operator with presence future spectrum payments. in wireless (CDMA+GSM), long-distance (wholesale Potential value unlocking from tower assets and voice and data), and broadband segments. It has ~17% Reliance Globalcom business. subscriber share of the Indian wireless market (second Final government decision on spectrum re-farming. highest). 'Global' segment includes wholesale voice Ramp-up of the 3G subscriber base post recent sharp services, retail ILD calling cards, and network tariff cuts introduced by the industry. infrastructure based services. Broadband segment caters to voice, data, video, internet, and IT 1QFY13 highlights; guidance for FY13, FY14 infrastructure requirements of enterprises. 1QFY13 EBITDA grew 3% YoY and 1% QoQ to INR16.5b (5% below estimate). Key investment positives Reported PAT of INR1.62b was in line with our Potential value unlocking in the tower business or estimate as lower depreciation and tax offset the strategic stake sale at the parent level can lead to EBITDA shortfall. de-leveraging and provide adequate resources to Wireless revenue growth was below estimate at drive growth in GSM and 3G. 0.5% QoQ. Wireless EBITDA grew 0.6% QoQ to Presence in GSM as well as CDMA technologies. INR12.1b (EBITDA margin of 26.7%). Potential outlay related to renewal remains one of Traffic was up 2% QoQ (4%/4%/6% for Bharti/ the lowest as none of the higher priced circles are Vodafone/Idea) to 105b minutes coming up for renewal in the next few years. RPM declined 1% QoQ (2.5% QoQ decline for Bharti/ Key challenges Idea) to 43.1p. Hyper-competition in the Indian mobile industry. Flat 1QFY13 wireless EBITDA performance compared Regulatory uncertainty related to pricing of allocated favorably with the sharp QoQ decline reported by spectrum and spectrum re-farming. Bharti (India & SA) and Idea. High leverage with net debt/EBITDA of >5x. While net debt declined by INR1.9b QoQ to INR356b, this was accompanied with ~INR19b Key news flows / triggers to watch increase in current liabilities to INR166b. 2G spectrum auction mandated by the Supreme Capex guidance for FY13 is INR15b. Court is expected to be held in November 2012. The
Stock info Quarterly Performance (INR Million) Bloomberg RCOM IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 2064 Revenue 49,401 50,402 50,521 53,100 53,192 203,424 213,979 CMP (INR) 56 YoY Change(%) -3.3 -1.5 1.0 -0.4 7.7 -1.1 5.2 Mcap (USD b) 2.1 EBITDA 16,021 16,051 16,111 16,322 16,502 64,506 65,949 52-Wk Range (INR) 110 / 53 YoY Change(%) -1.8 -3.3 -3.4 2.5 3.0 -1.5 2.2 1, 6, 12 Rel Perf (%) -17 / -43 / -31 EBITDA Margin(%) 32.4 31.8 31.9 30.7 31.0 31.7 30.8 Reported PAT 1,574 2,521 1,862 3,316 1,624 9,274 6,611 Shareholding pattern (%) Adjusted PAT 2,235 3,223 2,408 2,017 1,914 9,884 7,587 Jun-12 Mar-12 Jun-11 YoY Change(%) -25.4 -34.3 -54.2 13.6 -14.4 -33.8 -23.2 Promoter 67.9 67.9 67.9 PAT Margin(%) 4.5 6.4 4.8 3.8 3.6 4.9 3.5 Dom. Inst. 9.3 9.3 8.9 Key operating metrics Foreign 8.0 8.4 9.7 Mobile Traffic (B Min) 98 99 100 103 105 399 426 Others 14.8 14.4 13.5 QoQ Change(%) 3.2 1.4 1.0 3.4 1.8 Mobile RPM (INR) 0.44 0.45 0.45 0.44 0.43 0.44 0.43 QoQ Change(%) -0.1 0.7 -0.3 -2.0 -1.3 E: MOSL Estimates
134 August 27 - 31, 2012 8th Annual Global Investor Conference
Reliance Communications: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Revenues 205,627 203,424 213,979 226,617 Basic (INR) Change (%) -7.6 -1.1 5.2 5.9 EPS 7.2 4.8 3.7 6.0 EBITDA 65,515 64,506 65,949 70,981 Cash EPS 26.5 24.1 21.7 24.7 % of Gross Sales 31.9 31.7 30.8 31.3 Book Value 177.3 157.9 158.6 164.3 Depn. & Amortization 39,739 39,783 37,254 38,571 DPS 0.6 0.3 0.3 0.3 EBIT 25,776 24,723 28,694 32,410 Payout %(Incl.Div.Taxes) 9.0 6.5 9.1 5.6 Net Interest and others -10,723 -15,901 -21,033 -19,866 PBT 15,053 8,822 7,661 12,545 Tax 117 -1,062 74 250 Valuation (x) Rate (%) 0.8 -12.0 1.0 2.0 P/E 11.6 15.2 9.4 Adjusted PAT 14,936 9,884 7,587 12,295 Cash P/E 2.3 2.6 2.3 Change (%) -69.4 -33.8 -23.2 62.0 EV/EBITDA 7.3 6.9 6.1 PAT after EO 13,457 9,274 6,611 10,829 EV/Sales 2.3 2.1 1.9 Price/Book Value 0.4 0.4 0.3 Balance Sheet (INR Million) Dividend Yield (%) 0.5 0.5 0.5 Y/E March 2011 2012 2013E 2014E Share Capital 10,320 10,320 10,320 10,320 Profitability Ratios (%) Addl. Paid up Capital 90,306 90,306 90,306 90,306 RoE 3.9 2.9 2.3 3.7 Reserves 256,892 216,497 216,932 227,157 RoCE 2.9 2.7 2.9 3.4 Net Worth 357,518 317,123 317,558 327,784 Loans 373,757 369,178 364,610 341,371 Minority Interest 8,245 8,602 9,683 11,148 Turnover Ratios Capital Employed 739,520 694,903 691,851 680,302 Debtors (Days) 71 64 71 71 Asset Turnover (x) 0.32 0.30 0.32 0.34 Gross Block 1,002,814 1,045,869 1,087,660 1,109,462 Less : Depreciation 273,406 331,091 379,870 418,441 Leverage Ratio Net Block 729,408 714,778 707,789 691,021 Debt/Equity Ratio(x) 1.0 1.1 1.1 1.0 Investments 1,089 1,230 1,284 1,284
Curr. Assets 160,784 160,806 179,806 189,132 Cash Flow Statement (INR Million) Inventories 5,172 5,663 5,077 5,377 Y/E March 2011 2012 2013E 2014E Debtors 40,017 35,839 41,876 44,349 Cash & Bank Balance 53,272 10,785 21,891 21,891 Op.Profit/(Loss) bef Tax 64,036 63,896 64,972 69,517 Other Current Assets 62,323 108,519 110,962 117,515 Other Income 0 0 0 0 Interest Paid -10,723 -15,901 -21,033 -19,866 Curr. Liab. & Prov. 151,761 181,911 197,028 201,135 Direct Taxes Paid -117 1,062 -74 -250 Net Curr. Assets 9,023 -21,105 -17,222 -12,003 (Inc)/Dec in Wkg. Cap. -120,718 -61,424 1,650 -5,220 Appl. of Funds 739,520 694,903 691,851 680,302 CF from Op.Activity -67,522 -12,367 45,515 44,181 Key assumptions/operating metrics Wireless (inc)/Dec in FA + CWIP -53,752 -25,153 -30,266 -21,803 Subs (m) 136 153 161 171 (Pur)/Sale of Investments 110 -141 -54 0 YoY (%) 33 13 5 6 CF from Inv.Activity -53,642 -25,294 -30,320 -21,803 Net adds per month (m) 2.77 1.4 0.7 0.8 YoY (%) 12 -48 -52 16 Issue of Shares 0 0 0 0 Total mobile traffic (b min) 375 399 426 446 Inc/(Dec) in Debt 126,284 -4,579 -4,568 -23,239 YoY (%) 7 7 7 5 Dividends Paid 2 2 2 2 Avg. Rev Per User (INR/mon) 116 102 98 99 YoY (%) -28 -12 -4 1 Other Financing Activities -434 -246 478 861 Minutes of Use/Sub/Month 262 231 226 224 CF from Fin.Activity 125,852 -4,823 -4,088 -22,376 YoY (%) -21 -12 -2 -1 Wireless RPM (INR) 0.44 0.44 0.43 0.44 Inc/(Dec) in Cash 4,687 -42,487 11,106 0 YoY (%) -8 0 -2 2 Add: Opening Balance 48,585 53,272 10,785 21,891 Wireless capex (INR b) 116 8 9 14 Closing Balance 53,272 10,785 21,891 21,891 Wireless Capex/Sales (%) 70 5 5 7 E: MOSL Estimates
August 27 - 31, 2012 135 8th Annual Global Investor Conference
Reliance Industries
Company description cotton prices will act as a limiting factor for margins Reliance Industries (RIL), a Fortune 500 company, is in the short term. India's largest private sector entity, with turnover of Key challenges USD66.8b and net profit of USD3.9b. Till recently, RIL Declining KG-D6 production. has reported consistently high CAGR in topline and RoE accretive cash utilization. bottomline through backward integration in energy Our estimates could be adversely affected by lower chain (textiles, petchem, refining and E&P). It is now than expected refining and petchem margins. trying to make its mark in new areas like retail and telecom (owns BWA license). Key news flows / triggers to watch DGH approvals for its E&P program and update on Key investment arguments its KG-D6 ramp-up. E&P (22% of FY12 EBIT) upside contingent on Margin trend in refining and petchem. government approvals: E&P segment growth is Developments on its USD12b capex plan on new limited in medium-term led by declining KG-D6 capacities. production and reserve downgrade by RIL/Niko. Launch of its Broadband Wireless Access (BWA) Delays in approvals of development plans for services. satellite fields in KG-D6 and NEC-25 is further adding to uncertainty. 1QFY13 highlights; guidance for FY13, FY14 Refining (40% of FY12 EBIT) - global capacity closures RIL' 1QFY13 GRM stood at USD7.6/bbl, a premium of will boost margins: Unless significant refining USD0.9/bbl over Singapore led by expansion in Arab closures take place, GRM's are unlikey to increase L-H differential and increased premium for low meaningfully in view of uncertain global economic sulphur diesel. environment (particularly Europe) and declining Petchem EBIT margin at 8% was the lowest since Light-Heavy differentials. 3QFY05 led by weak polyester and PP margins. Petchem (38% of FY12 EBIT) - Margins seems to have RIL plans to submit integrated revised field bottomed: While polymers margins seems to have development plan (FDP) for D1/D3 in 3QFY13. bottomed, recovery will be contingent on global RIL guides for 8-10% contribution at EBITDA level economic environment. On the polyester front, from its shale gas business by 2015.
Stock info Quarterly Performance (INR Billion) Bloomberg RIL IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 3242 Operating Income 810 786 851 852 919 3,299 3,550 CMP (INR) 815 Change (%) 39.1 36.7 42.4 17.2 13.4 32.9 7.6 Mcap (USD b) 47.4 EBITDA 99 98 73 66 67 336 289 52-Wk Range (INR) 902 / 674 Change (%) 6.3 4.8 -23.7 -33.3 -32.0 -11.8 -13.9 1, 6, 12 Rel Perf (%) 10 / 3 / 3 EBITDA Margin (%) 12.3 12.5 8.6 7.7 7.3 10.2 8.2 Reported PAT 57 57 44 42 45 200 190 Adjusted PAT 57 57 44 42 45 200 190 Change (%) 16.7 15.8 -13.6 -21.2 -21.0 -1.2 236.2 PAT Margin (%) 7.0 7.3 5.2 5.0 4.9 6.1 5.4 Key Metrics Shareholding pattern (%) GRM (USD/bbl) 10.3 10.1 6.8 7.6 7.6 8.7 7.8 Jun-12 Mar-12 Jun-11 KG-D6 production (mmscmd) 49 45 41 35 33 43 28 Segmental EBIT Breakup Promoter 45.3 44.9 44.8 Refining 32 31 17 17 22 97 89 Dom. Inst. 11.1 10.6 10.7 Petrochemicals 22 24 22 22 18 90 78 Foreign 21.0 21.7 21.9 E&P, others 15 15 13 10 10 53 36 Others 22.6 22.8 22.6 Total 6970514849239203 E: MOSL Estimates
136 August 27 - 31, 2012 8th Annual Global Investor Conference
Reliance Industries: Financials and valuation
Income Statement (INR Billion) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 2,482 3,299 3,531 3,226 Basic (INR) Change (%) 28.9 32.9 7.0 -8.6 EPS 62.0 61.3 58.7 63.5 EBITDA 381 336 289 322 Adj. EPS (ex Treasury) 68.4 67.7 64.9 70.2 % of Net Sales 15.4 10.2 8.2 10.0 Cash EPS 103.5 96.1 89.8 93.5 Depreciation 136 114 101 97 Adj. Book Value 511.2 560.7 613.2 671.5 Interest 23 27 29 29 DPS 8.0 8.5 8.9 9.3 Other Income 31 62 79 70 Payout (incl. Div. Tax.) 13.7 14.7 17.7 17.0 PBT 252 258 239 266 Valuation (x) Tax 50574960 P/E 13.2 13.3 13.9 12.8 Rate* (%) 19.6 22.2 20.3 22.6 Adj. P/E 11.9 12.0 12.6 11.6 PAT 203 200 190 206 Cash P/E 7.9 8.5 9.1 8.7 Adj. PAT 203 200 190 206 EV / EBITDA 7.7 7.9 9.2 8.1 Change (%) 24.9 -1.2 -5.0 8.2 EV / Sales 1.2 0.8 0.8 0.8 Balance Sheet (INR Billion) Adj. Price / Book Value 1.6 1.5 1.3 1.2 Y/E March 2011 2012 2013E 2014E Dividend Yield (%) 1.0 1.0 1.1 1.1 Share Cap. (incl sh. Susp.) 33 33 32 32 Profitability Ratios (%) Reserves 1483 1628 1765 1938 RoE 14.8 13.0 11.2 11.1 Net Worth 1,515 1,661 1,798 1,970 RoCE 12.9 12.1 10.7 11.1 Total Loans 674 684 682 679 Deferred Tax 116 121 126 131 Turnover Ratios Capital Employed 2,305 2,466 2,605 2,781 Debtors (No. of Days) 21 20 19 20 Fixed Asset Turnover (x) 1.1 1.5 1.7 1.5 Gross Fixed Assets 2213 2055 2106 2166 Leverage Ratio Less: Depreciation 785 918 1018 1115 Net Debt / Equity (x) 0.2 0.0 0.0 0.0 Net Fixed Assets 1,427 1,137 1,088 1,051 Capital WIP 128 78 179 293 Cash Flow Statement (INR Billion) Investments 377 540 581 623 Y/E March 2011 2012 2013E 2014E OP/(Loss) before Tax 252 258 239 266 Curr. Assets, L & Adv. Depreciation 162 137 101 97 Inventory 298 360 383 348 Interest /Other Income -3 -17 -50 -41 Debtors 174 184 189 173 Direct Taxes Paid -42 -48 -44 -55 Cash & Bank Balance 271 396 344 414 (Inc)/Dec in Wkg. Capital 1 -28 -98 14 Loans&Adv.and Other CA 171 257 264 272 Other op activities -38 -32 0 0 CF from Op. Activity 333 270 147 281 Current Liab. & Prov. Liabilities 497 442 375 343 (Inc)/Dec in FA & CWIP -121 -80 -153 -175 Provisions 46 43 48 50 (Pur)/Sale of Investments -141 62 -41 -42 Net Current Assets 373 712 758 814 Other In activities 59 -12 79 70 Application of Funds 2,305 2,466 2,606 2,781 CF from Inv. Activity -203 -30 -114 -146
Key assumptions/operating metrics Change in Equity 2 -2 -24 0 Exchange rate 46 48 54 52 Inc / (Dec) in Debt 30 -85 -32 -31 Refining throughput (mmt) 67 68 69 66 Dividends Paid -24 -28 -29 -34 Ref. cap. utilization (%) 107 109 111 107 CF from Fin. Activity 7 -115 -85 -65 RIL GRM 8.7 8.4 7.8 8.6 Singapore GRM 5.2 8.3 7.2 8.0 Inc / ( Dec) in Cash 137 125 -52 70 Premium 3.5 0.1 0.6 0.6 Add: Opening Balance 135 271 396 344 KG-D6 gas production* 56 43 28 22 Closing Balance 271 396 344 414 *mmscmd
August 27 - 31, 2012 137 8th Annual Global Investor Conference
Reliance Infrastructure
Company description Key challenges Reliance Infrastructure is an infrastructure Internal orders represent ~80% of EPC business conglomerate with presence in Roads, Urban Infra order book and R-Power contributes 90%+ of (MRTS), Power (entire chain including Generation, internal order book, leading to concentration. Transmission, Distribution), Real Estate, etc. The Sectoral caps/group exposure norms have impacted company has in-house EPC capabilities developed over funding to various power/infrastructure projects. period of time. Successful financial closure for major projects under development is important for timely Key investment positives implementation. Regulatory approval 1) Renewal of Rinfra' Mumbai region power distribution license for 25 years 2) Key news flows / triggers to watch Recovery of past arrears of INR19b 3) Levy of Cross MERC has approved recovery of prior period tariff subsidy surcharge, removes overhang on arrears (Including cross subsidy surcharge) of distribution business of Rinfra. INR23b. Recovery is to start from 1QFY13. EPC order book of INR156b (book to bill ratio of 1.3x), Firm gas allocation for Dadri/other gas based provides revenue visibility for the segment. projects from EGoM will provide visibility on gas RELI has invested INR40b in its infra portfolio of 25 based generation projects of R-Power. infra projects aggregating around ~INR400b, of Operational performance of infra projects in FY13 which 7 road projects (590 km), 6 transmission line (715km) are operational and is targeting to 1QFY13 highlights; guidance for FY13, FY14 commission another 3 Roads and 3 transmission lines Reliance Infra 1QFY13 PAT boosted by higher by FY13. revenue and margin under EPC segment. Net cash stands as at FY12 at INR44b coupled with EBIT contribution from Infra segment stood positive robust cash flows from existing operations and net at INR364m (v/s loss of INR55m YoY) in 1QFY13. debt free status would enable the company to fund As at FY12, equity investment in various equity contribution towards on-going/future infrastructure SPV's stand at INR43.6b and INR12b projects. outstanding equity is expected to be infused in near term.
Stock info Quarterly Performance (INR Million) Bloomberg RELI IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 263 Operating Income 36,607 39,505 44,777 57,316 34,473 178,205 145,124 CMP (INR) 511 Change (%) 64.3 62.0 69.8 148.1 -12.7 85.3 -18.6 Mcap (USD b) 2.4 EBITDA 6,961 7,096 6,518 6,173 4,598 26,748 15,003 52-Wk Range (INR) 680 / 328 Change (%) 174.7 70.5 144.1 156.1 -35.2 127.1 -43.9 1, 6, 12 Rel Perf (%) -5 / -14 / 8 EBITDA Margin (%) 19.0 18.0 14.6 10.8 13.3 15.0 10.3 Reported PAT 4,305 4,957 4,158 6,581 3,270 20,002 10,486 Shareholding pattern (%) Adjusted PAT 2,874 4,903 4,057 6,478 3,270 19,621 10,486 Jun-12 Mar-12 Jun-11 Change (%) 16.7 122.4 118.6 56.6 -33.3 84.1 -46.6 Promoter 48.6 48.6 48.1 PAT Margin (%) 7.9 12.4 9.1 11.3 9.5 11.0 7.2 Domestic Instn 21.3 21.2 21.0 Key Operating metrics Foreign 16.5 16.3 17.1 EPC Order Book (INR b)280 243 212 173 156 173 223 Others 13.6 14.0 13.8 EPC Revenue (INR b) 19 24 30 44 18 117 69 EPC margins (%) 20 23 17 11 17 17 7 E: MOSL Estimates
138 August 27 - 31, 2012 8th Annual Global Investor Conference
Reliance Infrastructure: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Sales 58,062 56,140 77,013 85,275 Basic (INR) Other Operating Income 38,084 122,065 86,500 66,940 EPS 40.4 73.4 43.6 49.8 Total Revenues 96,146 178,205 163,513 152,215 EPS (Fully Diluted) 40.4 73.4 43.6 49.8 Change (%) -4.1 85.3 -8.2 -6.9 CEPS (INR) 52.1 83.4 60.3 64.7 EBITDA 11,777 26,748 20,087 18,075 Book Value 642.5 710.6 747.4 790.5 % of Total Revenues 12.2 15.0 12.3 11.9 DPS 6.0 6.0 6.0 6.0 Depreciation 3,134 2,678 4,452 3,982 Payout (incl. Div. Tax.) 16.7 9.2 15.5 13.6 Interest 2,424 4,466 7,579 4,377 Other Income 5,132 5,372 6,698 7,123 Valuation (x) PBT 11,351 24,977 14,755 16,838 P/E 7.0 11.7 10.3 Tax 541 4,975 3,085 3,521 EV/EBITDA 1.0 1.5 1.8 Rate (%) 4.8 19.9 20.9 20.9 EV/Sales 0.1 0.2 0.2 Reported PAT 10,810 20,002 11,669 13,318 Price/Book Value 0.7 0.7 0.6 Change (%) 1.8 85.0 -41.7 14.1 Dividend Yield (%) 1.2 1.2 1.2 Adj. PAT 10,810 19,621 11,669 13,318 Profitability Ratios (%) Change (%) 1.8 81.5 -40.5 14.1 RoE 6.8 11.1 6.0 6.5 Balance Sheet (INR Million) RoCE 7.1 13.3 9.1 8.1 Y/E March 2011 2012 2013E 2014E Share Capital 2,675 2,675 2,675 2,675 Turnover Ratios Reserves 169,182 187,379 197,243 208,755 Debtors (Days) 106 59 66 73 Net Worth 171,857 190,053 199,917 211,430 Inventory (Days) 11 6 6 6 Loans 39,692 51,792 55,642 58,967 Asset Turnover (x) 0.5 0.7 0.6 0.6 Consumer's Security Depos. 0 -45 -90 -134 Leverage Ratio Deferred Tax Liability 990 990 1,440 1,890 Debt/Equity (x) 0.3 0.2 0.3 0.3 Capital Employed 212,539 242,790 256,909 272,152
Gross Fixed Assets 105,137 113,387 118,887 123,637 Cash Flow Statement (INR Million) Less: Dep & Reval. Res. -47,896 -50,573 -55,025 -59,007 Y/E March 2011 2012 2013E 2014E Net Fixed Assets 57,242 62,814 63,863 64,630 PBT before EO Items 11,351 24,977 14,755 16,838 Capital WIP 6,493 5,644 3,500 0 Add : Depreciation 3,134 2,678 4,452 3,982 Investments 125,841 130,570 130,620 130,670 Less : Direct Taxes Pd 541 4,975 2,635 3,071 (Inc)/Dec in WC 48,907 72,992 -8,788 -10,454 Curr. Assets 160,940 234,924 231,711 229,935 CF from Operations 62,851 95,671 7,783 7,296 Inventory 2,903 2,700 2,700 2,700 Debtors 27,931 28,769 29,632 30,521 (Inc)/dec in FA -31,864 -7,402 -3,356 -1,250 Cash & Bank Balance 3,711 90,734 97,111 104,582 (Pur)/Sale of Investmnts-43,566 -4,729 -50 -50 Loans & Advances 108,713 83,888 76,976 72,565 CF from Investments -75,431 -12,130 -3,406 -1,300 Other Current Assets 17,681 28,832 25,291 19,567 Current Liab. & Prov. 137,976 197,928 179,551 159,850 (Inc)/Dec in Share Other Liabilities 125,114 185,324 167,199 147,745 Capital and reserves 16,288 0 0 0 Provisions 12,862 12,604 12,352 12,105 (Inc)/Dec in Debt -3,225 5,775 3,850 3,325 Net Current Assets 22,964 36,995 52,161 70,085 (Inc)/Dec in Customer Misc Expenses - 1 2 2 Security Deposits 0 -45 -45 -45 Application of Funds 212,539 242,790 256,909 272,152 Dividend Paid -1,805 -1,805 -1,805 -1,805 Others 2,014 -442 0 0 Key assumptions/operating metrics CF from Fin. Activity 13,272 3,483 2,000 1,475 Y/E March 2011 2012 2013E 2014E EPC Order Book (INR b) 246.25 172.8 222.8 272.8 Inc/Dec of Cash 692 87,023 6,377 7,470 EPC Revenue (INR b) 57.6 60.35 25.6 12.8 Add: Beginning Balance 3,018 3,711 90,734 97,111 EPC EBITDA Margins (%) 13.0 22.9 10.3 10.0 Closing Balance 3,710 90,734 97,111 104,582
August 27 - 31, 2012 139 8th Annual Global Investor Conference
Rural Electrification Corporation
Company description Key challenges Rural Electrification Corporation (RECL) is a Navratna Continued policy paralysis could lead to slowdown Central Public Sector Enterprise under Ministry of Power in growth as the current sanctions pipeline may not providing financial support to promote rural get converted into disbursements. electrification projects all over the country. As on June With increasing share of private players and higher 2012, RECL had an outstanding loanbook of over INR1t share of loans to SEBs the asset quality risks remain and sanctions pipeline of ~INR1.4 t. high.
Key investment positives Key news flows / triggers to watch The final guidelines on SEB loan restructuring for Despite macroeconomic slowdown, RECL has been banks and IFCs will be crucial in determining the able to grow its loan book by 24% YoY and 5% QoQ in asset quality impact for RECL. 1QFY13 led by strong sanctions pipeline (~INR1.4t RECL has submitted its roadmap to the RBI to adopt as on June 2012). While the current uncertain macro the standard NBFC regulations by March 2013. environment may put questions over existing Approval of the same will decide, the impact of sanctions getting converted into disbursements, standard asset provisioning on RECL's earnings from corrective measures by the government and its FY14 onwards. thrust on infrastructure development could boost growth. 1QFY13 highlights; guidance for FY13, FY14 RECL has demonstrated excellent asset liability RECL's 1QFY13 performance was much above management skills over the past few quarters, which expectations led by strong topline performance has resulted into strong margin performance. For (driven by better than expected margins), higher FY12, RECL recorded margin of 4.3%+, much higher other income and NIL provisions during the quarter. than its peers. With wholesale rates already starting Loans grew strongly by 24% YoY and 5% QoQ; while to cool off, we expect margins to remain steady at margins improved by 27bp QoQ leading to positive current levels. surprise on the topline front. Despite higher exposure to state utilities, RECL's For FY13, management expects loan growth in the asset quality has remained relatively healthy. region of 20-25%. Currently, the stock offers a healthy dividend yield On the asset quality front, management continues of ~5%, even after factoring in dividend payout of to remain cautious as the macro environment 25% v/s average ~30% payout historically. remains challenging.
Stock info Quarterly Performance (INR Million) Bloomberg RECL IN Y/E March (INR m) Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 987 Net Interest Income 9,097 9,501 10,052 10,207 11,654 38,850 47,271 CMP (INR) 211 YoY Gr. (%) 17.3 21.8 18.5 19.5 28.1 19.3 21.7 Mcap (USD b) 3.7 Operating Profit 9,206 8,337 10,629 10,277 11,784 38,454 47,068 52-Wk Range (INR) 251 / 142 YoY Gr. (%) 16.1 -0.3 17.9 8.6 28.0 10.6 22.4 1, 6, 12 Rel Perf (%) 6 / -12 / 11 Provisions 250 0 241 32 0 523 750 Profit After Tax 6,619 6,225 7,695 7,627 8,767 28,173 34,275 Shareholding pattern (%) YoY Gr. (%) 12.7 0.7 15.9 8.9 32.5 9.6 21.7 Jun-12 Mar-12 Jun-11 Adj. PAT 6,672 7,166 7,054 7,675 9,046 28,566 34,935 Promoter 66.8 66.8 66.8 YoY Gr. (%) 13.5 19.8 6.5 16.5 35.6 14.0 22.3 Dome. Inst. 6.1 6.4 5.2 Key Operating Metrics Foreign 20.2 19.6 19.1 Loan Growth (%) 24.0 24.0 25.4 24.1 24.3 23.4 19.8 Others 7.0 7.2 8.9 NIM (%; calc.) 4.3 4.3 4.3 4.2 4.5 4.2 4.2 GNPA (%) 0.3 0.3 0.5 0.5 0.5 0.5 0.8 E: MOSL Estimates
140 August 27 - 31, 2012 8th Annual Global Investor Conference
Rural Electric Corporation: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest on Loans 81,088 102,640 124,696 145,802 Spreads Analysis (%) Interest Expense 48,510 63,790 77,425 88,969 Avg.Yield-on Financing Net Financing Income 32,578 38,850 47,271 56,833 Portfolio 10.9 11.2 11.2 11.0 Change (%) 28.8 19.3 21.7 20.2 Avg Cost of Funds 7.6 7.9 7.8 7.7 Other Operating Income 1,481 741 1,481 1,778 Interest Spread 3.3 3.3 3.3 3.3 Other Income 2,384 1,189 841 976 Net Interest Margin 4.4 4.2 4.2 4.3 Net Income 36,443 40,780 49,592 59,586 Change (%) 29.8 11.9 21.6 20.2 Profitability Ratios (%) Employee Cost 1,275 1,710 1,795 2,064 RoE 21.5 20.5 21.6 22.5 Administrative Exp 337 370 426 490 RoA 3.4 3.0 3.0 3.1 Other Operating Exp. 66 246 303 363 Operating Income 34,765 38,454 47,068 56,669 Efficiency Ratios (%) Change (%) 31.5 10.6 22.4 20.4 Int. Expended/Int.Earned 59.8 62.1 62.1 61.0 Total Provisions 2 523 750 1,000 Op. Exps./Net Income 4.6 5.7 5.1 4.9 % to Operating Income 0.0 1.4 1.6 1.8 Empl. Cost/Op. Exps. 76.0 73.5 71.1 70.8 PBT 34,763 37,931 46,318 55,669 Prior Period Adjustments -32 0 0 0 Asset-Liability Profile (%) PBT(post prior period adj) 34,731 37,931 46,318 55,669 Loans/Borrowings Ratio 117.3 112.7 116.3 116.3 Tax (Incl Deferred tax) 9,067 9,758 12,043 14,474 Debt/Equity Ratio 5.5 6.1 6.2 6.3 Tax Rate (%) 26.1 25.7 26.0 26.0 PAT 25,664 28,173 34,275 41,195 Change (%) 28.5 9.8 21.7 20.2 Valuations PAT (Incl DTL) 25,610 28,200 34,275 41,195 Book Value (INR) 129.4 149.2 171.7 198.8 Change (%) 28.2 10.1 21.5 20.2 Price-BV (x) 1.4 1.2 1.1 Proposed Dividend 7,406 7,410 10,283 12,358 OPS (INR) 35.2 38.9 47.7 41.7 Price-OP (x) 5.4 4.4 5.1 Balance Sheet (INR Million) EPS (INR) 25.9 28.6 34.7 41.7 Y/E March 2011 2012 2013E 2014E EPS Growth (%) 28.2 10.1 21.5 20.2 Capital 9,875 9,875 9,875 9,875 Price-Earnings (x) 7.4 6.1 5.1 Reserves & Surplus 117,884 137,475 159,719 186,455 Dividend 7.5 7.5 10.4 12.5 Net Worth 127,758 147,349 169,594 196,329 Dividend Yield (%) 3.6 4.9 5.9 Borrowings 700,038 899,680 1,044,146 1,232,655 Change (%) 25.1 28.5 16.1 18.1 Total Liabilities 827,797 1,047,029 1,213,740 1,428,985 Investments 8,124 7,580 7,959 8,357 Change (%) -10.7 -6.7 5.0 5.0 Loans 821,321 1,013,620 1,214,123 1,433,320 Change (%) 23.6 23.4 19.8 18.1 Net Fixed Assets 881 780 865 890 Net current assets -2,529 25,049 -9,207 -13,582 Total Assets 827,797 1,047,029 1,213,740 1,428,985
August 27 - 31, 2012 141 8th Annual Global Investor Conference
Shoppers Stop
Company description 1QFY13), lower internal cash generation and faster Shoppers Stop is positioned as premium retailer in India expansions could burden the balance sheet. having 139 stores in 19 cities with an area of 3.7m sqft across formats. Major retail formats include Key news flows / triggers to watch Departmental stores (Shoppers Stop), Hypermart With FDI in retail likely in the near future, funding (Hypercity), Books (Crossword), Specialty (Mac, Estee options for Hypercity as well as other specialty Lauder and Clinique) and Home Retailing (Home Stop). formats could open up. It is promoted by CL Raheja group, one of the largest LTL growth and margin trends over next few real estate groups in India. quarters. Sales trend in Tier2/3 stores of Hypercity and EBIDTA Key investment positives level breakeven. Shoppers Stop is a play on rising consumer discretionary spends, with its lifestyle positioning 1QFY13 highlights; guidance for FY13, FY14 and growing presence across formats. LTL sales growth of 1% due to weak economic With current area of 3.2m sqft across 52 stores, it outlook. LTL volumes declined 4% as against 1% plans to expand by increasing its departmental store growth in 1QFY13. count to 60. Hypercity Retail (51% stake) reported sales of It provides an opportunity to participate in INR1.9b (INR1.6b in 4QFY12). LTL sales growth Hypermart format and benefit from FDI in retail due improved to 7% but LTL volumes fell 7%. Net loss to its 51% stake in Hypercity Retail. declined marginally from INR217m to INR214m. We expect margins for FY12-13 to remain under Key challenges pressure due to 1) weak consumer demand, Increase in apparel prices as well as initial signs of 2) higher apparel prices affecting volumes, 3) rising slower off-take in consumer discretionary formats wage costs due to high inflation, and 3) increase in have impacted LTL volume growth and margins. overheads due to new store openings. Margin With increasing losses in Hypercity (INR214m in recovery is likely only in FY14.
Stock info Quarterly Performance (INR Million) Bloomberg SHOP IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 FY13E Equity Shares (m) 83 Operating Income 3,930 4,973 5,017 5,406 4,467 19,300 25,148 CMP (INR) 365 change (%) 14.4 14.9 9.9 18.5 13.6 16.3 30.3 Mcap (USD b) 0.5 EBITDA 263 387 414 363 138 1,427 1,816 52-Wk Range (INR) 427 / 251 Change (%) 5.2 1.4 -19.7 -2.8 -47.7 -6.2 27.3 1, 6, 12 Rel Perf (%) -2 / 11 / -11 EBITDA Margin (%) 6.7 7.8 8.2 6.7 3.1 7.4 7.2 Reported PAT 117 195 193 137 12 12 220 Shareholding pattern (%) Adjusted PAT 117 195 193 137 12 12 220 Jun-12 Mar-12 Jun-11 Change (%) 17.2 12.5 -30.8 -31.0 -89.4 -89.4 12.6 Promoter 67.8 67.9 68.2 PAT Margin (%) 3.0 3.9 3.8 2.5 0.3 0.1 0.9 Dom. Inst. 9.5 6.5 6.6 Key Operating metrics Foreign 9.8 13.7 13.2 LTL Sales Gr % 7.0 11.0 -1.3 10.0 1.0 7.0 10.0 Others 12.9 12.0 12.1 Deptt Stores 41 43 49 51 52 51 60 E: MOSL Estimates
142 August 27 - 31, 2012 8th Annual Global Investor Conference
Shoppers Stop: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Revenues 17,120 19,024 25,148 29,943 Basic (INR) Change (%) 22.2 11.1 32.2 19.1 EPS 9.1 7.8 9.9 13.5 Other Income - Recurring 241 277 343 394 Cash EPS 12.9 12.4 15.5 19.9 Total Expenditure 15,599 17,829 23,331 27,667 BV/Share 72.8 79.0 87.2 98.3 EBITDA 1,521 1,427 1,816 2,276 DPS 0.8 1.2 1.5 2.0 Change (%) 43.0 -6.2 27.3 25.3 Payout % 8.2 14.9 15.0 15.0 Margin (%) 8.9 7.5 7.2 7.6 Depreciation 310 377 459 524 Valuation (x) Int. and Fin. Charges 145 250 299 251 P/E 46.7 36.8 27.0 Non-operational Income 72 178 159 160 Cash P/E 29.4 23.5 18.3 Profit before Taxes 1,138 978 1,218 1,661 EV/Sales 1.6 1.2 1.0 Change (%) 98.9 -14.0 24.5 36.4 EV/EBITDA 21.2 16.5 12.8 Margin (%) 6.6 5.1 4.8 5.5 P/BV 4.6 4.2 3.7 Tax 387 335 402 548 Dividend Yield (%) 0.3 0.4 0.6 Tax Rate (%) 34.0 34.3 33.0 33.0 Profit after Taxes 751 643 816 1,113 Return Ratios (%) Change (%) 79.9 -14.5 26.9 36.4 RoE 12.6 9.9 11.4 13.8 Margin (%) 4.4 3.4 3.2 3.7 RoCE 16.3 11.0 13.7 16.9 Exceptionals 1 0 0 0 RoCE Adjusted for Inv 23.9 15.0 18.7 23.7 Reported PAT 752 643 816 1,113 Working Capital Ratios Balance Sheet (INR Million) Debtor (Days) 3 3 3 3 Y/E March 2011 2012 2013E 2014E Asset Turnover (x) 2.3 2.0 2.5 2.9 Share Capital 411 411 411 411 Reserves 5,570 6,078 6,751 7,668 Leverage Ratio Net Worth 5,981 6,489 7,162 8,079 Debt/Equity (x) 0.2 0.5 0.4 0.3 Loans 1,487 3,062 2,765 2,260 Deferred Tax -33 0 0 0 Cash Flow Statement (INR Million) Capital Employed 7,436 9,551 9,927 10,339 Y/E March 2011 2012 2013E 2014E Profit before tax 1,138 978 1,218 1,661 Gross Block 5,056 6,649 7,691 8,669 Add : Depreciation 68 375 459 524 Less: Accum. Depn. 1,935 2,310 2,768 3,292 Interest 145 250 299 251 Net Fixed Assets 3,121 4,339 4,923 5,377 Direct Taxes Paid 387 335 402 548 Capital WIP 446 250 250 250 Incr in WC 613 463 -499 -434 Property Lease Deposit 1,068 1,352 1,516 1,664 Ch In DFA 13 33 0 0 Investments 2,372 2,550 2,652 2,958 Extra-ordinay Income 1 0 0 0 CF from Operations 366 772 2,072 2,322 Curr. Assets, L&A 3,428 4,537 5,092 5,469 Inventory 1,511 2,050 2,408 2,643 Incr in FA 650 1,396 1,042 978 Account Receivables 160 158 181 212 Investments 1,175 179 102 306 Cash and Bank Balance 26 195 219 156 CF from Invest. 1,825 1,574 1,144 1,284 Loans and Advances 1,730 2,134 2,284 2,458 Incraese in networth 2,210 -23 0 0 Curr. Liab. and Prov. 3,000 3,477 4,506 5,380 Increase In debt -506 1,575 -297 -505 Account Payables 2,771 3,182 4,152 4,942 Interest Paid 145 250 299 251 Other Liabilities 159 183 211 242 Dividend Paid 70 112 143 195 Provisions 70 112 143 195 Others -34 -219 -164 -149 Net Current Assets 428 1,060 586 89 CF from Fin. Activity 1,455 971 -903 -1,101 Application of Funds 7,436 9,551 9,927 10,339 Key assumptions/operating metrics Incr/Decr of Cash -4 168 25 -63 Number of Stores 38 51 60 68 Add: Opening Balance 30 26 195 219 Gross Margin 31.4 31.6 31.5 31.5 Closing Balance 26 195 219 156 E: MOSL Estimates
August 27 - 31, 2012 143 8th Annual Global Investor Conference
Shriram Transport Finance
Company description Expected moderation in interest rates, coupled with Shriram Transport Finance (SHTF) is strategically well abating regulatory headwinds will be positive for placed in the niche CV financing market with over three monoline financers like SHTF. decades of experience. After developing a strong presence in the CV financing space, SHTF has diversified Key challenges into the construction equipment financing business. It Continued moderation in economic growth can has an evenly distributed pan-India network of 513 lead to a prolonged period of moderation in AUM branch offices and an employee base of over 14,000 growth. people. SHTF has well established and time tested Tighter securitization norms could affect margins. procedures for valuation of assets, loan generation and Proposed changes in asset classification and collection. As of 1QFY13, it had AUM worth INR419b. provisioning norms for NBFCs could lead to higher Over FY09-12, SHTF posted AUM CAGR of 20% and profit stress on earnings and reported asset quality. CAGR of 27%. Moderating freight intake and fall in freight rates will lead to higher pressure on asset quality Key investment positives SHTF's business model is unique with high entry Key news flows / triggers to watch barriers and is difficult to replicate. This has enabled RBI guidelines on NBFC regulations SHTF to sustain superior return ratios with RoAs (on Comments by banks on CV portfolio growth and AUMs) of over 2.5% and RoEs in excess of 20% over asset quality a period of time. On back of significant moderation in macroeconomic 1QFY13 highlights; guidance for FY13, FY14 activities and higher competitive pressures SHTF Performance highlights of 1QFY13: AUM growth of moderated its AUM growth to 11% in FY12 vs ~35% 13% YoY and 4% QoQ; No securitization during the CAGR over FY06-11. We believe SHTF will be quarter, Share of On books AUM at 61% vs 55% a relatively better placed in terms of assets quality vs quarter ago, NIMs improved ~20bp QoQ to 7.4% and peers which have grown this portfolio aggressively GNPA stable QoQ at ~3%. during the uncertain times. Guidance for FY13: 10-15% AUM growth, NIM While certain state specific issues led to periodic between 7-8%, Asset quality to be stable from spike in GNPA, overall delinquency ratio remained hereon. under control. NNPA ratio remains under control at ~60bp and it has healthy PCR of 80%.
Stock info Quarterly Performance (INR Million) Bloomberg SHTF IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 FY13E Equity Shares (m) 226 Net Inc. (Incl. Secur) 7,821 8,347 8,038 8,056 8,025 31,707 34,093 CMP (INR) 594 YoY Growth (%) 16.0 19.3 4.5 5.4 2.6 9.5 7.5 Mcap (USD b) 2.4 Operating Profit 6,620 6,818 6,465 6,529 6,787 26,492 28,026 52-Wk Range (INR) 707 / 416 YoY Growth (%) 18.3 20.4 5.5 4.1 2.5 13.0 5.8 1, 6, 12 Rel Perf (%) 5 / 6 / -9 Provisions 1,420 2,363 1,920 1,918 2,026 7,683 7,963 Profit before Tax 5,200 4,454 4,545 4,610 4,761 18,809 20,062 Tax Provisions 1,727 1,460 1,518 1,530 1,543 6,235 6,520 Shareholding pattern (%) Net Profit 3,473 2,994 3,027 3,081 3,219 12,574 13,542 Jun-12 Mar-12 Jun-11 YoY Growth (%) 20.2 0.2 0.4 -9.6 -7.3 4.5 7.7 Promoter 46.2 45.6 41.3 Key Operating metrics Dom. Inst. 2.0 2.4 2.2 AUM Growth (%) 22.3 19.9 16.2 11.1 13.3 11.1 15.5 Foreign 40.2 39.4 42.6 Sec. Inc./Net Inc.(%) 62.3 56.1 59.1 62.0 61.0 58.8 52.8 Others 11.6 12.5 14.0 GNPA (%) 2.7 2.7 2.8 3.1 3.0 3.1 3.2 E: MOSL Estimates
144 August 27 - 31, 2012 8th Annual Global Investor Conference
Shriram Transport Finance: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Financing Income 36,165 35,581 42,325 58,246 Spreads Analysis (%) Finanancing charges 22,154 23,950 27,379 35,993 Avg. Yield-on Fin. portfolio 18.7 16.8 15.7 16.3 Net Financing income 14,011 11,632 14,946 22,253 Avg Cost of funds 11.6 11.1 9.8 9.5 Change (%) -4.8 -17.0 28.5 48.9 Int Spread on Fin.portfolio 7.1 5.7 5.9 6.8 Inc. from securitisation 14,943 20,075 19,147 16,684 NIM (incl Securitisation) 8.9 8.3 7.9 7.8 Net Income (Incl Secur) 28,954 31,707 34,093 38,937 NIM (Excl Securitisation) 7.5 5.7 5.7 6.4 Change (%) 34.5 9.5 7.5 14.2 Other Income 1,725 2,423 2,181 2,508 Profitability Ratios (%) Net Income 30,680 34,130 36,273 41,445 RoE 27.5 23.1 20.6 20.3 Change (%) 36.4 11.2 6.3 14.3 RoA on AUM 3.2 2.8 2.6 2.6 Employee Cost 3,582 3,701 4,163 4,475 Int. Expended/Int.Earned 61.3 67.3 64.7 61.8 Brokerage & Commission 752 662 662 729 Other Inc./Net Income 54.3 65.9 58.8 46.3 Other Operating Exp. 2,892 3,275 3,422 3,612 Operating Income 23,454 26,492 28,026 32,629 Efficiency Ratios (%) Change (%) 35.5 13.0 5.8 16.4 Op. Exps./Net Income 23.6 22.4 22.7 21.3 Total Provisions 5,235 7,683 7,963 9,029 Empl. Cost/Op. Exps. 49.6 48.5 50.5 50.8 % to operating income 22.3 29.0 28.4 27.7 PBT 18,219 18,809 20,062 23,600 Asset-Liability Profile (%) Tax 6,190 6,235 6,520 7,670 Loans/Borrowings Ratio 98.0 92.7 93.6 91.1 Tax Rate (%) 34.0 33.1 32.5 32.5 Leverage (x) 5.1 4.9 5.6 6.0 PAT 12,028 12,574 13,542 15,930 Change (%) 37.8 4.5 7.7 17.6 Valuations Proposed Dividend 1,468 1,471 1,625 1,912 Book Value (INR) 216.7 264.8 316.2 376.7 BV Growth (%) 27.4 22.2 19.4 19.1 Balance Sheet (INR Million) Price-BV (x) 2.2 1.9 1.6 Y/E March 2011 2012 2013E 2014E Adjusted BV (INR) 215.5 263.3 313.5 373.1 Capital 2,262 2,263 2,263 2,263 Price-ABV (x) 2.3 1.9 1.6 Reserves & Surplus 46,747 57,660 69,301 82,994 OPS (INR) 103.7 117.1 123.8 144.2 Net Worth 49,008 59,923 71,564 85,257 OPS Growth (%) 35.1 12.9 5.8 16.4 Borrowings 198,743 231,219 330,407 427,337 Price-OP (x) 5.1 4.8 4.1 Change (%) 7.7 16.3 42.9 29.3 EPS (INR) 53.2 55.6 59.8 70.4 Other Liabilities & Prov. 35 22 22 22 EPS Growth (%) 37.4 4.5 7.7 17.6 Total Liabilities 247,787 291,164 401,993 512,617 Price-Earnings (x) 10.7 9.9 8.4 Investments 36,453 39,544 43,499 47,849 Dividend 6.5 6.5 7.2 8.4 Change (%) 96.4 8.5 10.0 10.0 Dividend Yield (%) 1.1 1.2 1.4 Loans 194,740 214,378 309,391 389,341 Change (%) 8.3 10.1 44.3 25.8 Net Fixed Assets 364 377 402 402 Net Current Assets 16,229 36,864 48,701 75,025 Total Assets 247,787 291,164 401,993 512,617
August 27 - 31, 2012 145 8th Annual Global Investor Conference
Simplex Infrastructure
Company description Indian infrastructure and industrial capex is passing Incorporated in 1924, Simplex Infrastructures is the through a challenging phase given tight liquidity largest pure play civil construction and engineering condition and structural constraints like land, contractors in India, with more than eight decades of resources, etc. This has impacted the opportunity successful operations and completion of over 2500 pie in the interim period. projects in India and abroad. Simplex Infrastructures has a presence across various construction verticals, Key news flows / triggers to watch which include piling, industrial plants, power plants, Simplex has recently forayed in to the road BOT urban infrastructure and utilities, etc projects; and the company now has a portfolio of three projects. Key investment positives Simplex has entered into joint-venture with Order backlog as at the end of June 2012 stood at Gammon Infra for two projects - Vijaywada to INR155b, in addition to the L1 of INR11.8b. Current Gundugolanu (Ph V) and Mahulia to Kharagpur (Ph order book has 82% variable priced contracts and III). Simplex would have 49-51% stake and would 18% fixed price contracts. be carrying out large parts of the EPC work for these SINF has a diversified business, with presence across two projects. the infrastructure sector. It derives ~10% of the order book from the Middle East, Asia and Africa, 1QFY13 highlights; guidance for FY13, FY14 and thus diversifying the geography mix. Private Simplex reported revenue growth of 28% YoY, and sector orders, where payment terms are better, EBITDA increase of 19% YoY. Interest cost increased constitute 60%+ of its order book. from INR502m to INR695m YoY, impacting the reported profitability. Debt stood at INR24b (up Key challenges from INR21b) in March 2012. In FY12, order intake was INR64.4b v/s INR80b in Management expects revenues to increase by 10- FY11. BTB has declined from 3x in 4QFY11 to ~2.5x. 15% in FY13. This could impact near-term revenue growth.
Stock info Quarterly Performance (INR Million) Bloomberg SINF IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-12 FY12 Equity Shares (m) 49 Operating Income 12,685 13,242 15,973 17,979 15,904 59,168 CMP (INR) 207 Change (%) 7.7 25.5 36.6 30.6 25.4 23.8 Mcap (USD b) 0.2 EBITDA 1,202 1,190 1,294 1,483 1,270 4,678 52-Wk Range (INR) 290 / 157 Change (%) 0.1 12.6 20.3 7.9 5.7 (0.6) 1, 6, 12 Rel Perf (%) -11 / -11 / -34 EBITDA Margin (%) 9.5 9.0 8.1 8.3 8.0 7.9 Reported PAT 241 179 180 292 201 892 Adjusted PAT 241 179 180 292 201 892 Shareholding pattern (%) Change (%) (33.6) (33.5) (22.3) (21.0) (16.5) (27.6) Jun-12 Mar-12 Jun-11 PAT Margin (%) 1.9 1.3 1.1 1.6 1.3 1.5 Promoter 55.0 55.0 54.7 Key Operating Metrics Dom. Inst. 19.7 18.9 20.6 Order book (INR b) 143 150 144 152 155 152 Foreign 13.8 14.4 13.0 BTB (x) 3.0 2.9 2.6 2.5 2.5 2.5 Others 11.6 11.8 11.7 Order intake (INR b) 9 19 10 26 19 64 E: MOSL Estimates
146 August 27 - 31, 2012 8th Annual Global Investor Conference
Simplex Infrastructure: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2010 2011 2012 Y/E March 2010 2011 2012 Net Sales 44,427 47,497 59,068 Basic (INR) Change (%) -4.7 6.9 24.4 Adjusted EPS 24.8 24.8 18.0 Materials Consumed 38,224 41,115 53,638 Growth (%) -6.9 0.1 -27.3 Other Admin. Exp. 1,873 1,801 751 Cash EPS 55.8 57.2 41.1 EBITDA 4,330 4,581 4,679 Book Value 196.0 217.1 243.0 % of Net Sales 9.7 9.6 7.9 DPS 1.9 1.9 1.4 Depreciation 1,534 1,608 1,143 Payout (incl. Div. Tax.) 9.4 9.0 9.1 Interest 1,112 1,308 2,303 Valuation (x) Other Income 227 289 100 P/E (standalone) 9.0 12.4 PBT 1,911 1,954 1,333 Cash P/E 3.9 5.4 Tax 685 722 441 EV/EBITDA 5.9 6.7 Rate (%) 35.8 37.0 33.1 EV/Sales 0.6 0.5 Reported PAT 1,227 1,232 892 Price/Book Value 1.0 0.9 Adjusted PAT 1,227 1,232 892 Dividend Yield (%) 0.9 0.6 Change (%) -6.9 0.4 -27.6 Profitability Ratios (%) RoE 13.1 12.0 7.8 Balance Sheet (INR Million) RoCE 13.3 12.5 11.4 Y/E March 2010 2011 2012 Share Capital 99 99 99 Turnover Ratios Reserves 9,597 10,677 11,971 Debtors (Days) 147 175 160 Net Worth 9,696 10,777 12,070 Inventory (Days) 54 61 58 Loans 13,024 16,606 20,932 Creditors. (Days) 99 103 88 Deffered Tax Liability 883 1,381 1,944 Asset Turnover (x) 2.0 1.8 1.9 Capital Employed 23,604 28,764 34,945 Leverage Ratio Debt/Equity (x) 1.3 1.5 1.7 Gross Fixed Assets 12,509 14,764 17,420 Less: Depreciation 2,832 3,715 4,805 Cash Flow Statement (INR Million) Net Fixed Assets 9,677 11,049 12,615 Y/E March 2010 2011 2012 Capital WIP 187 275 444 PBT before Extraordinary Items 1,911 1,954 1,333 Investments 277 492 783 Add: Depreciation 1,534 1,608 1,143 Interest 1,112 1,308 2,303 Curr. Assets 30,598 36,847 48,478 Less: Direct Taxes Paid 685 722 441 Inventory 6,593 7,978 8,682 (Inc)/Dec in WC -2,140 -3,563 -4,477 Debtors 17,928 22,834 16,788 CF from Operations 1,733 584 -139 Cash & Bank Balance 873 795 428 Loans & Advances 3,868 3,833 6,102 (Inc)/Dec in FA -1,244 -3,069 -2,878 Other Current Assets 1,337 1,408 16,478 (Pur)/Sale of Investments -76 -215 -291 CF from Investments -1,321 -3,283 -3,169 Current Liab. & Prov. 17,135 19,899 27,419 (Inc)/Dec in Networth -133 457 991 Creditors 17,020 19,770 27,188 (Inc)/Dec in Debt 819 3,582 4,333 Provisions 115 129 231 Less: Interest Paid 1,112 1,308 2,303 Net Current Assets 13,463 16,948 21,058 Dividend Paid 115 110 81 Application of Funds 23,604 28,764 34,945 CF from Fin. Activity -541 2,621 2,939 Key Operational Metric Order Book (INR b) 115 147 152 Inc/Dec of Cash -129 -78 -368 BTB (x) 2.6 3.1 2.6 Add: Beginning Balance 1,002 873 795 Order Intake (INR b) 59 80 64 Closing Balance 873 795 426 E: MOSL Estimates
August 27 - 31, 2012 147 8th Annual Global Investor Conference
State Bank of India
Company description Key challenges State Bank of India (SBIN) is India's largest commercial Considering significant stress in the macroeconomic bank, with a standalone balance sheet size of over environment, higher exposure to SME and mid INR14t+ and government of India ownership of ~62%. corporate segment, bad monsoon etc asset quality The bank has strong liability franchises with 14,100+ is likely to remain under pressure owned branches (standalone), and 19,200+ branches Moderating top line growth with lower loan growth (group). SBIN along with its associate banks has ~25% and moderation in margins and higher credit cost market share in India. posses the threat to earnings growth. Key investment positives Provisioning related to wage negotiation to start SBIN's branch expansion, technological from November 2012. advancement and marketing efforts led to strong Key news flows / triggers to watch CASA CAGR of ~17% over FY02-12. The power of its One of the biggest beneficiaries of upturn in liability franchise can be seen from its strong and macroeconomic environment. Any concentrated improving CASA ratio of ~46% of which 80%+ are effort by Government to get rid of policy paralysis from highly granular Savings accounts deposits. and boost investment climate will be a key trigger Over the last two years, SBIN has reported for SBIN significantly higher net slippages as compared to Expected merger of one of associate bank with itself peers, leading to the perception of higher asset in FY13 quality issues. While reported net slippages have 1QFY13 highlights; guidance for FY13, FY14 been higher, restructured loans as a percentage of Guidance for FY13: Loan growth of 18-20%, Margins overall loans are one of the lowest among public of 3.75%, opex growth of less than 10% and sector banks (PSBs). Thus, SBIN outstanding net containing NNPA at 1.8%. stress loans stands at 5.5% of loans vs PNB of 9.8%, Performance highlights of 1QFY13: (a) Significantly BOI of 8.4% and BOB 6.9% higher slippages of INR108b led by SME, Mid- Healthy NIM of 3.5%+, higher fee income corporate and Agri segment (b) fall in standard contribution as a proportion of average assets, restructured loans by INR15b (c) Higher slippages control over opex, and absence of one-offs will help led to sharp margin contraction of ~ 30bp QoQ (d) SBIN to post ROA of 1%+. Operating leverage fee income growth disappointed (e) continued remains one of the key factor for RoA improvement. healthy traction in SA mobilization (+8% QoQ)
Stock info Quarterly Performance (INR Million) Bloomberg SBIN IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 671 Net Int. Income 96,995 104,817 115,188 115,911 111,189 432,911 470,781 CMP (INR) 1,896 % Change (YoY) 32.8 29.2 27.3 43.8 14.6 33.1 8.7 Mcap (USD b) 22.8 Other Income 35,342 33,674 20,730 53,768 34,988 143,514 175,713 52-Wk Range (INR) 2475 / 1576 Operating Exp. 59,913 63,749 63,318 73,710 64,410 260,690 289,091 1, 6, 12 Rel Perf (%) -17 / -18 / -18 Operating Profit 72,424 74,743 72,600 95,968 81,767 315,735 357,404 % Change (YoY) 18.1 17.6 7.3 57.8 12.9 24.6 13.2 Other Provisions 41,569 33,855 24,074 31,404 24,563 130,902 132,625 Shareholding pattern (%) Net Profit 15,835 28,104 32,630 40,503 37,516 117,073 147,230 Jun-12 Mar-12 Jun-11 % Change (YoY) -45.7 12.4 15.4 N.A. 136.9 41.7 25.8 Promoter 61.6 61.6 59.4 Key Operating Metrics Dom. Inst. 17.3 17.1 17.4 NIM (%) 3.6 3.8 4.1 3.9 3.6 3.9 3.6 Foreign 11.2 11.4 13.9 Loan Growth (%) 18.0 16.1 16.5 14.7 18.9 14.7 20.0 Others 10.0 9.9 9.3 Gross NPA (%) 3.5 4.2 4.6 4.4 5.0 4.4 5.9 E: MOSL Estimates
148 August 27 - 31, 2012 8th Annual Global Investor Conference
State Bank of India: Financials and valuation
Income Statement (Standalone) (INR Billion) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 814 1,065 1,204 1,376 Spreads Analysis (%) Interest Expense 489 632 733 835 Avg. Yield-Earning Assets 8.0 9.2 9.0 8.7 Net Interest Income 325 433 471 541 Avg. Yield on loans 8.6 10.0 9.7 9.3 Change (%) 37.4 33.1 8.7 14.9 Avg. Yield on Investments 6.7 7.9 7.9 7.4 Non Interest Income 158 144 176 200 Avg. Cost-Int. Bear. Liab. 5.0 5.7 5.7 5.5 Net Income 484 576 646 741 Avg. Cost of Deposits 5.0 5.6 5.7 5.4 Change (%) 25.1 19.2 12.2 14.7 Interest Spread 3.0 3.6 3.3 3.2 Operating Expenses 230 261 289 325 Net Interest Margin 3.2 3.8 3.5 3.4 Pre Provision Profits 253 316 357 417 Change (%) 38.3 24.6 13.2 16.6 Profitability Ratios (%) Provisions (excl tax) 104 131 133 152 RoE 12.7 16.0 16.9 17.4 PBT 150 185 225 265 RoA 0.7 0.9 1.0 1.0 Tax 67687891Consolidated RoE 13.5 17.2 17.3 18.0 Tax Rate (%) 44.7 36.7 34.5 34.5 Consolidated RoA 0.7 0.9 1.0 1.0 PAT 83 117 147 174 Change (%) -9.8 41.7 25.8 17.9 Efficiency Ratios (%) Consolidated PAT post MI 107 153 185 221 Cost/Income* 49.5 45.3 46.2 45.2 Change (%) -8.9 43.6 20.6 19.5 Empl. Cost/Op. Exps. 66.1 65.1 64.9 64.5 *Core PPP is (NII+Fee income-Opex) Busi. per Empl. (INR m) 73.9 82.2 96.4 113.1 NP per Empl. (INR lac) 3.9 5.3 6.8 7.8 Balance Sheet (INR Billion) * ex treasury and recoveries Y/E March 2011 2012 2013E 2014E Equity Share Capital 6 7 7 7 Valuation Reserves & Surplus 644 833 946 1,080 Book Value (INR) 1,014 1,215 1,384 1,583 Net Worth 650 840 953 1,086 BV Growth (%) -1.4 19.8 13.9 14.3 Deposits 9,339 10,436 12,524 15,029 Price-BV (x) 1.6 1.4 1.2 Change (%) 16.1 11.7 20.0 20.0 Consol BV (INR) 1,303 1,541 1,766 2,035 of which CASA Dep 4,615 4,676 5,328 6,073 BV Growth (%) 0.4 18.3 14.6 15.3 Change (%) 21.4 1.3 13.9 14.0 Price-Consol BV (x) 1.2 1.0 0.9 Borrowings 1,196 1,270 1,426 1,613 Adjusted BV (INR) 878 1,050 1,103 1,222 Other Liabilities & Prov. 1,052 809 931 1,118 Price-ABV (x) 1.8 1.7 1.6 Total Liabilities 12,237 13,355 15,833 18,846 Adjusted Consol BV 1,129 1,321 1,403 1,585 Current Assets 1,229 972 1,106 1,324 Price-Consol ABV (x) 1.4 1.3 1.1 Investments 2,956 3,122 3,621 4,201 EPS (INR) 130.2 174.5 219.4 258.6 Change (%) -0.1 5.6 16.0 16.0 EPS Growth (%) -9.9 34.0 25.8 17.9 Loans 7,567 8,676 10,411 12,493 Price-Earnings (x) 10.9 8.6 7.3 Change (%) 19.8 14.7 20.0 20.0 Consol EPS (INR) 168.3 228.6 275.7 329.3 Fixed Assets 48 55 58 64 Con. EPS Growth (%) -9.0 35.9 20.6 19.5 Other Assets 438 531 637 765 Price-Consol EPS (x) 7.9 6.5 5.4 Total Assets 12,237 13,355 15,833 18,846 Dividend Per Share (INR) 30.0 35.0 43.0 51.3 Dividend Yield (%) 1.8 2.3 2.7 Asset Quality (%) GNPA (INR b) 253 397 631 839 NNPA (INR b) 123 158 270 345 GNPA Ratio 3.3 4.5 5.9 6.5 NNPA Ratio 1.6 1.8 2.6 2.8 PCR (Excl Tech. write off) 51.2 60.1 57.3 58.8 PCR (Incl Tech. Write off) 65.0 68.1 63.1 63.2
August 27 - 31, 2012 149 8th Annual Global Investor Conference
Sun Pharmaceuticals
Company description Expect Taro's high profitability (49% EBITDA margins) Sun Pharma has successfully transitioned from a to come off in coming quarters as competitors come domestic company to establishing a strong presence in back in key product segments. Tax rate will go up in the US. It has become the largest Indian company in the FY13 due to imposition of MAT on partnership firms. US through the take-over of Taro. US (57% of sales), Potential damages in the Protonix patent litigation India (22% of sales) and emerging markets (13% of sales) case in the US could be significant. are the key markets for Sun. Key news flows / triggers to watch Key investment positives Re-entry of competitors in US for some key Taro Significant scale-up & internationalization of products. operations without dilution of return ratios has been Acceptance of the buy-out offer made by SUNP to SUNP's key achievement over the last five years. Taro's minority shareholders. We expect the high return ratios to sustain in future Further progress in the Protonix litigation in the as well given the efficient capital allocation strategy US. of the company. Its ability to sustain superior More clarity on the recent proposal to transfer the margins even on a high base is a clear positive. domestic business to a 100% subsidiary. An expanding generic portfolio coupled with sustained double-digit growth in high-margin life- 1QFY13 highlights style segments in India is likely to bring in long- Performance was above estimates led by strong term benefits for SUNP. traction at Taro, favourable currency & Doxorubicin Has a strong launch pipeline for the US with 135 supplies to the US. Domestic sales recorded 8% de- ANDAs pending US FDA approval including a growth due to extra sales booked in 4QFY12 while combination of low-competition & normal products. RoW sales grew by 45% partly helped by currency. Price increases for some key Taro products in the US Core EBITDA at INR10.4b was higher than our est of have boosted the performance in the past 3-4 INR7.6b while core EBITDA margins were at 45% quarters. compared to our estimate of 36%. Key challenges Adj PAT growth was strong at 54% led mainly by The proposed new "Domestic Pharma Policy", may Taro and favorable currency. adversely impact earnings.
Stock info Quarterly Performance (INR Million) Bloomberg SUNP IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1036 Operating Income 16,357 18,946 21,451 23,299 26,581 80,057 99,348 CMP (INR) 661 Op. Inc.(ex one-offs)14,982 17,823 20,375 21,223 23,104 74,406 95,870 Mcap (USD b) 12.3 Change (%) 58.8 70.1 36.9 57.6 54.2 54.2 28.8 52-Wk Range (INR) 690 / 448 EBITDA 5,474 7,840 9,638 9,552 12,169 32,507 38,401 1, 6, 12 Rel Perf (%) 2 / 25 / 31 EBITDA(ex one-offs) 4,644 7,148 8,903 8,317 10,430 29,015 36,663 Change (%) 45.3 121.9 137.4 65.9 124.6 91.1 26.4 EBITDA Margin (%) 31.0 40.1 43.7 39.2 45.1 39.0 38.2 Reported PAT 5,010 5,977 6,683 8,202 7,956 25,873 30,503 Adj. PAT (ex one-offs)4,386 5,454 6,110 7,279 6,738 23,228 27,058 Shareholding pattern (%) Change (%) 30.4 32.8 99.2 39.5 53.6 65.4 16.5 Jun-12 Mar-12 Jun-11 PAT Margin (%) 29.3 30.6 30.0 34.3 29.2 31.2 28.2 Promoter 63.7 63.7 63.7 Key Operating Metrics - Revenue Break-up Dome. Inst. 5.3 5.5 7.2 US 6,220 7,991 10,400 10,106 15,411 34,716 45,857 Foreign 20.6 20.1 18.6 India 6,385 7,046 6,956 8,767 5,877 29,154 32,825 Others 10.4 10.7 10.6 ROW 2,521 2,567 2,810 3,226 3,666 11,124 14,983 APIs 1,476 1,603 1,536 1,531 2,002 6,147 6,889 Others 2 4 17 8 18 31 41 E: MOSL Estimates
150 August 27 - 31, 2012 8th Annual Global Investor Conference
Sun Pharmaceuticals: Financials and valuation
Consolidated Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 57,214 80,057 99,348 110,895 Basic (INR) Change (%) 39.5 39.9 24.1 11.6 EPS 13.6 22.4 26.1 29.0 EBITDA 19,700 32,507 38,401 39,057 Fully Diluted EPS 13.6 22.4 26.1 29.0 Margin (%) 34.4 40.6 38.7 35.2 Cash EPS 19.5 27.8 30.5 32.5 Depreciation 2,041 2,912 3,354 3,639 BV/Share 91.6 117.5 138.0 159.1 EBIT 17,659 29,595 35,047 35,417 DPS 3.5 4.2 5.8 6.7 Int. and Finance Charges 577 282 164 164 Payout (%) 22.1 17.3 21.5 23.7 Other Income - Rec. 3,276 4,240 5,240 6,416 Valuation (x) PBT 20,358 33,554 40,123 41,670 P/E 29.5 25.3 22.8 Tax 1,284 3,826 7,222 7,501 Cash P/E 23.8 21.6 20.3 Tax Rate (%) 6.3 11.4 18.0 18.0 P/BV 5.6 4.8 4.2 Profit after Tax 19,074 29,727 32,901 34,169 EV/Sales 7.9 6.1 5.3 Less: Mionrity Interest 913 3855 4626 4163 EV/EBITDA 19.4 15.9 15.0 Net Profit 18,161 25,873 28,275 30,006 Dividend Yield (%) 0.6 0.9 1.0 Adj. PAT 14,041 23,228 27,058 30,006 Return Ratios (%) Consolidated Balance Sheet (INR Million) RoE 16.2 21.5 20.5 19.5 Y/E March 2011 2012 2013E 2014E RoCE 23.4 30.3 29.8 26.7 Equity Share Capital 1,036 1,036 1,036 1,036 Total Reserves 93,798 120,628 141,834 163,738 Working Capital Ratios Net Worth 94,833 121,664 142,870 164,774 Fixed Asset Turnover (x) 2.8 2.9 3.2 3.4 Minority Interest 8,472 11,615 16,240 20,403 Debtor (Days) 75 88 80 80 Deferred Liabilities -3652 -5199 -5199 -5199 Inventory (Days) 94 95 82 92 Secured Loan 1,804 1,644 1,644 1,644 Working Capital T/O (Days) 293 299 330 378 Unsecured Laon 2,452 1,096 1,096 1,096 Leverage Ratio Total Loans 4,256 2,739 2,739 2,739 Debt/Equity (x) 0.0 0.0 0.0 0.0 Capital Employed 103,908 130,818 156,650 182,718
Net Fixed Assets 25,234 30,210 31,855 32,716 Cash Flow Statement (INR Million) Capital WIP 2,706 2,706 2,706 2,706 Y/E March 2011 2012 2013E 2014E Goodwill 7,720 10,218 10,218 10,218 OP/(Loss) bef. Tax 19,700 32,507 38,401 39,057 Investments 22,310 22,129 22,129 22,129 Int./Dividends Recd. 3,276 4,240 5,240 6,416 Direct Taxes Paid -4,046 -5,373 -7,222 -7,501 Curr. Assets 60,172 90,506 121,003 152,426 (Inc)/Dec in WC -533 -7,882 -1,398 -4,188 Inventory 14,794 20,870 22,355 27,854 CF from Operations 18,397 23,493 35,021 33,785 Account Receivables 11,716 19,261 21,775 24,306 Cash and Bank Balance 21,936 33,672 56,460 77,479 (inc)/dec in FA -16,864 -10,386 -5,000 -4,500 L & A and Others 11,726 16,703 20,414 22,787 (Pur)/Sale of Invest. 8,354 181 0 0 Curr. Liability & Prov. 14,234 24,950 31,262 37,477 CF from investments -8,510 -10,205 -5,000 -4,500 Net Current Assets 45,939 65,556 89,742 114,949 Appl. of Funds 103,908 130,819 156,650 182,718 Change in networth 8,223 5,395 0 0 (Inc)/Dec in Debt 2,545 -1,517 0 0 Revenue model (INR M) Interest Paid -577 -282 -164 -164 Y/E March 2011 2012 2013E 2014E Dividend Paid -4,213 -5,149 -7,069 -8,102 Total Domestic Sales 24,948 30,340 34,059 40,017 CF from Fin. Activity 5,977 -1,553 -7,233 -8,266 Export - Formulations 28,982 45,841 60,840 66,072 Taro 9,962 22,128 27,619 26,036 Inc/Dec of Cash 15,864 11,736 22,788 21,019 Caraco 13,042 12,588 18,238 20,168 Add: Beginning Balance 6,072 21,936 33,672 56,460 Branded 5,978 11,124 14,983 19,868 Closing Balance 21,936 33,672 56,461 77,479 Export - API & Others 4,136 4,992 5,696 6,271 Note: Cashflows do not tally due to acquisition Gross Sales 58,066 81,173 100,594 112,360
August 27 - 31, 2012 151 8th Annual Global Investor Conference
Tata Consultancy Services
Company description Key news flows / triggers to watch TCS is the largest IT services company in India, with LTM The appreciation of the rupee and continued high revenue of over USD9.3b. It employs over 243,000 attrition could hamper profitability. people and provides IT and BPO services to over 900 Sovereign default in Europe could bring about global clients. It is one of the preferred IT vendors for freeze on spending as seen in 2009 most Fortune 500/Global 1,000 companies. Any weakness in BFSI vertical could be a negative trigger at current peer-leading valuations BFSI is TCS's key vertical, contributing 43% to the company's revenue (FY12), followed by Retail, which Key challenges contributed 12%. Weak macro is making it more and more difficult to grow revenue share from BFSI - where ?IT budgets Geographically, the company gets 53% of its revenues are down YoY from the US, 15% from UK, and 9% from India (all figures Majority of incremental revenues in 1QFY13 came based on FY12 mix). of BPO. Continued growth skew in favor of lower end services could hamper multiples/profitability. Key investment positives On a high base, the company continues to post 1QFY13 highlights; guidance for FY13, FY14 industry leading volume growth even in a TCS's broad-based execution defying any concerns challenging environment. from the prevailing macro was the key highlight of Despite the prevailing macro headwinds, the 1QFY13 results company's execution remains spectacular, and For the quarter, BPO was the key driver of growth, outlook bullish. contributing 60% of the incremental revenues, Traction for the company has been broad-based, the helped by Friends Life insurance platform deal company bagged 6 large deals across industries While macro remains dynamic, the company One of the largest players in IMS, the key growth continues to see opportunities, orders in driver for the industry. transformation and in discretionary projects.
Stock info Quarterly Performance (INR Million) Bloomberg TCS IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 1957 Operating Income 107,970 116,335 132,040 132,593 148,687 488,938 619,223 CMP (INR) 1,277 Change - QoQ (%) 6.3 7.7 13.5 0.4 12.1 31.0 26.6 Mcap (USD b) 44.8 EBITDA 30,738 30,310 33,829 40,921 39,117 144,177 182,494 52-Wk Range (INR) 1287 / 897 Change - QoQ (%) (1.4) 11.6 21.0 (4.4) 10.8 28.9 26.6 1, 6, 12 Rel Perf (%) 4 / 7 / 22 EBITDA Margin (%) 28.5 26.1 25.6 30.9 26.3 29.5 29.5 Reported PAT 23,804 24,390 28,866 29,324 32,806 106,384 140,115 Adjusted PAT 23,804 24,390 28,866 29,324 32,806 106,384 140,115 Shareholding pattern (%) Change - QoQ (%) 63.1 -2.2 -9.2 55.1 20.6 22.8 12.9 Jun-12 Mar-12 Jun-11 PAT Margin (%) 22.0 21.0 21.9 22.1 22.1 21.8 22.6 Promoter 74.0 74.0 74.1 Key Operating Metrics Dom. Inst. 6.7 7.2 8.1 Volume Growth 7.4 6.3 4.0 3.3 5.3 23.1 15.9 Foreign 14.6 14.0 12.8 Headcount 202,190 214,770 226,751 238,583 243,545 238,583 268,351 Others 4.7 4.8 5.0 Util. (incl. trainees) 76.2 76.4 74.0 71.3 72.3 74.4 73.7 E: MOSL Estimates
152 August 27 - 31, 2012 8th Annual Global Investor Conference
Tata Consultancy Services: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Sales 373,245 488,938 619,223 708,798 Basic (INR) Change (%) 24.3 31.0 26.6 14.5 EPS 44.4 54.4 71.1 78.3 Cost of Services 198,505 258,773 326,331 381,202 Cash EPS 48.4 59.0 76.4 84.2 SG&A Expenses 62,848 85,988 110,398 126,157 Book Value 129.5 166.7 207.0 259.8 EBITDA 111,892 144,177 182,494 201,439 DPS 14.0 25.0 20.0 22.0 % of Net Sales 30.0 29.5 29.5 28.4 Payout % 31.6 46.0 28.1 28.1 Depreciation 7,990 9,036 10,271 11,609 Other Income 5,243 4,041 11,941 11,299 Valuation (x) PBT 109,145 139,182 184,164 201,129 P/E 28.8 23.5 18.0 16.3 Tax 21,203 31,688 43,420 46,360 Cash P/E 26.4 21.7 16.7 15.2 Rate (%) 19.4 22.8 23.6 23.0 EV/EBITDA 21.9 17.2 13.0 11.5 Minority Interest 1,116 1,110 1,553 1,553 EV/Sales 6.6 5.1 3.8 3.3 PAT 86,826 106,384 139,191 153,216 Price/Book Value 9.9 7.7 6.2 4.9 Net Income 86,826 106,384 139,191 153,216 Dividend Yield (%) 1.1 2.0 1.6 1.7 Change (%) 26.3 22.5 30.8 10.1 Profitability Ratios (%) Balance Sheet (INR Million) RoE 37.4 36.7 38.1 33.5 Y/E March 2011 2012 2013E 2014E RoCE 42.2 44.1 44.8 39.7 Share Capital 1,957 1,957 1,957 1,957 Reserves 250,432 323,276 402,171 505,445 Turnover Ratios Net Worth 252,389 325,233 404,128 507,402 Debtors (Days) 81 87 89 91 Preference shares 1,000 1,000 1,000 1,000 Fixed Asset Turnover (x) 7.9 8.4 9.1 9.7 Minority Interest 4,663 5,276 5,506 5,506 * 1:1 bonus in FY07, accordingly ratios are adjusted Loans 10,718 12,306 14,907 17,171 Capital Employed 268,771 343,815 425,541 531,080 Cash Flow Statement (INR Million) Y/E March 2011 2012 2013E 2014E Gross Block 88,003 100,211 106,923 111,084 CF from Operations 94,816 115,420 149,462 164,825 Less : Depreciation 35,663 35,663 35,663 35,663 Cash for Working Capital 18,165 -73,671 34,208 -22,163 Net Block 52,340 64,548 71,260 75,421 Net Operating CF 112,981 41,748 183,670 142,663 Other LT Assets 89,929 110,269 115,017 124,284 Investments 18,390 0 32,956 32,956 Net Purchase of FA -53,633 -41,584 -21,732 -25,037 Net Purchase of Invest. 19,409 18,390 -32,956 0 Curr. Assets 171,948 237,173 314,579 418,850 Net Cash from Invest. -34,224 -23,193 -54,688 -25,037 Debtors 95,479 137,469 163,957 190,954 Cash & Bank Balance 47,401 34,617 106,134 176,083 Proc. from equity issues-11,155 24,319 -14,268 0 Other Current Assets 29,068 65,087 44,487 51,813 Proceeds from LTB/STB 1,608 1,588 2,601 2,265 Current Liab. & Prov 63,837 68,175 108,272 120,431 Dividend Payments -32,058 -57,246 -45,797 -50,377 Current Liabilities 63,837 68,175 108,272 120,431 Cash Flow from Fin. -41,604 -31,339 -57,465 -48,112 Net Current Assets 108,111 168,998 206,307 298,418 Misc. Expenses 2 2 2 2 Free Cash Flow 59,348 165 161,938 117,626 Application of Funds 268,771 343,815 425,541 531,080 Net Cash Flow 37,152 -12,784 71,517 69,514
Key assumptions/operating metrics Opening Cash Bal. 10,249 47,401 34,617 106,134 Y/E March 2011 2012 2013E 2014E Add: Net Cash 37,152 -12,784 71,517 69,514 Volume Growth (%) 29.7 23.1 15.9 17.5 Closing Cash Bal. 47,401 34,617 106,134 176,013 Headcount 198,614 238,583 268,351 311,410 Note: Cashflows do not tally due to acquisition Utilization* 76.2 74.4 73.7 73.4 *Including trainees
August 27 - 31, 2012 153 8th Annual Global Investor Conference
Tata Motors
Company description Key challenges Tata Motors is the largest commercial vehicle Given high operating leverage, slow-down in manufacturer in India with 59% market share in MHCV demand coupled with adverse forex movement and 58% in LCVs. It also manufactures passenger car could adversely impact JLR's profitability. vehicles and utility vehicles. In FY09, it acquired Jaguar Maintaining market share amidst increasing & Land Rover from Ford for USD2.5b. In FY12, JLR competition in domestic M&HCV industry. contributed ~63% of TTMT's consolidated revenues and ~85% of its profit. This coupled with Tata Daewoo, makes Key news flows / triggers to watch it a global player in the automobile industry. Level of competitive intensity in global luxury car market, with focus on incentives/discounts. Key investment positives Launch of new Range Rover in 1QCY13. JLR volumes to remain robust, driven by Evoque & Reduction in interest rates & pick-up in economic ramp up of operations in China. We factor in 16% activity to boost CV demand. volume growth in FY13 to ~365,000 (vs. management guidance of 370,000-380,000), with ~50% growth 1QFY13 highlights; guidance for FY13, FY14 driven by Evoque ramp-up. JLR's realizations improved 3.2% QoQ, driven by JLR on aggressive product development plan with favorable mix. EBITDA margins declined by 10 bps 40 new product/refreshes planned over next 5 years, QoQ (+110bps YoY) to 14.5%, driven by higher including smaller Jaguar by CY14/15. capitalization (~120bp QoQ) which off-set impact Improving market mix, internal cost efficiencies, of ~130bp QoQ higher cost. However, higher tax sourcing from low cost countries and operating restricted JLR's adj. PAT to GBP236m. leverage would offset higher cost pressures on JLR. S/A volumes declined by 4% YoY, as M&HCV We expect JLR's normalized EBITDA margin to volumes declined ~25% YoY & PVs by ~10%, despite decline by 70bp to 9.6% in FY13. ~17% growth in LCV volumes. EBITDA margins Demand for LCVs in India is expected to remain declined by 220bp QoQ (-150bp YoY) at 7.3%, robust, despite slow down in M&HCV demand. We impacted by negative operating leverage. model volume growth of 7% for CV business in FY13, Maintained FY13 volume guidance of ~370,000 units driven by 16% LCV volume growth and 7.5% de- and EBITDA margins of ~15% for JLR. For domestic growth in M&HCVs. operations, M&HCV volumes are expected to remain under pressure, but momentum in LCV to remain strong.
Stock info Quarterly Performance (INR Million) Bloomberg TTMT IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 2708 Total Op Income 332.8 361.9 452.6 509.1 433.2 1,656.5 1,956 CMP (INR) 240 Growth (%) 23.0 26.9 44.0 44.3 30.1 35.6 18.1 Mcap (USD b) 11.7 EBITDA 42.4 45.0 68.3 67.4 57.5 223.1 252.8 52-Wk Range (INR) 321 / 138 EBITDA Margins (%)12.7 12.4 15.1 13.2 13.3 13.5 12.9 1, 6, 12 Rel Perf (%) 3 / -9 / 49 Growth (%) 7.1 12.6 52.1 50.8 35.9 Adj PAT 20.5 22.5 35.3 44.4 25.7 125.6 111.5 Growth (%) (3.5) 6.4 43.9 79.2 25.2 38.5 -11.2 Shareholding pattern (%) Key Operating metrics Jun-12 Mar-12 Jun-11 JLR Vols ('000 units) 62.0 68.0 86.3 98.1 83.4 314.4 365.0 Promoter 34.8 34.9 34.9 JLR EBITDA Margins (%)13.4 14.4 17.0 14.6 14.5 15.0 14.3 Dom. Inst. 12.0 12.7 13.7 S/A Vols ('000 units)197.6 211.4 231.3 286.0 190.9 197.6 211.4 Foreign 44.9 44.5 43.1 S/A EBITDA Margins (%)8.8 7.2 6.7 9.5 7.3 8.1 8.4 Others 8.4 7.9 8.3 RM Cost (% of Sales) 78.0 78.6 79.1 79.6 77.8 78.9 78.4 E: MOSL Estimates
154 August 27 - 31, 2012 8th Annual Global Investor Conference
Tata Motors: Financials and valuation
Income Statement (Consolidated) (INR Billion) Ratios (Consolidated) Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Total Income 1,221.3 1,656.5 1,956.0 2,137.1 Basic (INR) Change (%) -99.9 35.6 18.1 9.3 EPS 28.4 39.6 34.0 38.8 EBITDA 178.2 237.0 268.2 293.2 EPS Fully Diluted 27.3 37.8 33.5 38.3 EBITDA Margins (%) 14.6 14.3 13.7 13.7 Normalized EPS ^ 15.4 22.2 14.7 17.2 Depreciation 46.6 56.3 69.3 79.4 EPS Growth (%) -461.6 43.7 -33.8 16.7 Product Dev. Exp. 10.0 13.9 15.4 16.3 Cash EPS 43.0 57.3 55.1 63.0 Interest 23.9 29.8 29.9 24.0 BV per share 62.8 61.0 67.7 69.4 Other Income 4.3 6.6 6.8 7.0 DPS 4.0 4.0 4.5 5.0 PBT 104.4 135.3 156.0 180.6 Div. Payout (%) 81.0 119.6 68.0 77.6 Eff. Tax Rate (%) 11.7 -0.3 30.5 29.6 Valuation (x) Adj. PAT 90.7 125.6 111.5 127.2 Consolidated P/E 8.8 6.3 7.1 6.2 Change (%) -99.4 38.5 -11.2 14.1 Cash P/E 5.6 4.2 4.3 3.8 Balance Sheet (Consolidated) (INR Billion) EV/EBITDA 5.2 3.7 3.6 3.3 Y/E March 2011 2012 2013E 2014E EV/Sales 0.8 0.5 0.5 0.5 Share Capital 6 6 7 7 Price to Book Value 4.0 2.3 1.9 1.5 Net Worth 192 327 418 526 Dividend Yield (%) 1.7 1.7 1.9 2.1 Loans 304 387 363 355 Profitability Ratios (%) Minority Interest 2 3 4 5 RoE 47.3 38.4 26.6 24.2 Deferred Tax 15 -24 -24 -24 RoCE 26.5 27.0 27.0 25.6 Capital Employed 512 693 761 862 Turnover Ratios Application of Funds Debtors (Days) 20 18 23 23 Net Fixed Assets 318 518 624 734 Inventory (Days) 42 40 43 43 Capital WIP 117 50 60 70 Creditors (Days) 83 81 77 77 Goodwill 36 41 41 41 Asset Turnover (x) 2.4 2.4 2.6 2.5 Investments 25 89 90 91 Curr.Assets 507 706 735 787 Leverage Ratio Inventory 141 182 230 252 Debt/Equity (x) 1.6 1.2 0.9 0.7 Sundry Debtors 65 82 123 135 Cash Flow Statement (Consolidated) (INR Billion) Cash & Bank Bal. 114 182 89 66 Y/E March 2011 2012 2013E 2014E Loans & Advances 178 250 292 334 OP/(Loss) before Tax 132 181 199 214 Current Liab. & Prov. 491 711 788 861 Int/Div. Received 20 7 7 7 Sundry Creditors 279 367 413 451 Depreciation 47 56 69 79 Other Liabilities 113 215 214 234 Direct Taxes Paid -14 -38 -48 -53 Provisions 100 128 161 176 (Inc)/Dec in WC -40 89 -45 -2 Net Current Assets 16 -5 -53 -74 Other Items -29 -19 -15 -15 Appl. of Funds 512 693 761 862 CF after EO Items 107 267 163 230 Key assumptions/operating metrics (Inc)/Dec in FA+CWIP -81 -189 -185 -200 Y/E March 2011 2012 2013E 2014E (Pur)/Sale of Invest. 10 -64 -1 -1 JLR Vols ('000 units) 243.6 314.4 365.0 398.7 CF from Inv Activity -71 -252 -186 -201 Growth (%) 25.6 29.1 16.1 9.2 Issue of Shares 32 15 0 0 JLR Realizations (GBP) 40,518 42,973 43,296 43,729 Inc/(Dec) in Debt -11 83 -24 -8 Growth (%) 20.4 6.1 0.8 1.0 Interest Paid -25 -30 -30 -24 JLR EBITDA Margins (%) 15.2 15.0 14.3 14.3 Dividends Paid -10 -15 -17 -19 S/A Vols ('000 units) 836.6 922.9 952.6 1084.2 CF from Fin Activity -14 54 -71 -51 Growth (%) 25.2 10.3 3.2 13.8 S/A Realizations (INR) 562,866 588,455 575,468 576,092 Inc/(Dec) in Cash 22 68 -93 -23 Growth (%) 5.63 4.55 -2.21 0.11 Add: Beginning Bal. 87 110 178 85 S/A EBITDA Margins (%) 10.2 8.1 8.4 8.9 Closing Balance 110 178 85 62
August 27 - 31, 2012 155 8th Annual Global Investor Conference
Tata Steel
Company description Further regulatory requirements in Europe and UK Tata Steel (TATA), the lowest cost steel producer in India, are the additional challenges that Tata Steel Europe has become the sixth largest steel maker in the world (TSE) has to deal with. after the acquisition of Corus. The combined entity has its business spread over Europe, the UK, Asia, North Key news flows / triggers to watch America and the rest of the world with 27mtpa capacity. Tata Steel is currently undergoing triennial On a consolidated level, it has ~22% raw material negotiations with trustee's of pension fund which security and plans to increase it to 50-60%. Production are expected to be completed in 2QFY13. This will will increase to 34mtpa through brownfield expansions lead to further increase in net debt as it has to in Jamshedpur and green-field projects in Orissa. contribute to the deficit.
Key investment positives 1QFY13 highlights; guidance for FY13, FY14 Tata Steel India (TSI) saleable steel volumes will post Tata Steel adj. consolidated PAT increased 83% QoQ CAGR of 13% over FY12-14 t due to ongoing capacity to INR8b due to lower than expected loss at TSE expansion to 10mtpa at Jamshedpur. and other subsidiaries. Reported PAT of INR6b Overseas investments in raw material assets are included forex loss of INR1.97b. Actuarial loss of expected to start generating cash flow in FY14. INR14.5b has been adjusted in reserves and surplus. TSE restructuring initiatives such as up gradation of Tata Steel India EBITDA was 6% lower than estimate plants, shutdown of old units and downsizing of at INR30b due to cost inflation. Realization (TSI) was Manpower will increase its cost effectiveness going up 5% QoQ but volumes were down 10%. forward. TSI EBITDA per ton remained flat due to cost inflation on account of (1) increase in power rate Key challenges (2) freight and handling cost (3) pension Sluggish domestic steel demand, cheaper imports provisioning on account of change in discount rate. and enhanced capacity of steel majors due to recent Cost inflation is sticky and will put further pressure expansions will put pressure on prices. Domestic on margins, in view of falling steel prices. producers will have to resort to more aggressive TSE reported better than expected EBITDA per ton pricing which will results in lower TSI margins. of USD35/t due to higher prices and easing of cost The European steel demand continues to remain pressure. subdued leading to lower steel prices and margins.
Stock info Quarterly Performance (INR Million) Bloomberg TATA IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 971 Operating Income 330,002 327,979 331,031 339,986 338,212 1,328,997 1,360,576 CMP (INR) 395 Change (%) 21.3 14.5 13.8 0.5 2.5 11.9 2.4 Mcap (USD b) 6.9 EBITDA 44,572 27,500 19,133 31,788 36,003 124,168 141,040 52-Wk Range (INR) 504 / 332 Change (%) 0.6 -25.1 -44.1 -17.9 -19.2 0.9 2.8 1, 6, 12 Rel Perf (%) -6 / -14 / -21 EBITDA Margin (%) 13.5 8.4 5.8 9.3 10.6 9.3 10.4 Reported PAT 52,937 1,390 -6,874 2,032 5,170 49,485 28,471 Shareholding pattern (%) Adjusted PAT 19,846 2,124 -6,027 4,335 7,949 20,279 32,744 Jun-12 Mar-12 Jun-11 Change (%) 5.3 -83.8 -168.4 -63.3 -59.9 -61.4 61.5 Promoter 31.4 31.4 30.6 PAT Margin (%) 6.0 0.6 -1.8 1.3 2.4 1.5 2.4 Dom. Inst. 28.7 28.3 26.3 Key operating metrics Foreign 15.8 16.2 19.7 Sales (mt) 6.1 6.1 5.8 6.2 5.7 24.3 24.0 Others 24.1 24.1 23.4 Realization (INR/ton)54,099 53,679 56,683 54,660 59,544 54,759 56,647 EBITDA/ton (USD/ton)163 98 64 102 116 107 110 E: MOSL Estimates
156 August 27 - 31, 2012 8th Annual Global Investor Conference
Tata Steel: Financials and valuation
Income Statement (Consolidated) (INR Million) Ratios (Consolidated) Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 1,187,531 1,328,997 1,360,576 1,430,516 Basic (INR) Change (%) 16.0 11.9 2.4 5.1 EPS 62.3 18.6 31.0 46.4 EBITDA 159,956 124,168 141,040 152,119 Cash EPS 138.3 97.4 85.4 103.7 % of Net Sales 13.5 9.3 10.4 10.6 BV/Share 211.4 264.4 278.4 310.2 Depn. & Amortization 44,148 45,167 54,492 54,979 DPS 12.0 12.0 12.0 12.0 EBIT 115,808 79,001 86,547 97,140 Payout (%) 21.9 74.6 45.3 30.3 Finace cost 27,700 42,501 42,206 44,246 Valuation (x) Other income 2,809 15,730 10,346 10,750 P/E 6.4 21.3 12.8 8.5 PBT before EO 90,917 52,231 54,688 63,644 Cash P/E 2.9 4.1 4.6 3.8 EO income 30,103 33,619 -1,970 P/BV 1.9 1.5 1.4 1.3 PBT after EO 121,020 85,850 52,718 63,644 EV/Sales 0.7 0.7 0.7 0.7 Tax 32,459 36,365 24,247 17,923 EV/EBITDA 5.5 7.3 6.9 6.7 Rate (%) 26.8 42.4 46.0 28.2 Dividend Yield (%) 3.0 3.0 3.0 3.0 Reported PAT 88,561 49,485 28,471 45,721 Return Ratios (%) Minority interest P/L -603 -1,731 -640 -195 RoE 40.5 7.8 11.4 15.8 Share of asso. PAT 664 2,681 1,663 1,730 RoCE (pre-tax) 13.2 9.1 8.8 9.6 PAT (After MI & asso.) 89,827 53,898 30,774 47,646 Working Capital Ratios Div. on Pref. /Hybrid Sec. 2,225 2,616 2,616 Debtor (Days) 46 41 42 42 Adjusted PAT 59,724 18,054 30,127 45,030 Inventory (Days) 74 70 70 70 Change (%) -n/a- -69.8 66.9 49.5 Payables (Days) 53 51 50 50 Working Capital T/O (Days) 67 61 62 62 Balance Sheet (Consolidated) (INR Million) Leverage Ratio (x) Y/E March 2011 2012 2013E 2014E Interest Cover Ratio 4.2 1.9 2.1 2.2 Share Capital 9,587 9,714 9,714 9,714 Debt/Equity 2.5 2.0 2.2 2.1 Reserves 346,226 420,672 434,236 465,117 Net Worth 355,814 430,386 443,950 474,831 Cash Flow Statement (Consolidated) (INR Million) Minority Interest 8,889 10,912 10,271 10,076 Y/E March 2011 2012 2013E 2014E Total Loans 639,107 646,318 646,318 646,318 EBITDA 159,956 124,168 141,040 152,119 Deferred Tax Liability 20,126 24,424 24,424 24,424 Non cash exp. (income) 8,773 13,603 -1,251 -989 Capital Employed 1,023,936 1,112,039 1,124,963 1,155,649 (Inc)/Dec in Wkg. Cap. -71,749 11,590 -10,439 -11,880 Gross Block 981,023 1,133,047 1,253,047 1,373,047 Tax Paid -32,351 -36,524 -24,247 -17,923 Less: Accum. Deprn. 615,338 712,043 766,536 821,515 CF from Op. Activity 64,629 112,838 105,101 121,327 Net Fixed Assets 365,685 421,003 486,511 551,532 Capital WIP 135,508 200,397 200,397 200,397 (Inc)/Dec in FA + CWIP -101,636 -119,586 -120,000 -120,000 Investments 46,881 26,229 26,229 26,229 (Pur)/Sale of Investments 22,294 4,164 Goodwill on consolid. 152,982 173,546 173,546 173,546 Acquisition in subsidiaries -647 -1,970 Other assets 87,181 84,833 84,833 84,833 Int. & Divident Income 3,518 6,194 10,346 10,750 Net Current Assets 235,699 206,031 153,447 119,112 Other investing activities 39,218 61,251 Appl. of Funds 1,023,936 1,112,039 1,124,963 1,155,649 CF from Inv. Activity -37,254 -47,978 -111,624 -109,250
Key assumptions/operating metrics Equity raised/(repaid) 45,568 6,045 Y/E March 2011 2012 2013E 2014E Debt raised/(repaid) 37,874 -39,803 Forex Rate (INR/USD) 45.6 47.9 53.5 52 Dividend (incl. tax) -7,146 -11,639 -13,639 -13,639 Realization (USD/ton) Interest & equiv. paid -31,366 -37,646 -42,206 -44,246 Indian Business 918 986 884 862 CF from Fin. Activity 44,930 -83,043 -55,844 -57,885 Europe and other business 1158 1175 1108 1093 EBITDA (USD/ton) (Inc)/Dec in Cash 72,305 -18,184 -62,367 -45,808 Indian Business 374 347 278 251 Add: opening Balance 67,878 140,183 122,000 58,976 Europe and other business 51 9 25 35 Closing Balance 140,183 122,000 58,976 12,761
August 27 - 31, 2012 157 8th Annual Global Investor Conference
Titan Industries
Company description overheads due to increased pace of store openings Titan Inds is the largest specialty retailer with leadership and 3) rising competition from regional players. in watches (~45% of total market, 65% of organised Maintaining leadership position in watches with market) and branded Jewelry (~40% share), and largest rising competition from small/regional players at chain in Eyewear. It owns brands like Titan, Fastrack, the lower end and premium global brands at the Sonata, Tanishq, Goldplus, Zoya, and Titan Eye+. high end. Sustaining profitable operations at the PE (Precision Key investment positives engineering) SBU. Titan is debt free with cash surplus of ~INR10.0b (~INR4.3b excluding Gold Harvest scheme) and Key news flows / triggers to watch operating ROE of 128%. Trend in gold and diamond prices can impact Its watch business is likely to grow by 18-20% CAGR consumer demand and profit margins. led by strong brand, distribution and innovations in Poor consumer confidence and slowdown in spends design and segments. will impact sales growth. Tanishq is likely to add 15 stores in the next 15-18 Breakeven in the eyewear business. months (6 in past 30 months) which would enable sales growth given strong brand, contemporary 1QFY13 highlights; guidance for FY13, FY14 designs and quality assurance. Jewelry volumes declined 21% due to high gold Fastrack has emerged as Rs3.5-4b brand focused on prices and slowdown in consumer demand. Sales youth with products like watches, eyewear, bags, grew 8% and EBIT grew 9%; margins remained flat belts, wallets and other accessories; this brand has YoY at 10.2%. the potential to grow manifold in the coming 3/5 Watch business reported 14% sales growth (3% years. decline in volumes) while Eyewear sales grew 6% even as LTL sales growth remained under pressure Key challenges at 1%. Jewelry business faces near term headwinds from We remain cautious on the jewellery volumes 1) volatility in gold and diamond prices 2) higher considering the weak macroeconomic scenario.
Stock info Quarterly Performance (INR Million) Bloomberg TTAN IN Y/E March Jun-12 Sep-12 Dec-12 Mar-12 Jun-13 FY12 FY13E Equity Shares (m) 888 Operating Income 20,205 20,963 24,401 22,814 22,057 88,384 103,823 CMP (INR) 221 change (%) 61.3 36.5 24.8 28.3 9.2 35.5 17.5 Mcap (USD b) 3.5 EBITDA 1,921 2,002 2,129 2,071 2,120 8,329 10,096 52-Wk Range (INR) 255 / 154 Change (%) 72.7 15.4 9.2 95.7 10.3 42.2 21.2 1, 6, 12 Rel Perf (%) -4 / -2 / 0 EBITDA Margin (%) 9.5 9.6 8.7 9.1 9.6 9.4 9.7 Reported PAT 1,436 1,529 1,639 1,443 1,561 6,001 7,158 Shareholding pattern (%) Adjusted PAT 1,436 1,529 1,639 1,443 1,561 6,048 7,158 Jun-12 Mar-12 Jun-11 Change (%) 76.9 19.7 16.4 72.0 8.7 39.5 18.3 Promoter 53.1 53.4 53.3 PAT Margin (%) 7.1 7.3 6.7 6.3 7.1 6.8 6.9 Dome. Inst. 3.8 4.5 6.2 Key Operating metrics Foreign 16.2 15.0 12.5 Watches Sales (%) 24.2 16.1 17.2 27.0 14.4 Others 27.0 27.1 28.0 Jewellery Volume (%)40.0 0.0 -5.0 -7.0 -21.0 E: MOSL Estimates
158 August 27 - 31, 2012 8th Annual Global Investor Conference
Titan Industries: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 65,209 88,588 103,823 123,199 Basic (INR) Change (%) 39.5 35.9 17.2 18.7 EPS 4.9 6.8 8.1 10.0 Total Expenditure 59,353 80,292 93,727 110,915 Cash EPS 5.2 7.3 8.5 10.5 EBITDA 5,856 8,296 10,096 12,284 BV/Share 11.5 16.3 21.7 28.7 Change (%) 53.5 41.7 21.7 21.7 DPS 1.5 2.0 2.4 3.0 Margin (%) 9.0 9.4 9.7 10.0 Payout % 30.0 30.0 30.0 30.0 Depreciation 345 450 482 533 Int. and Fin. Charges 82 437 650 700 Valuation (x) Other Income - Recurring 561 958 977 1,304 P/E 32.5 27.4 22.1 Profit before Taxes 5,990 8,367 9,941 12,354 Cash P/E 30.3 25.9 21.0 Change (%) 80.4 39.7 18.8 24.3 EV/Sales 2.1 1.8 1.4 Margin (%) 9.2 9.4 9.6 10.0 EV/EBITDA 22.5 18.2 14.5 Tax 1,686 2,523 3,006 3,776 P/BV 13.5 10.2 7.7 Deferred Tax 32 187 223 280 Dividend Yield (%) 0.9 1.1 1.4 Tax Rate (%) 27.6 27.9 28.0 32.8 Profit after Taxes 4,336 6,031 7,158 8,858 Return Ratios (%) Change (%) 65.8 39.1 18.7 23.8 RoE 49.6 48.7 42.4 34.8 Margin (%) 6.7 6.8 6.9 7.2 Operating RoE 128.1 175.4 95.2 97.9 Reported PAT 4,336 5,984 7,158 8,858 RoCE 61.8 66.8 58.7 54.1
Balance Sheet (INR Million) Working Capital Ratios Y/E March 2011 2012 2013E 2014E Debtor (Days) 6 7 6 6 Share Capital 444 888 888 888 Asset Turnover (x) 6.0 6.1 5.3 4.7 Reserves 9,810 13,611 18,410 24,557 Net Worth 10,254 14,499 19,297 25,445 Leverage Ratio Loans 677 59 200 200 Debt/Equity (x) 0.1 0.0 0.0 0.0 Deferred Tax 15 -38 185 465 Capital Employed 10,946 14,520 19,682 26,110 Cash Flow Statement (INR Million) Y/E March 2011 2012 2013E 2014E Gross Block 6,089 7,614 8,989 10,164 OP/(loss) before Tax 5,990 8,367 9,941 12,354 Less: Accum. Depn. 3,393 3,818 4,250 4,747 Int./Div. Received 561 958 977 1,304 Net Fixed Assets 2,696 3,796 4,739 5,416 Depreciation and Amort. 345 450 482 533 Intangibles 135 110 60 25 Interest Paid 82 437 650 700 Capital WIP 194 150 150 150 Direct Taxes Paid 1,686 2,523 3,006 3,776 Investments 91 161 161 161 Incr in WC -6,445 3,827 887 499 CF from Operations 11,573 2,988 6,857 9,216 Curr. Assets, L&A 34,224 42,752 52,411 65,327 Inventory 19,938 28,787 34,454 41,151 Extraordinary Income 0 -47 0 0 Account Receivables 1,137 1,631 1,729 2,052 Incr in FA 524 1,456 1,325 1,140 Cash and Bank Balance 10,949 9,605 12,977 18,264 Investments 15 69 0 0 Others 2,200 2,729 3,251 3,861 CF from Invest. -539 -1,572 -1,325 -1,140 Curr. Liab. and Prov. 26,394 32,437 37,839 44,968 Current Liabilities 24,193 29,381 34,440 40,815 Incr in Debt -51 -618 141 0 Provisions 2,201 3,057 3,398 4,153 Dividend Paid 776 1,290 1,818 2,147 Net Current Assets 7,830 10,314 14,573 20,358 Others 1,125 852 483 2,922 Application of Funds 10,946 14,520 19,682 26,110 CF from Fin. Activity -1,952 -2,760 -2,160 -5,069 Key assumptions/operating metrics Volume Growth (%) Incr/Decr of Cash 9,082 -1,344 3,372 5,287 Jewelry 12.6 11.0 10.1 11.2 Add: Opening Balance 1,867 10,949 9,605 12,977 Watches 9.2 6.7 7.0 8.0 Closing Balance 10,949 9,605 12,977 18,264 E: MOSL Estimates
August 27 - 31, 2012 159 8th Annual Global Investor Conference
UltraTech Cement
Company description Key challenges UltraTech Cement, is a subsidiary of Grasim, a part of Being largest exporter of cement, its earnings are the Aditya Birla Group. Post merger of Grasim's cement sensitive to export volumes & realizations. business, it is the largest cement company in India with Consol net debt of INR18.8b as of Mar-12. a total cement capacity of 50m ton with a pan-India presence. It is the largest exporters of cement and Key news flows / triggers to watch Its brownfield expansion would commission clinker from India. It also has ancillary businesses like operations from 1QFY14 at both Raipur (4.8mt) & white cement and RMC. Karnataka (4.4mt). Also, grinding unit at Pipava Key investment positives (1mt) is expected to start operations in 2QFY13. Cement demand recovery over next 12-18 months, UltraTech is a truly pan-India play without driven by pick-up in infrastructure activity. concentration in any particular region, insulating it Sustenance of pricing discipline in the key markets from wide variation in regional demand and price of South and North India. volatility. Outcome of the appeal against CCI order in the Ongoing capacity addition to add ~10mt capacity by appellate tribunal on alleged cartelization. 1QFY14, taking total capacity to ~60mt. Potential to increase throughput without incurring 1QFY13 highlights; guidance for FY13, FY14 major capex by increasing utilization and blending, Volumes at 10.33mt (+5% YoY, -10% QoQ). Grey along with locational advantage, gives it the cement realizations estimated to improve ~6% QoQ flexibility to either export or sell in the domestic (~10% YoY) to INR4,124/ton. market. EBITDA at INR12.9b and EBITDA/ton of INR1,235 Product mix is expected to improve with lower (+INR154/ton QoQ, +INR44/ton YoY), driven by contribution from clinker as new grinding unit at higher realizations and in-line cost. Gujarat commissions operations by 2QFY13. It has further increased capex by INR10b to INR120b, UltraTech has well diversified fuel mix, with only with incremental capex towards modernization and ~53% dependence on domestic coal (~33% linkage RMC business. coal). Apart from domestic coal, it uses imported Expects industry to grow over 8% and surplus coal (~33%) and pet-coke (~14%). scenario to continue for next 3 years.
Stock info Quarterly Performance (INR Million) Bloomberg UTCEM IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 274 Operating Income 43,515 39,101 45,681 53,366 50,748 181,664 212,698 CMP (INR) 1,717 Change (%) 9.1 21.6 23.0 18.9 16.6 37.6 17.1 Mcap (USD b) 8.4 EBITDA 11,882 5,837 9,647 12,641 12,918 40,007 49,964 52-Wk Range (INR) 1,737 / 980 Change (%) 18.9 43.1 36.3 22.2 8.7 56.3 24.9 1, 6, 12 Rel Perf (%) 5 / 19 / 63 EBITDA Margin (%) 27.3 14.9 21.1 23.7 25.5 22.0 23.5 Reported PAT 6,831 2,790 6,169 8,673 7,784 24,462 30,880 Adjusted PAT 6,831 2,790 5,695 8,673 7,784 23,982 30,880 Shareholding pattern (%) Change (%) 22.5 141.0 78.5 19.3 14.0 70.8 28.8 Jun-12 Mar-12 Jun-11 PAT Margin (%) 15.7 7.1 12.5 16.3 15.3 13.2 14.5 Promoter 63.3 63.3 63.4 Key Operating Metrics Dom. Inst. 4.8 5.5 7.8 Volume (mt) 9.86 9.22 10.11 11.54 10.33 40.7 43.8 Foreign 22.1 20.6 16.4 Realiz.(INR/t) 3,749 3,507 3,759 3,894 4,124 3,738 4,083 Others 9.8 10.6 12.5 EBITDA (INR/T) 1,190 624 940 1,080 1,235 969 1,126 E: MOSL Estimates
160 August 27 - 31, 2012 8th Annual Global Investor Conference
UltraTech Cement: Financials and valuation
Income Statement (Post-Merger)* (INR Million) Ratios (Post-Merger) * Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 132,062 181,664 212,698 246,819 Basic (INR) Change (%) 87.3 37.6 17.1 16.0 EPS 51.2 87.5 110.0 122.0 EBITDA 25,597 40,007 48,808 56,566 Cash EPS 79.2 120.4 143.3 165.8 Margin (%) 19.4 22.0 22.9 22.9 BV/Share 389.2 469.2 565.3 669.8 Depreciation 7,657 9,026 9,118 12,010 DPS 6.0 8.0 12.0 15.0 Int. and Finance Charges 2,725 2,239 2,135 2,226 Payout (%) 13.6 10.4 12.7 14.3 Other Income - Rec. 2,619 4,520 4,900 4,750 EO Expense/(Income) 0 -666 0 0 Valuation (x) PBT after EO expense 17,833 33,929 42,455 47,080 P/E 33.5 19.6 15.6 14.1 Tax Rate (%) 21.3 27.9 29.0 29.0 Cash P/E 21.7 14.3 12.0 10.4 Adj PAT 14,042 23,982 30,143 33,427 P/BV 4.4 3.7 3.0 2.6 Change (%) 28.4 70.8 25.7 10.9 EV/Sales 3.5 2.6 2.3 1.9 EV/EBITDA 17.9 11.7 10.0 8.5 EV/Ton (Cap-US$) 168 172 175 144 Balance Sheet (Post-Merger) * (INR Million) Dividend Yield (%) 0.3 0.5 0.7 0.9 Y/E March 2011 2012 2013E 2014E Equity Share Capital 2,740 2,741 2,741 2,741 Return Ratios (%) Net Worth 106,660 128,598 154,920 183,570 RoE 18.4 20.4 21.3 19.8 Deferred liabilities 17301 17378 19925 22750 RoCE 21.1 23.7 24.8 24.1 Loans 26,373 38,117 38,117 33,117 Capital Employed 150,334 184,093 212,961 239,436 Working Capital Ratios Asset Turnover (x) 0.9 1.0 1.0 1.0 Net Fixed Assets 114,003 116,342 132,192 180,181 Debtor (Days) 17 15 15 15 Capital WIP 6,831 18,968 50,000 25,000 Inventory (Days) 54 41 45 45 Investments 37,303 37,888 19,475 21,475 Leverage Ratio Curr. Assets 41,809 56,235 63,158 72,963 Debt/Equity 0.2 0.3 0.2 0.2 Inventory 19,565 20,359 26,223 30,430 Debtors 6,023 7,660 8,741 10,143 Cash Flow Statement (Post-Merger) * (INR Million) Cash & Bank Bal 1,448 1,882 1,971 1,960 Y/E March 2011 2012 2013E 2014E Others 14,773 26,334 26,223 30,430 Op. Profit/(Loss) bef.Tax 25,597 40,007 48,808 56,566 Curr. Liability & Prov. 49,612 45,340 51,863 60,183 Interest/Dividends Recd. 2,619 4,520 4,900 4,750 Creditors 43,877 37,132 43,122 50,040 Direct Taxes Paid -3,791 -9,390 -9,765 -10,828 Provisions 5,735 8,207 8,741 10,143 (Inc)/Dec in WC 10,146 -18,264 -310 -1,496 Net Current Assets -7,803 10,895 11,295 12,779 CF from Operations 34,571 16,873 43,633 48,992 Appl. of Funds 150,334 184,093 212,961 239,436 CF from Oper. incl EO Exp. 34,571 17,539 43,633 48,992
(inc)/dec in FA -76,480 -23,502 -56,000 -35,000 Key assumptions/operating metrics (Pur)/Sale of Invest. -20,608 -584 18,412 -2,000 Y/E March 2011 2012 2013E 2014E CF from investments -97,088 -24,087 -37,588 -37,000 Capacity (mt) 48.8 48.8 49.8 60.0 Dispatches (mt) 35.2 41.3 44.4 49.2 Issue of Shares 57,436 24 0 0 Growth (%) 74.0 17.4 7.5 10.8 (Inc)/Dec in Debt 10,327 11,744 0 -5,000 Realizations (INR/t) 3798 4460 4857 5083 Interest Paid -2,725 -2,239 -2,135 -2,226 EBITDA (INR/Ton) 727 969 1100 1150 Dividend Paid -1,911 -2,548 -3,822 -4,777 EBITDA Margins (%) 19.4 22.0 22.9 22.9 CF from Fin. Activity 63,127 6,981 -5,956 -12,003 E: MOSL Estimates; * Assuming merger w.e.f July 1, 2010 Inc/Dec of Cash 611 434 89 -11 Add: Beginning Balance 837 1,448 1,882 1,971 Closing Balance 1,448 1,882 1,971 1,960
August 27 - 31, 2012 161 8th Annual Global Investor Conference
Union Bank of India
Company description Key challenges Union Bank is a state-owned bank with a balance sheet Volatile asset quality performance, uncertainty of size of over INR2.6t. The government holds 54% in the further deterioration in the macroeconomic bank. UNBK has a pan- India presence, with a higher environment and expectation of higher concentration in the western region, with 3,300+ restructuring will remain an overhang. branches and 4,100+ ATMs Despite equity infusion of INR7.6b over FY11/12, core Tier I ratio of the bank stood at 7.7% which Key investment positives would result into higher equity infusion UNBK has been able to deliver margins of 3%+ requirement in coming years specifically under despite higher slippages (which led to higher Basel III regime. interest income reversal) and tight liquidity condition which is impressive (FY12 NIM was at Key news flows / triggers to watch 3.2%; down just 10bp YoY). Management expects to One of the biggest beneficiaries of upturn in maintain margin of 3% going forward led by fall in macroeconomic environment. Any concentrated cost of funds and improvement in asset quality. Loan effort by Government to get rid of policy paralysis CAGR is expected to be 17% over FY13/14 which and boost investment climate will be a key trigger would lead to NII CAGR of 14% over the same period. for UNBK. UNBKS core fee income to average assets of ~40bp remains low as compared to its peers. However 1QFY13 highlights; guidance for FY13, FY14 increased focus of the management has started Performance highlights of 1QFY13: (a) Slippages yielding results as a consequence YoY fee income rose significantly to INR16.3b v/s INR6.1b in 4QFY12. growth has improved to 17% in 1QF13 v/s 14% for (b) UNBK restructured INR16.4b in 1QFY13, of which FY12 and 4% in FY11. Continuous traction in fee INR12b was on account of restructuring of one SEB income would provide cushion if pressure on asset account. (c) NIM declined 25bp QoQ to 3% (d) CASA quality increases. ratio stable at 31%, (e) Fee income grew 17% YoY UNBK is highly leveraged to macro-economic Management guidance: (a) Quarterly run-rate of environment given the asset quality pressure it has slippages to be in the range of INR6-8b (b) Further witnessed over past two years. As macro-economic restructuring of INR26-30b expected over next few environment improves and liquidity condition quarters (c) Margin to be 3%+ (d) Loan growth to be eases, concerns over asset quality would abate and 16-18% for FY13. could lead to re-rating of the stock.
Stock info Quarterly Performance (INR Million) Bloomberg UNBK IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 551 NII 15,902 16,611 17,809 18,766 18,217 69,089 79,471 CMP (INR) 164 Change (%) 18.0 8.2 10.2 9.3 14.6 11.1 15.0 Mcap (USD b) 1.6 Other Income 4,840 5,009 5,921 7,554 4,912 23,324 23,493 52-Wk Range (INR) 274 / 156 Opex 9,084 9,571 10,889 10,332 10,459 39,875 45,365 1, 6, 12 Rel Perf (%) -22 / -35 / -43 Operating Profit 11,658 12,050 12,841 15,988 12,671 52,538 57,598 Change (%) 11.7 6.6 1.8 83.9 8.7 22.0 9.6 Shareholding pattern (%) Provisions 4,284 6,228 9,727 5,172 5,185 25,410 22,956 Jun-12 Mar-12 Jun-11 PAT 4,644 3,524 1,970 7,732 5,116 17,871 23,383 Promoter 54.4 54.4 57.1 Change (%) -22.8 16.2 -66.0 29.4 10.2 -14.2 30.8 Dom. Inst. 19.6 18.9 12.8 Key Operating metrics Foreign 9.5 9.6 14.3 NIM (%) 3.1 3.2 3.3 3.3 3.0 3.2 3.2 Others 16.5 17.1 15.8 Loan Growth (%) 16.7 16.5 16.8 18.3 19.5 18.3 14.8 GNPA (%) 2.6 3.5 3.3 3.0 3.8 3.0 3.9 E: MOSL Estimates
162 August 27 - 31, 2012 8th Annual Global Investor Conference
Union Bank of India: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 164,526 211,443 259,439 291,512 Spreads Analysis (%) Interest Expense 102,364 142,354 179,969 201,921 Avg. Yield-Earning Assets 8.5 9.3 9.8 9.4 Net Interest Income 62,162 69,089 79,471 89,592 Avg. Yield on loans 8.9 9.7 10.5 10.0 Change (%) 48.3 11.1 15.0 12.7 Avg. Yield on Investments 7.1 7.6 7.8 7.8 Non Interest Income 20,388 23,324 23,493 27,450 Avg. Cost-Int. Bear. Liab. 5.2 6.2 6.9 6.6 Net Income 82,550 92,413 102,963 117,041 Avg. Cost of Deposits 5.1 6.3 7.1 6.7 Change (%) 33.9 11.9 11.4 13.7 Interest Spread 3.3 3.0 2.9 2.8 Operating Expenses 39,500 39,875 45,365 49,677 Net Interest Margin 3.2 3.0 3.0 2.9 Pre Provision Profits 43,050 52,538 57,598 67,365 Change (%) 17.6 22.0 9.6 17.0 Profitability Ratios (%) Provisions (excl tax) 13,496 25,410 22,956 27,253 RoE 20.9 14.8 16.8 16.7 PBT 29,554 27,128 34,642 40,111 RoA 1.0 0.7 0.8 0.8 Tax 8,735 9,256 11,259 13,638 Int. Expense/Int.Income 62.2 67.3 69.4 69.3 Tax Rate (%) 29.6 34.1 32.5 34.0 Fee Income/Net Income 16.5 16.6 16.5 16.8 PAT 20,819 17,871 23,383 26,474 Non Int. Inc./Net Income 24.7 25.2 22.8 23.5 Change (%) 0.3 -14.2 30.8 13.2 Profits for Equity SH 20,768 17,766 23,276 26,366 Efficiency Ratios (%) Core PPP* 36,286 44,590 51,098 59,615 Cost/Income* 50.7 45.3 45.6 44.1 Change (%) 25.0 22.9 14.6 16.7 Empl. Cost/Op. Exps. 65.8 62.2 62.8 62.0 *Core PPP is (NII+Fee income-Opex) Busi. per Empl. (INR m) 115.8 122.3 133.6 149.2 NP per Empl. (INR lac) 7.5 5.8 7.2 7.8 Balance Sheet (INR Million) * ex treasury Y/E March 2011 2012 2013E 2014E Equity Share Capital 5,243 5,505 5,505 5,505 Asset-Liability Profile (%) Preference Share Capital 1,110 1,110 1,110 1,110 Loans/Deposit Ratio 74.6 79.8 79.1 79.1 Reserves & Surplus 121,292 139,715 157,144 176,941 CASA Ratio 31.8 31.3 28.9 27.9 Net Worth 127,645 146,331 163,760 183,556 Investment/Deposit Ratio 28.8 28.0 28.9 28.2 Of which Equity Networth 126,535 145,221 162,650 182,446 G-Sec/Investment Ratio 79.6 80.9 89.8 92.2 Deposits 2,024,613 2,228,690 2,585,280 3,050,630 CAR 13.0 11.9 12.1 11.4 Change (%) 19.1 10.1 16.0 18.0 Tier 1 8.7 8.4 8.7 8.3 of which CASA Dep 643,072 697,051 747,480 849,963 Change (%) 19.2 8.4 7.2 13.7 Valuation Borrowings 133,160 179,095 210,534 246,006 Book Value (INR) 211.3 235.9 268.3 305.0 Other Liabilities & Prov. 74,427 67,999 81,135 97,138 Change (%) 21.2 11.6 13.7 13.7 Total Liabilities 2,359,844 2,622,114 3,040,709 3,577,331 Price-BV (x) 0.7 0.6 0.5 Current Assets 200,984 156,751 177,074 225,576 Adjusted BV (INR) 189.0 200.2 211.6 222.4 Investments 583,991 623,636 748,363 860,617 Price-ABV (x) 0.8 0.8 0.7 Change (%) 7.3 6.8 20.0 15.0 EPS (INR) 39.6 32.3 42.3 47.9 Loans 1,509,861 1,778,821 2,045,644 2,413,860 Change (%) -3.6 -18.5 31.0 13.3 Change (%) 26.5 17.8 15.0 18.0 Price-Earnings (x) 5.1 3.9 3.4 Fixed Assets 22,928 23,358 24,147 24,975 Dividend Per Share (INR) 8.0 8.0 8.5 9.6 Other Assets 42,080 39,549 45,481 52,303 Dividend Yield (%) 4.9 5.2 5.8 Total Assets 2,359,844 2,622,114 3,040,709 3,577,331 Asset Quality (%) GNPA (INR M) 36,228 54,499 80,304 114,236 NNPA (INR M) 18,034 30,250 48,055 69,951 GNPA Ratio 2.37 3.02 3.86 4.65 NNPA Ratio 1.19 1.70 2.35 2.90 PCR (Excl Tech. write off) 49.0 43.1 40.2 38.8 PCR (Incl Tech. Write off) 67.6 62.2 54.7 50.0
August 27 - 31, 2012 163 8th Annual Global Investor Conference
Voltas
Company description Key challenges A Tata Group company, Voltas is the second largest air- Increasing competitive intensity in domestic and conditioning company in India. The company has three overseas HVAC market. segments, Electro-mechanical Projects (EMP, 60% of Maintaining market share in highly competitive and sales), Unitary cooling (30%) and Engg Products (10%). crowded unitary cooling (Room AC) market. Voltas has significant presence in Middle-East air- Profitability in overseas orders is impacted by cost conditioning market, the region accounting for 65% of over runs. the current orderbook. Key news flows / triggers to watch Key investment positives Orders from Middle East, particularly Qatar and UAE. Ordering from Indian infrastructure space, Voltas is a strong player in the Middle-East HVAC particularly Airports and Railways. market, and derives 60% of MEP revenues from the Any news on Government incentives for setting up region. While demand has stagnated in recent times cold storages. impacted by global uncertainty and unrest in the region, the company stands to significantly benefit 1QFY13 results highlights/guidance from a pickup in demand in Middle-eastern Voltas reported robust growth in revenues during economies. 1QFY13, up 20% YoY led by UCP segment, up 35% The HVAC market in India, estimated at around YoY while profitability continued to remain under INR60b, has a potential to grow at an accelerated pressure. EBITDA margins declined by 240bp YoY. pace over next five years, as industrial and The companies' order book stood at INR 45.7b with infrastructure investments pick up. Voltas, second a BTB (x) of 1.5x annualized 1QFY13 revenues. largest player after Bluestar, stands to gain from the The management expects the international order opportunity. flows to pick up, especially from Abu-Dhabi and Voltas has nearly 20% market share in room ac Qatar, while on the domestic front the overall macro segment (part of unitary cooling) and stands to gain environment is still uncertain. The Engineering from growing demand for room air-conditioning products division is likely to be under pressure as driven by increasing power availability and textile and mining business are both facing increasing living standard. tremendous pressures due to macro environment.
Stock info Quarterly Performance (INR Million) Bloomberg VOLT IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 Equity Shares (m) 331 Operating Income 13,458 11,019 11,539 15,735 16,116 51,750 CMP (INR) 113 Change (%) (4.1) 3.6 11.0 (5.8) 19.8 (0.0) Mcap (USD b) 0.7 EBITDA 1,062 76 766 1,356 887 3,258 52-Wk Range (INR) 133 / 72 Change (%) (13.2) (92.8) (66.4) (55.5) (79.9) 138.6 1, 6, 12 Rel Perf (%) -5 / 1 / -14 EBITDA Margin (%) 7.9 0.7 6.6 8.6 5.5 6.3 Reported PAT 1,318 419 (1,154) 1,038 788 1,621 Adjusted PAT 504 169 611 1,013 777 2,295 Shareholding pattern (%) Change (%) (46.4) (77.4) 10.8 8.5 54.3 (27.6) Jun-12 Mar-12 Jun-11 PAT Margin (%) 3.7 1.5 5.3 6.4 4.8 4.4 Promoter 30.2 30.2 30.6 Key Operating Metrics Dom. Inst. 27.0 26.8 29.8 Order book (INR m) 45,530 44,610 50,940 42,920 45,740 42,920 Foreign 21.5 20.8 19.2 BTB (x) 1.7 1.5 1.5 1.2 1.5 1.3 Others 21.4 22.3 20.5 MEP Segment EBIT Margin (%) 4.6 0.7 7.3 8.3 4.5 5.4 E: MOSL Estimates
164 August 27 - 31, 2012 8th Annual Global Investor Conference
Voltas: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2009 2010 2011 2012 Y/E March 2009 2010 2011 2012 Total Revenues 43,259 47,575 51,768 51,750 Basic (INR) Change (%) 35.1 10.0 8.8 0.0 EPS 6.8 10.8 9.6 6.9 Raw Materials 31,685 32,876 36,808 37,800 Cash EPS 18.5 21.3 23.0 17.6 Staff Cost 4,656 5,450 5,563 5,995 Book Value 23.2 32.2 40.7 44.0 Other Expenses 4,087 4,653 4,990 4,698 DPS 1.6 2.0 2.0 2.0 Payout (incl. Div. Tax.) 24.6 20.3 21.6 47.6 EBITDA 2,831 4,596 4,408 3,258 % of Total Revenues 6.5 9.7 8.5 6.3 Valuation (x) Depreciation 210 214 210 340 P/E 13.8 8.7 9.8 13.5 Other Income 962 785 810 1,092 Cash P/E 5.1 4.4 4.1 5.3 Interest 128 98 165 314 EV/EBITDA 9.5 5.3 5.6 8.4 PBT 3,456 5,068 4,843 3,696 EV/Sales 0.6 0.5 0.5 0.5 Tax 1,172 1,472 1,729 1,401 Price/Book Value 4.1 2.9 2.3 2.1 Rate (%) 33.9 29.1 35.7 37.9 Dividend Yield (%) 1.7 2.1 2.1 2.1 Adjusted PAT 2,258 3,560 3,170 2,296 Extra-ordinary Income (net) 261 250 402 -675 Profitability Ratios (%) Reported PAT 2,519 3,810 3,572 1,622 RoE 32.3 35.1 25.8 15.5 Change (%) 28.2 57.7 -10.9 -27.6 RoCE 29.3 34.9 25.0 15.6
Balance Sheet (INR Million) Turnover Ratios Y/E March 2009 2010 2011 2012 Debtors (Days) 80 77 83 82 Inventory (Days) 94 88 114 116 Share Capital 331 331 331 331 Creditors. (Days) 99 85 94 96 Reserves 7,567 10,521 13,286 14,448 Asset Turnover (x) 3.9 3.2 3.1 2.9 Net Worth 7,674 10,649 13,465 14,536 Loans 1,814 352 1,381 2,234 Leverage Ratio Deferred Tax Liability -224 -202 -152 -242 Debt/Equity (x) 0.2 0.0 0.1 0.2 Capital Employed 9,647 11,140 15,064 16,940 Cash Flow Statement (INR Million) Gross Fixed Assets 3,986 3,890 4,410 4,928 Y/E March 2009 2010 2011 2012 Less: Depreciation 1,839 1,821 1,987 2,197 PBT before EO Items 3,456 5,068 4,843 3,696 Net Fixed Assets 2,148 2,069 2,422 2,730 Add: Depreciation 210 214 210 340 Capital WIP 132 193 36 91 Interest 128 98 165 314 Investments 1,562 2,339 2,613 3,116 Less: Direct Taxes Paid 1,204 1,451 1,678 1,401 (Inc)/Dec in WC (1,718) (527) (3,012) (4,031) Curr. Assets 27,489 28,249 35,310 34,066 CF from Operations 871 3,403 528 -1,083 Inventory 11,194 11,441 16,183 16,442 Debtors 9,521 10,060 11,705 11,668 EO Income 261 250 402 -675 CF from Oper. Incl. EO Items 1,133 3,653 929 -1,757 Cash & Bank Balance 4,571 4,689 4,980 2,710 Loans & Advances 2,203 2,055 2,440 3,246 (Inc)/Dec in FA (591) (196) (406) 23 Other Assets 0 5 2 0 (Pur)/Sale of Investments 1,023 (777) (274) (503) Current Liab. & Prov. CF from Investments (244) (1,062) (832) (453) Creditors 11,782 11,122 13,383 13,573 Other Liabilities 7,961 8,708 9,692 6,863 (Inc)/Dec in Net Worth 350 (141) (163) 177 Provisions 2,617 2,645 3,157 2,790 (Inc)/Dec in Debt 1,077 -1,463 1,030 853 Net Current Assets 5,129 5,774 9,077 10,839 Less: Interest Paid 128 98 165 314 Application of Funds 9,647 11,140 15,064 16,940 Dividend Paid 619 772 771 771 Key Operational Metrics CF from Fin. Activity 680 (2,474) (70) (55) Order book (INR m) 47,180 46,530 48,870 42,920 BTB (x) 1.7 1.5 1.6 1.3 Inc/Dec of Cash 1,569 118 27 (2,266) MEP segment EBIT mar. (%) 7.7 9.9 7.9 5.4 Add: Beginning Balance 3,002 4,571 4,689 4,980 Working Capital days 5 8 29 57 Closing Balance 4,571 4,689 4,980 2,710 E: MOSL Estimates
August 27 - 31, 2012 165 8th Annual Global Investor Conference
Wipro
Company description Key challenges Wipro is the third largest Indian IT services company Risk pricing in FPP projects could go wrong (45.6% and the largest third-party BPO operator in India. It is revenues from FPP in 1QFY13). the largest third-party R&D services provider globally, Increased investments in the pursuit for growth will employing over 138,000 employees. It offers among the keep margins muted in the near term. Margin widest range of IT and ITeS services and its corporate recovery will be hit if growth challenges persist governance and transparency are at the highest level over the medium term. in the industry. Key news flows / triggers to watch Wipro has a balanced vertical spread - BFSI (27%), Wipro has won a multi-year engagement with a Manufacturing and Hi-Tech (19%) Global Media and leading communication service provider in North Telecom (16%) and Retail and Transportation (15%) America, to provide technical support services and being the key revenue sources. in future, enable a set of IT and Operations transformation initiatives. Geographically, Americas contributes 52% to revenues If volumes growth does not pick up, the company (FY12) and Europe contributes 28%. India & Middle East could witness further pressures on its valuation constitute 9% of revenues. relative to peers like Infosys. Key investment positives It is the largest player in infrastructure management 1QFY13 highlights; guidance for FY13, FY14 services (IMS), the fastest growing service line for Weak 2Q guidance (0.3-2.3% QoQ USD revenue Indian IT companies. growth) on the top of soft 1Q more than dent any It has a strong presence in domestic and emerging expectations of restructuring exercise bearing fruit markets, growing ahead of developed markets. in FY13. Muted guidance was on account of Post restructuring, company has seen impressive continued weakness in Investment Banks and India client additions and mining of large clients to region. increase its number of customers in the higher Continued investment in hunters and ~180bp contribution buckets (USD100m+ clients up from 1 negative impact from wage hikes bode negatively to 8 in 6 quarters). for near term margins.
Stock info Quarterly Performance (INR Million) Bloomberg WPRO IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 2460 Operating Income 85,640 90,945 99,972 98,691 106,530 375,248 436,439 CMP (INR) 354 Change (%) 3.2 6.2 9.9 (1.3) 7.9 20.7 16.3 Mcap (USD b) 15.6 EBITDA 17,290 17,397 19,843 19,611 21,426 74,141 82,991 52-Wk Range (INR) 453 / 310 Change (%) 1.3 0.6 14.1 (1.2) 9.3 12.5 11.9 1, 6, 12 Rel Perf (%) -6 / -18 / -2 EBITDA Margin (%) 20.2 19.1 19.8 19.9 20.1 19.8 19.0 Reported PAT 13,349 13,009 14,564 14,809 15,802 55,731 61,966 Adjusted PAT 13,349 13,009 14,564 14,809 15,802 55,731 61,966 Shareholding pattern (%) Change (%) (2.9) (2.5) 12.0 1.7 6.7 5.2 11.2 Jun-12 Mar-12 Jun-11 PAT Margin (%) 15.6 14.3 14.6 15.0 14.8 14.9 14.2 Promoter 78.4 78.4 79.2 Key Operating Metrics Dom. Inst. 3.5 3.4 3.7 Volume growth 1.8 6.0 1.8 0.8 0.8 11.5 6.9 Foreign 9.3 9.3 8.0 Headcount 126,490 131,730 136,734 135,920 138,552 135,920 147,447 Others 8.9 8.9 9.0 Util. (incl. trainees) 76.9 76.1 73.5 74.1 75.5 75.1 75.6 E: MOSL Estimates
166 August 27 - 31, 2012 8th Annual Global Investor Conference
Wipro: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Sales 310,986 375,248 436,439 473,218 Basic (INR) Change (%) 14.7 20.7 16.3 8.4 EPS 21.6 22.7 25.2 27.0 Operating Costs 204,639 253,045 292,945 321,771 Book Value 98.6 116.5 133.8 155.0 SG&A 40,467 48,062 60,502 62,868 DPS 4.4 6.0 4.5 5.0 EBITDA 65,880 74,141 82,991 88,578 Payout % 20.4 26.4 17.8 18.5 % of Net Sales 21.2 19.8 19.0 18.7 Depreciation & Amort. 8,211 10,129 11,078 12,011 Valuation (x) EBIT 57,669 64,012 71,913 76,567 P/E 15.6 14.0 13.1 Margins 18.5 17.1 16.5 16.2 EV/EBITDA 10.9 9.5 8.6 Other Income 4,718 5,404 6,222 7,307 EV/Sales 2.1 1.8 1.6 Income from Eq. Inv. 648 333 -408 -408 Price/Book Value 3.0 2.6 2.3 PBT 63,035 69,749 77,728 83,466 Dividend Yield (%) 1.7 1.3 1.4 Tax 9,896 13,762 15,373 16,775 Rate (%) 15.7 19.7 19.8 20.1 Profitability Ratios (%) PAT 53,139 55,987 62,354 66,691 RoE 24.2 21.2 20.2 18.7 Minority Interest -345 -256 -388 -388 RoCE 20.1 19.4 19.0 17.9 PAT bef EO 52,794 55,731 61,966 66,303 Extraordinary items 182 0 0 0 Turnover Ratios Net Income 52,976 55,731 61,966 66,303 Debtors (Days) 90 95 101 106 Change (%) 15.3 5.2 11.2 7.0 Asset Turnover (x) 5.3 5.8 6.7 6.9 Balance Sheet (INR Million) Leverage Ratio Y/E March 2011 2012 2013E 2014E Debt/Equity Ratio(x) 0.3 0.2 0.2 0.2 Share Capital 4,908 4,917 4,920 4,920 Reserves 234,772 280,397 322,915 374,883 Cash Flow Statement (INR Million) Net Worth 239,680 285,314 327,835 379,803 Y/E March 2011 2012 2013E 2014E Minority Interest&others 13,710 10,492 10,369 10,369 CF from Operations 56,287 60,456 66,822 71,007 Loans 52,802 58,958 63,895 63,888 Cash for Wkg. Capital -12,374 -16,462 -5,196 -7,164 Capital Employed 306,192 354,764 402,098 454,060 Net Operating CF 43,913 43,994 61,626 63,843
Gross Block 99,346 113,369 122,894 138,894 Net Purchase of FA -9,847 -14,023 -20,603 -28,011 Less : Depreciation 44,252 54,381 54,381 54,381 Net Pur. of Investments -28,775 -11,691 -37,314 -1,654 Net Block 55,094 58,988 68,513 84,513 Net Cash from Invest. -38,622 -25,714 -57,917 -29,666 Investments 49,282 41,961 70,105 70,105 Intangible Assets 58,369 72,166 79,053 79,053 Issue of Shares/Other adj3,386 7,257 -6,366 0 Other non current assets 22,682 27,897 30,180 31,835 Proceeds from LTB/STB -4,592 2,780 4,636 -6 Curr. Assets 186,016 234,989 263,620 309,561 Dividend Payments -12,540 -17,196 -12,902 -14,335 Debtors 85,776 110,353 131,559 143,537 Net CF from Finan. -9,028 -1,755 -8,410 -7,034 Inventories 9,707 10,662 13,153 14,261 Cash & Bank Balance 61,141 77,666 72,966 100,109 Free Cash Flow 34,066 29,971 41,024 35,832 Adv., Other Current Assets 29,392 36,308 45,942 51,654 Net Cash Flow -3,737 16,525 -4,700 27,143 Current Liab. & Prov 65,251 81,237 109,373 121,007 Net Current Assets 120,765 153,752 154,247 188,555 Opening Cash Bal. 64,878 61,141 77,666 72,966 Application of Funds 306,192 354,764 402,098 454,060 Add: Net Cash -3,737 16,525 -4,700 27,143 Closing Cash Bal. 61,141 77,666 72,966 100,109 Key assumptions/operating metrics Y/E March 2011 2012 2013E 2014E Volume Growth (%) 16.8 11.5 6.9 12.1 Headcount 122,385 135,920 147,447 166,007 Utilization (%) 77.0 75.1 75.6 76.2 *Including trainees
August 27 - 31, 2012 167 8th Annual Global Investor Conference
Yes Bank
Company description Key challenges Under the leadership of Mr. Rana Kapoor, YES bank has YES Banks tier I ratio stood at 9.7% (core Tier I at posted "above industry" loan growth, healthy return 8.7%) at end of 1QFY13. And with growth expected ratios while maintaining asset quality. With a strong to resume in CY13, it becomes imperative for the management team in place, Yes Bank now targets to bank to raise capital or it may act as a hurdle. scale up its branch network to 900 by FY15 (380 at end Yes Bank's growth plans are heavily dependent on of 1QFY13) and nearly double the balance sheet to strong branch expansion. If there is a delay in getting INR1.5t by FY15. branch licenses from RBI, it could impact retail liability and asset growth. Key investment positives Even in a tight liquidity condition and sharp increase Key news flows / triggers to watch in bulk deposit rate, bank's performance on keeping Faster than expected fall in interest rate and easing margins stable at 2.8%-3% is impressive and liquidity conditions could lead to surprise on margin demonstrates the soundness of ALM and pricing Improvement in economic macro-economic power. With the interest rate expected to fall YES is environment would be beneficial for YES given its likely to be a biggest beneficiary. diversified product offering. CASA traction remains strong and continuous improvement in same would provide cushion to 1QFY13 highlights; guidance for FY13, FY14 margins. We expect non-interest income (excluding Performance highlights of 1QFY13: Strong traction financial markets) to grow (~20%) largely in line with in SA deposits continues (+20% QoQ). Sequentially balance sheet growth. Half of the branch network is stable NIM of 2.8% despite challenging less than 18 months old and productivity gains from environment. Strong customer asset growth (+7% the same will help to augment CASA growth and QoQ and 32% YoY) led by higher growth in credit fee income of the bank. substitutes. Asset quality remains impeccable. In an uncertain economic environment bank Management guidance: (a) Customer asset CAGR moderated its loan growth and preferred to of 30% over FY12-15 (b) By FY15, SME and Retail loan increase its exposure to high rated corporate in form mix is targeted to be 30% from the current levels of of investment which is positive. Strong growth, ~15%. (c) CASA ratio of 30% by FY15 as against 16% proven execution capabilities, diversified fee at end of 1QFY13. (d) sustainable RoA target of 1.5- income and superior return ratios are key positives 1.75% and RoE of 22-24% for Yes Bank. RoA is expected to remain healthy at 1.5%+ and RoE at ~23% over FY11-13. Stock info Quarterly Performance (INR Million) Bloomberg YES IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 354 NII 3,542 3,856 4,276 4,482 4,722 16,156 20,958 CMP (INR) 360 Change (%) 35.1 23.1 32.3 28.6 33.3 29.6 29.7 Mcap (USD b) 2.3 Other Income 1,653 2,141 2,114 2,664 2,881 8,571 11,767 52-Wk Range (INR) 389 / 231 Opex 1,944 2,138 2,402 2,842 3,007 9,325 12,465 1, 6, 12 Rel Perf (%) -1 / 2 / 19 Operating Profit 3,251 3,859 3,988 4,304 4,596 15,402 20,259 Change (%) 30.6 37.1 28.1 23.4 41.4 29.4 31.5 Shareholding pattern (%) Provisions 15 379 224 285 300 902 1,723 Jun-12 Mar-12 Jun-11 PAT 2,161 2,350 2,541 2,718 2,901 9,770 12,512 Promoter 26.1 26.1 26.5 Change (%) 38.2 33.3 32.9 33.6 34.3 34.4 28.1 Dom. Inst. 14.2 10.9 7.0 Key Operating metrics Foreign 43.5 51.9 53.7 NIM (%) 2.8 2.9 2.8 2.8 2.8 2.8 3.0 Others 16.3 11.1 12.9 Loan Growth (%) 26.1 12.7 15.3 10.5 16.4 10.5 18.0 GNPA (%) 0.2 0.2 0.2 0.2 0.3 0.2 0.5 E: MOSL Estimates
168 August 27 - 31, 2012 8th Annual Global Investor Conference
Yes Bank: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Interest Income 40,417 63,074 78,196 88,295 Spreads Analysis (%) Interest Expense 27,948 46,917 57,239 61,988 Avg. Yield-Earning Assets 8.8 10.0 10.2 9.5 Net Interest Income 12,469 16,156 20,958 26,307 Avg. Yield on loans 10.6 12.2 12.6 11.7 Change (%) 58.2 29.6 29.7 25.5 Avg. Yield on Investments 7.1 7.9 8.2 7.6 Non Interest Income 6,233 8,571 11,767 14,149 Avg. Cost-Int. Bear. Liab. 6.6 8.1 8.2 7.3 Net Income 18,702 24,728 32,725 40,456 Avg. Cost of Deposits 6.3 8.1 8.5 7.4 Change (%) 37.2 32.2 32.3 23.6 Interest Spread 2.2 1.9 2.0 2.2 Operating Expenses 6,798 9,325 12,465 15,561 Net Interest Margin 2.7 2.6 2.7 2.8 Pre Provision Profits 11,904 15,402 20,259 24,895 Change (%) 37.9 29.4 31.5 22.9 Profitability Ratios (%) Provisions (excl tax) 982 902 1,723 2,634 RoE 21.1 23.1 24.1 23.7 PBT 10,922 14,500 18,537 22,261 RoA 1.5 1.5 1.5 1.5 Tax 3,650 4,730 6,024 7,235 Int. Expense/Int.Income 69.1 74.4 73.2 70.2 Tax Rate (%) 33.4 32.6 32.5 32.5 Fee Income/Net Income 35.8 33.1 30.2 35.0 PAT 7,271 9,770 12,512 15,026 Non Int. Inc./Net Income 33.3 34.7 36.0 35.0 Change (%) 52.2 34.4 28.1 20.1 Equity Dividend (Incl tax) 1,012 1,641 2,196 2,254 Efficiency Ratios (%) Core PPP* 12,367 15,024 18,381 22,816 Cost/Income* 35.5 38.3 40.4 40.5 Change (%) 61.7 21.5 22.3 24.1 Empl. Cost/Op. Exps. 53.3 51.0 51.5 50.3 *Core PPP is (NII+Fee income-Opex) Busi. per Empl. (INR m) 164.5 148.4 131.3 133.9 NP per Empl. (INR lac) 18.5 17.3 17.3 17.7 Balance Sheet (INR Million) * ex treasury Y/E March 2011 2012 2013E 2014E Equity Share Capital 3,471 3,530 3,530 3,530 Asset-Liability Profile (%) Reserves & Surplus 34,469 43,236 53,553 65,942 Loans/Deposit Ratio 74.8 77.3 77.9 77.9 Net Worth 37,941 46,766 57,083 69,472 CASA Ratio 10.3 15.0 18.6 20.4 Deposits 459,389 491,517 575,075 701,591 Investment/Deposit Ratio 41.0 56.5 59.9 61.3 Change (%) 71.4 7.0 17.0 22.0 G-Sec/Investment Ratio 57.1 58.3 41.8 40.8 of which CASA Dep 47,509 73,921 107,210 142,923 CAR 16.5 17.9 16.5 15.1 Change (%) 68.6 55.6 45.0 33.3 Tier 1 9.7 9.9 9.7 9.1 Borrowings 66,909 141,565 186,845 242,576 Other Liabilities & Prov. 25,831 56,773 81,646 109,783 Valuation Total Liabilities 590,070 736,621 900,648 1,123,422 Book Value (INR) 109.3 132.5 161.7 196.8 Current Assets 34,960 35,855 43,688 56,463 Change (%) 20.2 21.2 22.1 21.7 Investments 188,288 277,573 344,191 430,239 Price-BV (x) 2.7 2.2 1.8 Change (%) 84.4 47.4 24.0 25.0 Adjusted BV (INR) 109.1 132.2 160.4 194.1 Loans 343,636 379,886 448,266 546,884 Price-ABV (x) 2.7 2.2 1.9 Change (%) 54.8 10.5 18.0 22.0 EPS (INR) 20.9 27.7 35.4 42.6 Fixed Assets 1,324 1,771 2,201 2,613 Change (%) 48.9 32.1 28.1 20.1 Other Assets 21,861 41,535 62,302 87,223 Price-Earnings (x) 13.0 10.1 8.4 Total Assets 590,070 736,621 900,648 1,123,422 Dividend Per Share (INR) 2.5 4.0 5.3 6.4 Dividend Yield (%) 1.1 1.5 1.8 Asset Quality (%) GNPA (INR m) 805 839 2,308 4,842 NNPA (INR m) 92 175 695 1,490 GNPA Ratio 0.23 0.22 0.51 0.88 NNPA Ratio 0.03 0.05 0.15 0.27 PCR (Excl Tech. write off) 88.6 79.2 69.9 69.2
August 27 - 31, 2012 169 8th Annual Global Investor Conference
Zee Entertainment Enterprises
Company description Key news flows / triggers to watch ZEE is a leading player in television broadcasting and Successful implementation of mandatory syndication of content overseas, with a portfolio of 30 digitization. channels including flagship Zee TV. Post the merger with Potential pick-up in adverting growth led by Zee News, it added regional channels like Zee Telugu, increased spends by FMCG companies and/or Zee Kannada, Zee Marathi and Zee Bangla to the fold. recovery in the economic outlook. ZEE has a large Hindi film library and a well-established Ramp-up of domestic subscription revenue, reach of over 650m viewers across 168 countries. especially in the geographies where mandatory digitization is being implemented. Key investment positives Ad revenue and core margins trajectory as ZEE ramps With its offering of 30 channels, ZEE addresses up original programming hours. majority of the viewership market in India. Operating Loss in the sports business. ZEE's flagship channel, Zee TV is placed strongly among the top three players in the Hindi GEC 1QFY13 highlights; guidance for FY13, FY14 segment. 1QFY13 PAT grew 18% YoY (11% QoQ) to INR1.58b, We expect ad revenue CAGR of 15% over FY12-14. (v/s estimate INR1.5b). EBITDA, PBT were 17-20% Mandatory digitization to drive better monetization above estimate; PAT was dragged by higher tax rate. of domestic subscription and reduce the carriage Key positives: 1) Ad growth bounce-back and and placement expenses. 2) Superior margin performance led by cost cutting. ZEE is one of the most profitable broadcasting Revenue grew 21% YoY to INR8.4b. Ad revenue companies in India. grew 18% YoY and 8% QoQ to INR4.47b. Key challenges Flagship Zee TV's average GRPs improved from 158 Lower ad spends led by macro slowdown. in 3QFY12 to 215 in 1QFY13. Zee would be increasing Higher-than-expected losses in the sports business programming hours in coming quarters. Potential negative regulatory developments Subscription revenue up 19% YoY to INR3.6b led by related to restriction on ad durations. domestic as well as international. Potential postponement of the digitization EBITDA grew 49% YoY to INR 2.3b. Margin rose 5pp deadlines. Currently the timeline for mandatory YoY to 27.7%. Sports loss was INR210m. Core (non- digitization of four metros is October 31st 2012. sports) EBITDA margin grew 470bp QoQ to 34.2%.
Stock info Quarterly Performance (INR Million) Bloomberg Z IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 FY13E Equity Shares (m) 954 Revenue 6,983 7,184 7,548 8,691 8,430 30,406 35,198 CMP (INR) 169 YoY Change(%) 3.2 1.0 0.0 8.9 20.7 3.4 15.8 Mcap (USD b) 2.9 EBITDA 1,560 2,076 2,160 1,600 2,332 7,395 9,355 52-Wk Range (INR) 176 / 110 YoY Change(%) -16.5 10.1 40.1 -29.5 49.5 -2.2 26.5 1, 6, 12 Rel Perf (%) 14 / 31 / 32 EBITDA Margin(%) 22.3 28.9 28.6 18.4 27.7 24.3 26.6 PAT 1302 1600 1376 1630 1570 5907 7069 Adjusted PAT 1,337 1,560 1,393 1,422 1,582 5,712 7,119 Shareholding pattern (%) YoY Change(%) 10.4 23.6 22.1 -31.8 18.3 -2.4 24.6 Jun-12 Mar-12 Jun-11 PAT Margin(%) 19.1 21.7 18.5 16.4 18.8 18.8 20.2 Promoter 43.9 43.7 42.8 Key operating metrics Dome. Inst. 13.1 12.5 14.3 Ad revenue growth (%) 0 -4 -10 -13 18 -7 17 Foreign 35.6 37.3 35.5 Domestic subscription growth (%)29 12 23 47 21 28 17 Others 7.4 6.5 7.5 Sports EBITDA loss (INRm) -566 -226 -100 -588 -210 -1,480 -1,018 Non-sports EBITDA margin (%)34.8 36.5 34.0 29.5 34 34 34 E: MOSL Estimates
170 August 27 - 31, 2012 8th Annual Global Investor Conference
Zee Entertainment Enterprises: Financials and valuation
Income Statement (INR Million) Ratios Y/E March 2011 2012 2013E 2014E Y/E March 2011 2012 2013E 2014E Net Sales 29,414 30,406 35,198 39,742 Basic (INR) Change (%) 33.9 3.4 15.8 12.9 EPS 6.0 5.9 7.4 8.5 Total Income 29,414 30,406 35,198 39,742 Cash EPS 6.3 6.3 7.8 9.0 Total Expenses 21,849 23,011 25,843 29,126 Book Value per Share 31.6 35.8 41.1 47.1 EBITDA 7,565 7,395 9,355 10,616 DPS 2.4 1.5 1.9 2.1 Change (%) 24.3 -2.2 26.5 13.5 Payout (Incl. Div. Tax) % 40.0 25.0 25.0 25.0 % of Net Sales 25.7 24.3 26.6 26.7 Depreciation 288 323 401 445 Valuation EBIT 7,276 7,073 8,954 10,171 P/E 28.7 22.8 19.8 Other Income 1,070 1,204 1,218 1,524 Cash P/E 26.9 21.6 18.8 Interest & Finance Charges 103 50 73 76 EV/EBITDA 20.4 15.9 13.7 Extraordinay Income 897 180 0 0 EV/Sales 5.0 4.2 3.6 PBT 9,140 8,407 10,098 11,620 Price/Book Value 4.9 4.2 3.7 Tax 2,751 2,500 3,030 3,486 Dividend Yield (%) 0.9 1.1 1.3 Effective Rate (%) 30.1 29.7 30.0 30.0 Profitability Ratios (%) PAT 6,390 5,907 7,069 8,134 RoE 16.9 17.5 19.3 19.4 Minority Interest -118 15 -50 -50 RoCE 23.8 25.5 27.8 27.9 Extraordinay Income 656 180 0 0 Adj. PAT 5,852 5,712 7,119 8,184 Turnover Ratios Change (%) 24.9 -2.4 24.6 15.0 Debtors (No. of Days) 111 104 104 104 Inventory (No. of Days) 115 169 150 150 Balance Sheet (INR Million) Creditors (No. of Days) 71 93 90 90 Y/E March 2011 2012 2013E 2014E Asset Turnover (x) 1.0 0.9 0.9 0.9 Share Capital 978 959 959 959 Leverage Ratio Reserves 29,970 33,396 38,427 44,211 Debt/Equity (x) 0.0 0.0 0.0 0.0 Net Worth 30,948 34,355 39,386 45,170 Minority Interest -119 -32 0 0 Cash Flow Statement (INR Million) Loans 17121212 Deffered tax liability -192 -337 -337 -337 Y/E March 2011 2012 2013E 2014E Capital Employed 30,654 33,998 39,061 44,845 OP/(Loss) before Tax 7,276 7,073 8,954 10,171 Interest/Div. Received 1,070 1,204 1,218 1,524 Net Fixed Assets 8,064 9,001 9,100 9,155 Interest paid -103 -50 -73 -76 Capital WIP 399 399 399 399 Depreciation & Amort. 288 323 401 445 Investments 6,964 7,999 7,999 7,999 Direct Taxes Paid -2,751 -2,500 -3,030 -3,486 Curr. Assets, Loans&Adv. 23,026 25,414 30,716 37,361 (Inc)/Dec in Wkg. Capital -638 -1,946 -2,422 -2,384 Program Films 5,382 7,339 7,598 8,667 CF from Oper. Activity 5,143 4,103 5,048 6,194 Sundry Debtors 8,955 8,690 10,060 11,359 Cash & Bank Balances 3,858 3,283 5,826 9,170 Extraordinary Items 656 180 0 0 Loans & Advances 4,818 6,101 7,232 8,166 CF after EO Items 656 180 0 0 Current Liab. & Prov. 7,801 8,817 9,154 10,071 Net Current Assets 15,225 16,597 21,562 27,290 Appl.of Funds 30,654 33,997 39,061 44,844 (Inc)/Dec in FA + CWIP 10,835 -1,259 -500 -500 (Pur)/Sale of Invest. -3,761 -1,035 0 0 Key assumptions/operating metrics CF from Invest. Activity 7,074 -2,294 -500 -500 Y/E March 2011 2012 2013E 2014E Sports/Non-sports break-up Issue of Shares -11,602 -1,130 -226 -304 Revenue 29.4 30.4 35.2 39.7 Inc/(Dec) in Debt -1,178 -5 0 0 -Sports 4.4 3.9 4.7 5.3 Dividends Paid -2,341 -1,428 -1,780 -2,046 -Non-sports 25 26.5 30.5 34.5 Others 0 0 0 0 EBITDA 7.6 7.4 9.4 10.6 CF from Finan. Activity -15,121 -2,563 -2,006 -2,350 -Sports -2.1 -1.5 -1 -0.8 -Non-sports 9.6 8.9 10.4 11.4 Inc/(Dec) in Cash -2,006 -574 2,542 3,344 EBITDA margin (%) 25.7 24.3 26.6 26.7 Add: Beginning Balance 5,864 3,858 3,283 5,826 Sports -47.1 -37.6 -21.6 -15.1 Closing Balance 3,858 3,284 5,825 9,170 Non-sports 38.6 33.5 34 33.1
August 27 - 31, 2012 171 8th Annual Global Investor Conference
Bajaj Finance
Company description Key challenges Bajaj Finance is a subsidiary of Bajaj Finserv, which Moderation in economic activity leading to 1) holds ~61% stake in the company. The company has slowdown in consumer spending and 2) slower transformed itself from a captive auto financier offering rampup in some of the new business verticals such two wheeler loans for Bajaj Auto to a well diversified as CE and infrastructure financing could pose a retail loan provider. The company currently offers loans threat to Bajaj Finance's growth and asset quality. for Bajaj Auto two-wheelers under the name of Bajaj SME segment constitutes ~45% of total portfolio, Finance and other consumer durable loans, personal which in the current environment lead to higher loans, small business and construction equipment loans stress on the balance sheet. under the name of Bajaj Finserv Lending. As on June Key news flows / triggers to watch 2012, the company had AUM of INR145b. Growth trends in the coming quarters, as seasonally Key investment positives Q2 and Q3 are being strong quarters led by festive Bajaj Finance has successfully transformed itself season. from a captive two-wheeler financier to a full- Asset quality trends of some of the retail focused fledged player in the consumer financing space. The private banks company has further diversified its product Company may look to raise capital towards the end portfolio by entering into small business loans, CE of this fiscal and infrastructure financing, which would help the company to grow at a steady clip. 1QFY13 highlights; guidance for FY13, FY14 Shifting the target customer segment from mass In 1QFY13, BFL's PAT grew 53% YoY on the back of segment to affluent and mass affluent and with strong 60% YoY growth in its AUMs. Asset quality tighter controls and risk management processes in remained healthy with loan loss provisions (as % of place, Bajaj Finance has witnessed steep AUMs) at 0.8% (annualized) v/s 1.3% for FY12. improvement in its asset quality. Moreover, For FY13, management has guided for AUM growth substantial chunk of AUMs in the retail / consumer of 25-30%. segment (~40%) too has helped in improving / On a long term sustainable basis, RoA is expected maintaining healthy asset quality. to be ~3% and RoE 18-20%. As on 1QFY13, the company maintains a PCR of more The company targets to raise ~INR7.5b in the next than 90%, which provides adequate cushion to round capital raising to address growth needs of absorb any asset quality shock. the next three years.
Stock info Quarterly Performance (INR Million) Bloomberg BAF IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 41 Net Interest Income 3,073 3,244 3,956 3,890 4,390 10,350 14,260 CMP (INR) 1,079 YoY Gr. (%) 37.9 36.8 39.5 39.4 41.2 44.8 37.8 Mcap (USD b) 0.8 Operating Profit 1,688 1,729 2,133 2,010 2,380 5,750 7,560 52-Wk Range (INR) 1133 / 585 YoY Gr. (%) 28.7 23.7 33.4 39.6 41.0 45.6 31.5 1, 6, 12 Rel Perf (%) 8 / 37 / 52 Provisions 342 441 358 400 320 2,050 1,540 PBT 1,346 1,289 1,775 1,610 2,060 3,700 6,020 Tax 438 415 575 530 680 1,230 1,960 Shareholding pattern (%) PAT 908 874 1,200 1,080 1,380 2,470 4,060 Jun-12 Mar-12 Jun-11 YoY Gr. (%) 94.1 65.6 57.1 52.0 53.0 177.5 64.4 Promoter 61.1 61.1 56.1 Key Operating Metrics Dom. Inst. 12.1 12.0 13.0 AUM (INR b) 90.3 100.7 119.2 131.1 144.9 75.7 131.1 Foreign 10.1 9.5 10.4 RoAA (%) 4.8 4.0 4.8 3.6 4.4 4.4 4.2 Others 16.7 17.4 20.5 Net NPA (%) 0.5 0.3 0.3 0.1 0.1 0.8 0.1 E: MOSL Estimates
August 27 - 31, 2012 172 8th Annual Global Investor Conference
Bajaj Finserv
Company description Bajaj Finance is rapidly growing its loan book by Bajaj Finserv is a financial services holding company diversifying into different product segments and with diversified interests in insurance (life and non- has substantially improved its asset quality leading life), lending and asset management businesses. While to steep improvement in its return ratios. In FY12, the insurance businesses are into separate joint BFL contributed ~17% of Bajaj Finserv's ventures with JV partner Allianz (both life and non-life), consolidated profits. the lending business is housed under its subsidiary Bajaj Finance (formerly known as Bajaj Auto Finance). Key challenges Bajaj Finserv currently holds 74% in each of the Regulatory risk is a major challenge in the insurance insurance ventures and ~61% in Bajaj Finance business. (subsidiary). Significant deterioration in asset quality / moderation in asset growth for Bajaj Finance could Key investment positives affect consolidated profitability of Bajaj Finserv. Bajaj Finserv is a well diversified financial services player with strong presence in the insurance, Key news flows / triggers to watch lending and wealth management businesses. Announcement regarding hiking FDI in the In the life insurance business, the company insurance sector. However, Bajaj Finserv already has continues to focus on profitable growth and has an agreement in place through which Allianz can sacrificed market share to improve profitability. As increase its stake in the life and general insurance a result, the life insurance business recorded profit business at a predetermined price. of INR13b in FY12 v/s INR10.6b in FY11. The improvement in profitability could be attributed to 1QFY13 highlights tight control on opex as the Commission ratio In 1QFY13, Bajaj Finserv reported PAT of INR1.95b declined to ~5% from 15% in FY08 and the Opex ratio up 52% YoY. Nearly 43% of the profits for the quarter moderated to slightly over 15% from 20%+ in FY08. came in from Bajaj Finance. In the general insurance business, the company BALIC's new business premium for the quarter grew retains the second position. BAGIC achieved a PAT by 28% YoY as against 6.4% YoY growth for the of INR1.2b in FY12 driven by strong operating industry. Meanwhile, the gross written premium efficiencies by bringing in the combined ratio down (excl. pool) for BAGIC grew 18% YoY. to 96% from 101% in FY09.
Stock info Quarterly Performance (INR Million) Bloomberg BJFIN IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 145 Gross Written Premium CMP (INR) 897 Life Insurance 13,877 16,785 16,739 27,438 12,114 96,100 74,838 Mcap (USD b) 2.3 General Ins. 7,981 8,106 7,754 12,918 9,773 31,294 36,759 52-Wk Range (INR) 954 / 392 PAT(Cons.) 1,287 1,582 1,701 8,808 1,952 11,148 13,378 1, 6, 12 Rel Perf (%) 28 / 68 / 75 Breakup Bajaj Finserv * 122 421 145 78 100 1,883 766 Shareholding pattern (%) BALIC 388 427 460 8,428 548 7,822 9,703 BAGIC 288 470 442 -285 477 320 915 Jun-12 Mar-12 Jun-11 Bajaj Finance 508 489 672 606 846 1,301 2,275 Promoter 58.9 58.9 58.4 BA Fin. Dist. 2 3 3 3 3 10 11 Dom. Inst. 5.1 5.3 6.1 Bajaj Fin. Solutions -21 -23 -21 -22 -22 -70 -87 Foreign 10.5 10.4 9.8 Intercompany Adj. 0 -205 0 0 0 -118 -205 Others 25.5 25.5 25.7 *Standalone
August 27 - 31, 2012 173 8th Annual Global Investor Conference
Container Corporation of India
Company description Key challenges Concor controls ~74% of container rail business in India. Concor till FY06 was a virtual monopoly player in It has ~250 operational rakes and an extensive network the container rail business in India. Since FY06, of 61 terminals. Even post the liberalization of the almost ~15 new players have entered the segment, industry in 2006, Concor has been able to continue its resulting in new challenges for the company. dominance, primarily due to its ownership of ~61 In FY10, Indian railways hiked haulage charges by terminals, which partially insulates it from high haulage ~37%, which negatively impacted the viability of charges by Indian railways. Concor is now aiming to re- rail transport compared to road transport. position itself as a total logistics and transport solutions Concor has plans transform itself from a container company, to its customers by expanding across all rail transporter to a total transport provider, while segments of the transport value chain in the EXIM as this opens up significant new growth opportunities, well as Domestic segments. Concor's total throughput it could also result in new challenges for the for the year FY11 was 25,62,297 TEUs, up 5.8% YoY. company.
Key investment positives Key news flows / triggers to watch It plans to re-position itself as a total logistics player By virtue of its strategic capital intensive assets, and expand its presence into various segments of Concor enjoys significant entry barriers and the transport value chain in the EXIM as well as the sustainable competitive advantage. domestic market. Concor has earmarked ~INR16b The current share of containerization in India is for the same. ~25%, as compared to ~60-70% for the world market. The share of rail transport is expected to increase in 1QFY13 highlights; guidance for FY13, FY14 India, once the dedicated freight corridor is 1QFY13, net sales increased 9.3% YoY to INR10.3b, completed in the next 2-3 years. while net profit was up 4.7% YoY to INR2.5b. Concor is debt free and enjoys high FCF's, which Increase in container rakes by ~30 in FY13. positions it favorably to leverage on the huge Capex of ~INR16b for FY13, which includes INR7b opportunities in the logistics vertical. for land acquisitions.
Stock info Quarterly Performance (INR Million) Bloomberg CCRI IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 130 Net Sales 9,490 9,946 10,463 10,711 10,370 38,349 40,610 CMP (INR) 947 Changes (%) 3.6 5.3 7.7 6.9 9.3 3.5 5.9 Mcap (USD b) 2.2 EBITDA 2,597 2,628 2,773 2,240 2,672 10,066 10,241 52-Wk Range (INR) 1,057 / 805 Changes (%) 5.1 0.4 -0.8 2.8 2.9 4.7 1.7 1, 6, 12 Rel Perf (%) 2 / 0 / -6 EBITDA Margin (%) 27.4 26.4 26.5 20.9 25.8 26.2 25.2 Reported PAT 2,342 1,754 2,412 2,271 2,451 8,760 8,779 Shareholding pattern (%) Adjusted PAT 2,342 1,754 2,412 2,271 2,451 8,767 8,778 Jun-12 Mar-12 Jun-11 Changes YoY (%) 21.0 -15.1 5.6 -8.1 4.7 11.4 0.1 Promoter 63.1 63.1 63.1 PAT Margin (%) 24.7 17.6 23.1 21.2 23.6 22.9 21.6 Dom. Inst. 7.1 7.3 7.2 E: MOSL Estimates Foreign 25.6 25.7 26.5 Others 4.3 4.0 3.2
August 27 - 31, 2012 174 8th Annual Global Investor Conference
ICRA
Company description expansion of bank loan ratings. With Basel II ICRA is one of India's leading credit rating agencies set approach wherein risk weights are lower for high up in 1991 by various financial institutions and rated corporate and state-owned banks increasing commercial banks to act as an independent and focus on capital conservation would demand for professional credit rating agency. The international rating of corporate is expected to increase which credit rating agency Moody's is the largest shareholder would be beneficial for ICRA. in the company holding 28.5%. ICRA currently offers Bond market in India is at a nascent stage and as it rating services, IPO grading, consulting services and develops there would be increased need especially knowledge process outsourcing services among others. mid-corporate and SME for getting rated which would provide opportunities. Key investment positives ICRA has very well diversified product offerings viz. Key challenges 1) rating services, 2) consulting services, 3) out- Increasing competitive pressures on account of sourcing and information services and 4) aggressive pricing and rating strategies adopted by professional and I.T. services. Though, large share competitors could adversely impact revenues. of revenues (65%+ in FY12) come from rating Volumes to likely depend on the movement in services, it has created different segments within interest rates and systemic liquidity conditions. rating services viz. corporate, financial sector, High interest rates and sluggish markets could structured finance which completes the whole adversely affect volumes and thereby revenues. gamut of offerings. The increase in rating services income (INR1.4b in FY12 v/s INR1.3b) was attributable largely to the
Stock info Quarterly Performance (Consolidated) (INR Million) Bloomberg ICRA IN Y/e March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 10 Operating Income 387 519 542 626 508 1,930 2,075 CMP (INR) 1,161 Change (%) (5.6) 7.2 14.8 11.1 31.3 18.9 7.5 Mcap (USD b) 0.2 Operating Expense 347 382 367 399 438 1,318 1,496 52-Wk Range (INR) 1,350 / 797 Change (%) 19.8 29.1 6.2 3.1 26.2 24.7 13.5 1, 6, 12 Rel Perf (%) -9 / 10 / 8 EBITDA 69 156 245 322 125 740 792 Change (%) (56.5) (27.1) 44.6 62.0 81.7 (6.7) 7.1 Shareholding pattern (%) EBITDA Margin (%) 17.7 30.0 45.2 51.5 24.5 38.3 38.2 Jun-12 Mar-12 Jun-11 Reported PAT 36 86 174 243 87 481 539 Promoter 28.5 28.5 28.5 Adjusted PAT 36 87 174 243 85 481 540 Dom. Inst. 43.2 43.0 43.8 Change (%) (66.2) (39.8) 54.6 106.2 136.1 (10.0) 12.3 Foreign 8.0 7.4 9.2 PAT Margin (%) 9.3 16.7 32.1 38.8 16.7 24.9 26.0 Others 20.3 21.2 18.4
August 27 - 31, 2012 175 8th Annual Global Investor Conference
Manappuram Finance
Company description Key challenges Manappuram Finance Ltd. (MGFL; formerly known as FY13 is likely to be a year of consolidation for gold Manappuram General Finance and Leasing) is the loan companies on the back of the regulatory second largest gold loan player in India. As on Jun'12, it changes announced by the RBI. Capping of LTV at operates through a network of 2,971 branches, has a 60% could lead to business moving back to the customer base of 1.62m and AUM of ~INR109b. unorganized sector. Manapurram has also introduced Instant Money Transfer Intensifying competition from banks in this service in collaboration with UAE Xchange, Wallstreet business can make difficult to achieve higher and MoneyGram. growth. Key investment positives Key news flows / triggers to watch MGFL is the second largest gold loan company in While the RBI has capped LTV at 60%, drop in gold the country and it remains among one of the prices can impact growth led by demand for more preferred financiers given its strong brand recall, gold from customers. better services and low turnaround time. During the Steep decline in gold prices may also impact asset period FY07-12, MGFL has grown its AUM at 85% quality of these players and hence remains a key CAGR. monitorable. The gold loan market in India is highly unorganized and remains largely dominated by local money 1QFY13 highlights; guidance for FY13, FY14 In 1QFY13, MGFL's AUM grew by 20% YoY, though lenders. In such a scenario, MGFL stands well poised declined by 7% QoQ on the back of changes in RBI to grab market share by offering competitive rates guidelines capping LTVs at 60%. compared to local money lenders and being more Profits for the quarter grew by 46% YoY, though efficient as compared to banks offering similar down 16% QoQ. product. GNPAs increased sequentially to 0.89% from 0.55% High collateral value and lower loss ratios has in 4QFY12 as the delay in auctioning process due to resulted into healthy asset quality. As on Jun'12, regulatory changes affected asset quality. MGFL's net NPA ratio stood at 0.7%. For FY13, the management targets 10-15% AUM Post the recent regulatory changes, the growth for growth, largely back-ended. The company plans to gold loan companies is expected to moderate. add 200-250 branches against ~840 branches added However, we expect growth to pick up in the in FY12. medium term on a more sustainable basis.
Stock info Quarterly Performance (INR Million) Bloomberg MGFL IN Y/e March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 841 Net Operating Income 3,145 3,713 4,300 4,362 4,170 8,263 15,520 CMP (INR) 37 Change (%) 121.2 107.2 84.3 49.4 32.6 148.1 87.8 Mcap (USD b) 0.6 Operating Expenses 1,424 1,687 1,870 1,716 1,871 3,802 6,697 52-Wk Range (INR) 66 / 18 Change (%) 101.6 98.1 84.9 12.2 31.4 161.8 76.1 1, 6, 12 Rel Perf (%) 11 / -17 / -36 Operating Profit 1,727 2,081 2,497 2,776 2,442 4,622 9,081 Change (%) 138.8 119.9 87.7 98.7 41.4 135.8 96.5 Shareholding pattern (%) Adjusted PAT 1,078 1,353 1,614 1,869 1,578 2,827 5,914 Jun-12 Mar-12 Jun-11 Change (%) 133.6 125.2 116.5 135.1 46.4 136.1 109.2 Promoter 31.6 31.6 36.5 Key operating Metrics Dom. Inst. 2.0 0.9 1.5 AUM 90,296 106,010 123,582 116,308 108,515 75,492 116,308 Foreign 47.8 48.8 45.5 AUM Gr. (%) 167.4 113.9 90.2 54.1 20.2 190.5 54.1 Others 18.6 18.8 16.6 Gold Stock (MT) 60.1 65.2 69.5 65.6 60.6 53.0 66 NNPA (%) 0.3 0.3 0.2 0.3 0.7 0.1 0.3
August 27 - 31, 2012 176 8th Annual Global Investor Conference
Muthoot Finance
Company description Key challenges Muthoot Finance Ltd. (MFL) is the largest gold financing FY13 is likely to be a year of consolidation for gold company in India in terms of asset under management loan companies on the back of the regulatory (AUM of INR233bn as on Jun'12). As on Jun'12, the changes announced by the RBI. Capping of LTV at company operated through a network of 3,780 branches 60% could lead to business moving back to the spread across the country with nearly 64% of branches unorganized sector. concentrated in the southern states. Of the outstanding Intensifying competition from banks in this gold loan portfolio, 67% is concentrated in the southern business can make difficult to achieve higher region, followed by northern (18%) and western (10%) growth. regions. Key news flows / triggers to watch Key investment positives While the RBI has capped LTV at 60%, drop in gold prices can impact growth led by demand for more In terms of sheer size, MFL is the largest gold loan gold from customers. company in the country. MFL has achieved its Steep decline in gold prices may also impact asset leadership position in this niche business segment, quality of these players and hence remains a key given its strong domain knowledge, brand monitorable. reputation, widespread distribution network and operational efficiency to achieve scale along with 1QFY13 highlights; guidance for FY13, FY14 profitability, while maintaining quality. In 1QFY13, MFL's AUM grew by 30% YoY, though The gold loan market is highly unorganized and declined by 5% QoQ on the back of changes in RBI largely dominated by local money lenders. Muthoot guidelines capping LTVs at 60%. is well poised to grab market share by offering Profits for the quarter grew by 29% YoY and 5% QoQ competitive rates compared to local money lenders as the company maintained tight leash on operating and being more efficient as compared to banks expenses. offering similar product. GNPAs increased sequentially to 1.28% from 0.56% Post the recent regulatory changes, the growth for as the delay in auctioning process due to regulatory gold loan companies is expected to moderate. changes affected asset quality. However, we believe in the medium term MFL can For FY13, the management targets 10-15% AUM achieve a more sustainable growth rate of ~20%. growth, largely back-ended. Return ratios expected to stabilize at current levels.
Stock info Quarterly Performance (INR Million) Bloomberg MUTH IN Y/e March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 372 Net Operating Income 4,735 5,532 5,920 5,756 5,932 12,657 21,581 CMP (INR) 132 Change (%) 95.9 66.2 38.1 25.3 109.6 70.5 Mcap (USD b) 0.9 Operating Expenses 1,786 2,248 2,165 2,291 2,113 4,897 8,129 52-Wk Range (INR) 191 / 106 Change (%) 95.5 70.1 18.3 18.3 82.7 66.0 1, 6, 12 Rel Perf (%) -3 / -20 / -31 Operating Profit 3,004 3,349 3,801 3,509 3,862 7,936 13,662 Change (%) 93.2 62.8 54.1 28.6 128.3 72.2 Shareholding pattern (%) Adjusted PAT 1,905 2,156 2,509 2,351 2,461 4,942 8,919 Jun-12 Mar-12 Jun-11 Change (%) 88.3 61.3 68.7 29.2 117.1 80.5 Promoter 80.1 80.1 80.1 Key operating Metrics Dom. Inst. 4.3 3.5 1.6 AUM 179,492 209,405 228,850 246,736 233,359 158,685 246,736 Foreign 12.1 12.4 13.2 AUM Gr. (%) 96.5 81.3 66.0 55.5 30.0 113.3 55.5 Others 3.6 4.0 5.2 Gold Stock (MT) 120.0 130.0 132.0 137.0 130.0 112.0 137.0 GNPA (%) 0.3 0.6 0.6 0.6 1.3 0.3 0.6
August 27 - 31, 2012 177 8th Annual Global Investor Conference
Radico Khaitan
Company description Key challenges Radico Khaitan (RDCK) is India's oldest alcoholic Increasing competition can reduce the success rate beverage company. It entered the IMFL segment in 1999, for new launches in premium segment as many with the launch of its flagship brand, 8PM. RDCK has mid- sized players are eyeing this segment. three distilleries in Rampur, UP and holds 36% interest Firm molasses prices and higher glass bottle costs in a JV in Aurangabad, Maharashtra. It owns six bottling could restrict margin expansion in FY13. units and maintains 27 contract bottling units. It holds Govt regulations regarding distribution, pricing and 8% market share in the IMFL industry and ~24% market taxes on IMFL and inputs (Molasses and Grain) are a share in the CSD segment. The company offers all types threat to industry profitability and cash flows. of liquor, except for beer and wine, in regular and premium categories. Key news flows / triggers to watch Movement in molasses/grain and crude (28% of Key investment positives glass cost) prices. Success of new launches in the premium space, Radico is a pure India play on the huge growth After Dark Whisky and Morpheus brandy can opportunity in the IMFL space. improve volume growth and margin profile. Rising sales of Magic Moments Vodka and new Impact of increase in competition on existing launches (After Dark Whisky, Morpheus brandy) in brands. the premium segment will reduce dependence on mass segment and improve profitability. 1QFY13 highlights; guidance for FY13, FY14 A large spirits capacity, a pan India distribution Premium Brands volume growth of 21.0%. (second only to United Spirits) and increasing focus Morpheus Premium Brandy volume growth of on premium segment gives Radico an edge over 50.0%. other emerging IMFL players. Magic Moments Vodka volume growth of 17.7%. Decline in molasses and glass prices could improve Price increases received in the state of Kerala margins and profitability. Launched Florence, a super premium brandy, in Tamil Nadu. The company has planned capex of ~INR400m in FY13, funded by internal accruals.
Stock info Quarterly Performance (INR Million) Bloomberg RDCK IN Y/E March Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 FY12 Equity Shares (m) 133 Operating Income 2,849 2,627 2,904 2,732 2,909 10,978 CMP (INR) 106 Change (%) 21.9 18.4 8.3 23.1 2.1 20.3 Mcap (USD b) 0.3 EBITDA 459 431 500 353 586 1,809 52-Wk Range (INR) 135 / 92 Change (%) 29.3 10.7 14.5 -9.3 27.6 11.8 1, 6, 12 Rel Perf (%) -12 / -8 / -23 EBITDA Margin (%) 16.1 16.4 17.2 12.9 20.1 16.5 Reported PAT 207 148 237 45 211 637 Shareholding pattern (%) Adjusted PAT 207 183 212 170 211 761 Jun-12 Mar-12 Jun-11 Change (%) 29.2 0.5 3.7 -6.9 1.8 4.6 Promoter 40.4 40.4 40.0 PAT Margin (%) 7.3 7.0 7.3 6.2 7.3 6.9 Dome. Inst. 10.1 10.6 14.7 Foreign 26.4 26.2 27.5 Others 23.1 22.8 17.8
August 27 - 31, 2012 178 8th Annual Global Investor Conference
Raymond
Company description Key challenges Incorporated in 1925, Raymond is an integrated textiles Raymond faces near-term challenges of rising input company, with presence across the vertical – from fabric prices and poor consumer demand, particularly in to retail. its branded apparel business. However, over the longer term, it is one of the strongest plays in the In textiles, Raymond is increasingly moving away from branded garment segment, well positioned to capital intensive segments to high-margin, high-return capitalize its strong franchise value. segments, positioning itself as a brand and retail play. Key news flows / triggers to watch Besides textiles, it also has a presence in engineering Post closure of its Thane plant, Raymond has and auto components businesses. managed to free up ~125 acres for commercial Key investment positives development. However, the management has not There is tremendous scope to increase efficiencies shared any concrete plans with regard to and rationalize costs, including lower working monetization timeline, development plan or cash capital, higher focus on key brands, etc. flow utilization. Raymond has now identified four key apparel Early monetization of its real estate could be a key brands to focus on - Park Avenue, Parx, Color Plus trigger. We estimate the value of its 125 acres land and Raymond Premium Apparel. It will direct bulk at Thane plant at INR147/share (based on INR120m/ of its advertisement and promotional initiatives acre monetized within 2 years, discounted @ 14%). (INR1.7b advertisement expenditure in FY12). In this regard, over the last one year it has slowly 1QFY13 highlights; guidance for FY13, FY14 phased out several unprofitable brands such as The outlook for 1HFY13 remains challenging given Manzoni (Premium luxury), Zapp (Kid's wear) and the continuance of several of the above factors. GAS (JV brand). 1QFY13 consolidated results were below estimates, Raymond added 269 new stores (net) over FY10-12, with net Sales up 9.5% to INR8.4b, while EBITDA taking its retail store count to 853 in FY12 from 584 dropped 74% YoY to INR180m. stores in FY09. The management has a target of We expect Raymond's performance to improve having presence across all Class 1-5 cities/ towns. In from 2HFY13. We model Raymond's FY13 EBIT to be this regard it has identified ~435 towns where it flat at INR2.6b and PAT down 10% to INR1.3b. would like to have its TRS (The Raymond Store) Adjusting for real estate value, Raymond trades at format retail presence over the next 3-4 years. EV/ EBITDA of 5x.
Stock info Quarterly Performance (INR Million) Bloomberg RW IN Y/E March Jun-11 Sep-11* Dec-11 Mar-12 Jun-12 FY11 FY12 Equity Shares (m) 61 Net Sales 7,649 5,038 9,537 9,574 8,377 30,333 36,395 CMP (INR) 362 Change (%) 26.4 11.3 14.1 9.5 126.0 20.0 Total Expenditure 6,934 4,182 8,005 8,777 8,197 28,552 32,129 Mcap (USD b) 0.4 EBITDA 715 856 1,533 797 180 1,781 4,266 52-Wk Range (INR) 439 / 300 Change (%) LTP 5.1 306.4 -21.3 -74.8 19.1 139.6 1, 6, 12 Rel Perf (%) -6 / 0 / -1 As % of Sales 9.4 17.0 16.1 8.3 2.1 16.8 17.8 Depreciation 396 255 433 441 439 1,608 1,658 Shareholding pattern (%) Interest 362 321 409 443 472 1,243 1,651 Jun-12 Mar-12 Jun-11 Other Income 146 207 119 117 141 990 1,087 Promoter 39.5 39.5 39.1 Extra-ordinary Items 0 0 0 0 -129 20 107 Dom. Inst. 25.5 26.9 28.2 PBT 105 488 810 30 -590 -81 2,044 Foreign 10.5 10.4 7.7 Tax 32 126 232 25 -180 614 560 Others 24.4 23.2 25.0 Reported PAT 73 362 578 5 -410 1,695 1,487 Adj. PAT 108 362 617 31 -394 1,695 1,487 Change (%) -147.2 -7.9 - -89.3 - 558.9 -12.3 * Standalone
August 27 - 31, 2012 179 8th Annual Global Investor Conference
AIA Engineering
Company description Capacity utilization of the company remains at AIA Engineering (AIAE) makes high chrome mill around 65-70%, despite which the company is internals, used mainly by the cement, mining and utility adding additional capacity of 100k pa on the back of sectors. The company also services different mineral aggressive demand outlook. Any prolonged slow ores like iron, copper, gold, platinum and zinc for mining down in mining sector could have a significant customers in geographies like USA, Canada, Brazil, negative impact on margins and cashflows. South Africa, Australia, etc. High steel prices are a key risk to margins and earnings growth to that extent is linked to Key investment positives commodity cycle. The global market for mill internals for the mining and the cement sectors is estimated at 2.5mt and Key news flows/triggers to watch 0.3mt, respectively and the market is growing at Demand from mining sector needs to be monitored. 4-5%. Bulk of company's revenues come from consumable wear parts and its revenues to that 1QFY13 highlights; guidance for FY13, FY14 extent are shielded from the significant pull back in AIAE's 1QFY13 revenues at INR4.4b were up 62.7% capital spending. yoy, driven by volume growth and weak rupee. The penetration of high chrome mill internals is low Volumes grew 34% YoY to 40k MT (mining 18k MT) in the mining sector, but it is expected to rise, over a low base in 1QFY12. EBITDA margin of 18.3% opening up significant growth opportunities. AIAE was impacted by forex loss of INR150m. is aggressively focusing on this space. The company's The management has guided for FY13 volume of rated capacity stands at 200,000 tons per annum; 160k-170k MT with growth being driven by the and in the process to chart out further expansion mining sector (80k MT expected). plans through a combination of Greenfield and EBITDA margin is expected to remain muted due to Brownfield projects to increase the overall capacity (1) weakness in cement segment, and (2) aggressive by additional 100,000 tons per annum. pricing in mining segment to secure new clients. Key challenges AIAE is a single-product company and runs the risk of moderate growth.
Au Financiers
Company description ~47% of the branches are in the state of Rajasthan (82 Incorporated in 1996, Au Financiers is an asset financing branches) alone. Au Financiers aims to expand and company based out of Rajasthan. The company largely reach out to the un-banked masses pan-India to offers its products and services in the semi urban and identify and finance true entrepreneurial potential. rural parts of the country and has been classified as About the business "Systemically Important Non Deposit Accepting NBFC". Au Financiers operates in the space of vehicle financing The company enjoys "A-" rating from CARE and "BBB+/ for both new and old vehicles, SME loans, loan against Positive" rating from CRISIL on its long term property and commercial vehicle loans. The company borrowings. also offers General insurance & Life insurance products Area of presence as a service provider. To diversify its product portfolio, Apart from Rajasthan, the company has business the company recently started housing finance business presence in Maharashtra, Gujarat, Goa, Punjab, Madhya (both rural and micro loans). Moving forward, the Pradesh and Chhattisgarh with an overall network of company also plans to diversify further into insurance 173 Branches. Of the current network of 173 branches, and broking business.
August 27 - 31, 2012 180 8th Annual Global Investor Conference
Bajaj Electricals
Company description Key news flows / triggers to watch Bajaj Electricals (BEL) operates five strategic business Recovery in the E&P business with increase in order units – Engineering and Projects (E&P), Appliances, inflow. Fans, Luminaires, Lighting and Morphy Richards. Order completion and recovery in margins.
Key investment positives 1QFY13 highlights; guidance for FY13, FY14 De-risked business model. Revenue grew by 22% to INR6.7b while the PAT The company has wide range of well accepted growth stood at 8% to INR120mn. products and distribution network. It has 19 branch Consumer segment ~60% of 1QFY13 revenue grew offices spread in different parts of the country ~29% with 10-12% volume growth. besides being supported by a chain of about 1,000 Order backlog post 1QFY13 stood at INR4.5b (down distributors, 4,000 authorized dealers, over 4,00,000 38% YoY). retail outlets and over 282 Customer Care centers. EBITDA margins for the quarter decline 40bp to 5.2% Diversified product portfolio and products across due to drag in margins in the lighting business on various price points enables the company target account of higher imports. large number of customers. Management indicated plans to divest stake in Bajaj Key challenges Venture e (a 50:50 JV with a group company for Macroeconomic slowdown and delayed execution manufacturing power tools). in E&P has increased project costs and hurt margins. The company took 5-10% price hikes across Increasing competition remains a key concern. products.
Fort Point Automotive
Company description levels rise coupled with car ownership levels. FortPoint Auto is founded by Mr Sundeep Kumar Bafna While near term pressures exist, CV dealership will in 1993 with a Hero Honda (now Hero MotoCorp) benefit from healthy long term growth with rise in dealership. In the same year, it was awarded Hindustan industrial and economic activity. Post the JV with Motors dealership. In early 2000s, it ventured in the small Volvo, Eicher HCVs are gaining acceptance among car segment with the dealership of Daewoo in Thane transporters with improved product quality and and later switched over to FIAT India. In the year 2003, it after market service. was awarded General Motors India Ltd dealership. In Key challenges 2006, Mr Bafna took a bold step by surrendering all car Current slowdown in demand with weak consumer dealerships and taking up Maruti Udyog dealership at and business sentiments to impact dealership three locations - Mahim, Mahalaxmi, and Thane. business. FortPoint represents Hero MotoCorp for 2-wheelers, Maintaining market share in increasing competitive Maruti Suzuki for cars, and Eicher Motors for CVs. environment to test pricing power and margins, Key positives particularly in the two-wheeler and passenger Healthy growth in per capita income, shrinking vehicle dealership business. replacement cycle together with strong brand pull Key news flows / triggers to watch for flagship products Splendor and Passion augurs Performance of the Hero branded products well for two-wheeler dealership business. Response to new launches: (1) Ignitor and Maestro PV dealership business would benefit from healthy in two-wheeler; (2) Ertiga in passenger vehicle; and growth in the PV industry as income and aspiration (3) HCV (VE Series) in CVs.
August 27 - 31, 2012 181 8th Annual Global Investor Conference
Sidhivinayak Logistics
Company description Key challenges Siddhi Vinayak Logistics (SVVL), the largest and fastest Macro-economic headwinds have impacted the growing fleet operator in India, owns more than 3700 freight traffic and freight rates, leading to pressure trucks of various models and configuration and has an on logistics companies' profitability. annual turnover of over INR9b. It operates across Availability of truck drivers has been one of the key diverse segments like steel, cement, tractors, challenges being faced by the logistics industry. chemicals, machinery and is a pioneer in new segments like commercial vehicle chassis carriers. SVLL is among the first and largest customer for any CV player in India. Key news flows / triggers to watch Reduction in interest rates & pick-up in economic Key positives activity to boost freight traffic. Given its strong presence across the country and wide client base, healthy growth in the economic activity, over the longer term, augurs well for SVVL. Share of organized transportation is on the rise as corporate look for complete logistics solutions, benefiting players like SVVL.
Unitech Automobile
Company description PV dealership business would benefit from healthy Unitech Automobiles, based out of Mumbai, is the growth in the PV industry as income and aspiration largest Tata Motor's CV dealership with annual sales of levels rise coupled with car ownership levels. over 11k units. Mr. G.S.Arora (CMD - Unitech Automobiles) has been associated with the automotive Key challenges industry for over 2.5 decades. He has recently entered Macro-economic headwinds have impacted the passenger vehicle dealership business with the freight traffic and freight rates, leading to fall in acquisition of Maruti Suzuki dealership. Apart from the MHCV volumes. automobile dealership business, Mr. Arora also runs a Maintaining market share amidst increasing logistics company with over 130 trucks. competition in domestic M&HCV industry, particularly from Daimler (Bharat Benz). Key positives While near term pressures exist, CV volumes are Key news flows / triggers to watch expected to grow at a healthy rate over the long Reduction in interest rates & pick-up in economic term with rise in industrial and economic activity. activity to boost CV demand. Proliferation of hub & spoke model and rise in Response to the recently launched Ertiga. consumption spend augurs well for the LCV segment.
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Disclosure of Interest Statement Companies where there is interest 1. Analyst ownership of the stock None 2. Group/Directors ownership of the stock Bharti Airtel,Cairn India, GSK Pharma, HeroMotoCorp, Marico, State Bank of India 3. Broking relationship with company covered State Bank of India 4. Investment Banking relationship with company covered None
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