IPO Review March 23, 2018

Rating matrix

Rating : Avoid Lemon Tree HotelsLtd Issue Details Price band | 54-56 Issue Details No juice in valuations! Issue Opens 26-Mar-18 Issue Closes 28-Mar-18 Lemon Tree Hotels (LTH), started in 2004, is one of the largest hotel Price Band (|) 54-56 chains in the mid-priced hotel segment with a total room inventory of Bid Multiples (no of shares) 265.0 around 4,697 rooms across 28 cities with 45 hotels. The key major No. of Shares on Offer (crore) 18.5 cities/regions include NCR, Bengaluru, and that Issue Size (| crore) 1001-1038 accounts for 60% of total room inventory. LTH operates through three QIB (%) 50.0 brands catering to upper middle class (Lemon Tree Premier), middle class (Lemon Tree Hotels) and the economy segments (Red Fox by Lemon Tree Non-Institutional (%) 15.0 Hotels). Over FY13-17, revenues and EBITDA have grown at a CAGR of Retail (%) 35.0 17.7% and 32.7%, respectively. Objects of the Issue Investment Rationale Unlocking value for shareholders and listing benefits Hotel sector on verge of turnaround

In recent years, the hotel sector has witnessed some green shoots mainly Shareholding Pattern led by an increase in demand and a slowdown in room supply (11.7% Pre-offer Post-offer CAGR in FY14-17) leading to an increase in occupancy (up from 58% to Promoters & Promoters Group 31.1 31.1 65% in FY17). Going forward, we expect occupancy levels to improve Others 68.9 68.9 further to 76% in FY21 due to a rise in spending by domestic travellers,

Stock data demand growth (12.4%) outpacing supply growth (7.9%) and improved Particular Amount tourism measures by the government. Market Capitalisation | 4404 Lemon Tree one of the leading mid-priced hotel chains in Total Debt (9MFY18) | 975 Lemon Tree is one of the leading players in the mid-price segment and Cash and investment (9MFY18) | 30 has a market share of ~7% in the organised segment. With the EV | 5349 burgeoning growth in the mid-price segment, occupancy is expected to Equity Capital (in | crore) | 786 improve from 65% in FY17 to 80% in FY21. LTH is expected to be a key Face Value | 10 beneficiary of the same mainly due to robust expansion plans (room count to increase from 4,697 rooms to 7735 rooms).

Financial Summary Low cost of operations a key positive

| crore FY13 FY14 FY15 FY16 FY17 The company’s development cost per room across its three brands are Total Revenues 214.8 221.7 290.4 368.0 411.9 lower than industry. Further, focus on domestic guests, operating EBITDA 37.5 23.3 50.7 101.2 116.4 efficiency & low employee cost have enabled LTH to keep its operational EBITDA Margins 17.4 10.5 17.5 27.5 28.2 cost lower, margins higher than peers and compete effectively on pricing. PAT -20.7 -49.3 -53.4 -31.2 -8.2 Key risks EPS (Diluted) -1.6 -3.8 -0.7 -0.4 -0.1  Heavy capex has negatively impacted FCFF generation

Research Analyst  Potential dilution of shareholding in subsidiaries (Carnation) Rashesh Shah  Limited room of average room revenue (ARR) growth [email protected] Limited room for upside We recommend AVOID on offering, based on high capex oriented nature Devang Bhatt of expansion, low RoCE, higher competition in the mid-scale segment. [email protected] The stock is being offered at 25-30% premium valuation than peers (44- 46x FY17 EBITDA) at a band of | 54-56 per share. Exhibit 1: Key Financials | crore FY13 FY14 FY15 FY16 FY17 Total Revenues 214.8 221.7 290.4 368.0 411.9 EBITDA 37.5 23.3 50.7 101.2 116.4 EBITDA Margins (%) 17.4 10.5 17.5 27.5 28.2 PAT -20.7 -49.3 -53.4 -31.2 -8.2 Diluted EPS -1.6 -3.8 -0.7 -0.4 -0.1 RoCE 1.1 -0.4 0.0 2.7 3.5 EV/EBITDA 124.5 208.1 96.9 49.5 44.5 P/BV 0.7 0.7 3.5 3.5 3.5

Source: RHP, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Company Background Lemon Tree Hotels (LTH), started in 2004, is one of the largest hotel chains in the mid-priced hotel sector, and the third largest overall, on the basis of controlling interest in owned and leased rooms, as of June 30, 2017, according to the Horwath Report. LTH undertakes business via (i) direct ownership of hotel properties, (ii) long-term lease or license arrangements for the land on which they construct their own hotels; (iii) long-term leases for existing hotels that are owned by third parties and (iv) operation and management agreements. LTH also has project design, management & development capabilities and operates through subsidiary, Grey Fox. As of January 31, 2018, LTH had a portfolio of 19 owned hotels, three owned hotels located on leased or licensed land, five leased hotels and 18 managed hotels The company currently has around 4697 rooms across 28 cities with 45 hotels. LTH has hotels across India, in metro regions, including the NCR, Bengaluru, Hyderabad and Chennai, as well as tier I and tier II cities like , , , , and .

Exhibit 2: Geographical distribution of hotel rooms Upper Midscale Midscale Economy Rooms rooms rooms Rooms Total Owned/Leased Managed NCR 502.0 585 455.0 1542 1165 377 Bengaluru 188.0 305 493 493 Chennai 162 162 108 54 Hyderabad 267.0 190 121.0 578 578 Pune 124 124 124 Ahmedabad 63.0 99 162 99 63 Goa 99 99 99 Others 281.0 761 495.0 1537 527 1010 Total Existing 1301.0 2325 1071.0 4697 3193 1504 Source: RHP, ICICIdirect.com Research

Exhibit 3: Room bifurcation by ownership, leased and managed FY 17 Revenue Ownership Type Number of hotels Rooms contribution Owned 19.0 2228 63.1 Owned hotels on leased land 3.0 568 20.2 Leased 5.0 397 12.3 Managed 18.0 1504 2.2 Total 45.0 4697 Source: RHP, ICICIdirect.com Research

The company operates hotels under three brands, which are focused on catering to guests in different hotel segments. Within each brand, hotel design, room interiors and common areas are standardised, providing for low cost of construction and presenting consistency of customer experience across hotels. These brands are Lemon Tree Premier (upper mid scale), Lemon Tree Hotels (mid scale), Red Fox by Lemon Tree (Economy). The differentiated brand strategy allows targeting of distinct customer market segments while avoiding brand dilution.

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Exhibit 4: Brand wise rooms, RevPAR and Occupancy Brandwise Rooms As % of total rooms FY17 RevPar FY17 Occupancy LemonTree Premier 1,301.0 27.7 3,570.0 77.0 LemonTree 2,235.0 47.6 2,752.0 74.0 Redfox 1,161.0 24.7 2,099.0 76.0 Total 4,697.0 100.0 Source: RHP, ICICIdirect.com Research

Lemon Tree Premier brand is targeted primarily at the upper midscale hotel segment catering to business and leisure guests who want to use hotels at strategic locations and are willing to pay for a premium service and hotel property.

Lemon Tree Hotels brand is targeted primarily at the midscale hotel segment catering to business and leisure guests by offering a comfortable, cost effective and convenient experience.

Red Fox by Lemon Tree Hotels brand is primarily targeted at the economy hotel segment.

Exhibit 5: Brand wise rooms, ARR and occupancy trend Lemon tree premium Lemon Tree Hotels Red Fox Hotels FY15 FY16 FY17 9MFY18 FY15 FY16 FY17 9MFY18 FY15 FY16 FY17 9MFY18 Number of available rooms 681.0 877.0 877.0 957.0 1306.0 1306.0 1351.0 1477.0 589.0 605.0 605.0 759.0 Number of Hotels 4.0 5.0 5.0 6.0 13.0 13.0 15.0 16.0 4.0 4.0 4.0 5.0 ARR (|) 3635.0 3834.0 4123.0 4639.0 3175.0 3321.0 3522.0 3715.0 2179.0 2278.0 2372.0 2777.0 Occupancy (%) 68.3 78.3 74.6 77.0 67.9 73.3 77.1 74.1 67.8 75.1 79.1 75.6 RevPAR (|) 2482.0 3001.0 3075.0 3570.0 2155.0 2433.0 2716.0 2752.0 1477.0 1711.0 1877.0 2099.0 Room revenues as % of total revenues (%) 64.0 64.9 64.9 70.1 64.6 66.8 68.5 71.5 72.7 73.3 74.6 82.7 Food and Beverage revenues % of total revenues (%) 25.6 25.1 25.0 20.4 26.1 23.9 22.3 19.9 17.0 17.5 16.4 10.4 Other revenues % of Total revenues (%) 10.4 10.0 10.1 9.5 9.4 9.2 9.2 8.5 10.3 9.2 9.0 6.9 Staff per room ratio (%) 1.0 1.2 1.1 1.1 1.1 1.2 1.2 1.2 0.7 0.8 0.7 0.7 Domestic guests (%) 84.5 85.4 83.4 81.2 82.0 84.4 85.1 84.3 88.1 89.7 84.2 84.0 Foreign guests (%) 15.5 14.6 16.6 18.8 18.0 15.6 14.9 15.7 11.9 10.3 15.8 16.0

Source: RHP, ICICIdirect.com Research

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Key strengths Indian hotel industry highly under penetrated compared to global scenario The Indian hotel industry is highly under penetrated when compared to its peers. In terms of room/1000 people, India has the lowest room/1000 people of 0.2 vs. world average of 2.2 and US average of 15.7. Exhibit 6: India Penetration vis-à-vis Global average Supply of rooms (in Penetration (room/1000 Region million) Population (in million) people) World 16.2 7349.0 2.2 USA 5.0 321.0 15.6 India 0.2 1211.0 0.2 Source: RHP, STR; STR census inventory as at December 2016, United Nations - Population and Vital Statistics Report 2017, ICICIdirect.com Research

Hotel industry on verge of turnaround The global financial crisis and slowdown in the Indian economy adversely impacted hotel demand growth in 2007-14 while room supply addition increased at 14.9% CAGR in the same period adversely impacting occupancy levels (down from 69% in 2007 to 58% in 2014). However, improvement in demand and slowdown in room supply (11.7% CAGR in 2014-17) led to an increase in occupancy up from 58% to 65% in FY17. Going forward, we expect occupancy levels to improve further to 76% in FY21 due to a rise in spending by domestic travellers and demand growth (12.4%) outpacing supply growth (7.9%). In addition, with improved tourism measures by the government, we expect the sector to see a better growth trajectory and healthy pricing in the next four years. Exhibit 7: Occupancy trend in hotel sector All Segments 100 20 Particulars CAGR (%) FY07 to FY17 90 14 15 Supply 13.0 80 65 10 Demand 12.4 70 69 68 63 5 ADR -2.7 60 59 59 60 58 58 59 2 0 -1 57 0 0 50 -3 -3 RevPAR -3.3 -4 -4 -4 -5 40 Period CAGR (%) FY17 to FY21 -10 Occupancy (%) Occupancy 30 Suppply growth (E) 7.9 20 -15 Change in ADR (%) Demand growth (E) 12.4 10 -21 -20 Source: RHP, Horwath HTL India, ICICIdirect.com Research 0 -25

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 With demand (12.4%) outpacing supply (7.9%) we expect occupancy to improve from 65% in FY17 to 76% in FY21 Change in ARR (%) Occupancy (%)

Source: RHP, Horwath HTL India, ICICIdirect.com Research

Within the hotel space, the mid-priced hotel sector has traditionally been underserved in terms of chain-affiliated products carrying consistent standards and marketing reach. This sector had been typically served by independent hotels with fragmented and mainly localised ownerships, inconsistent physical products, upkeep and services. However, over a period of time, India has moved from having more luxury and upper scale rooms to a more balanced supply scenario, with 19.8% of supply estimated to be available in each of the upscale and upper midscale segments, 22.5% of the supply estimated to be available in the midscale and economy segments and 38% of the supply estimated to be available in the luxury and upper upscale levels. The trend of increasing supply in mid-priced hotel sectors is expected to continue. However, considering

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the domestic travel growth in the mid-priced segment, it is expected to outpace supply over the next four years leading to improved occupancy levels.

Exhibit 8: Occupancy trend in upper mid scale Exhibit 9: Occupancy trend in mid scale and economy

100 100

80 82 80 80 76 72 75 69 73 68 64 63 65 60 62 60 57 61 61 55 56 54 58 56 40 40

20 20

0 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Occupancy (%) for upper mid scale Occupancy (%) for mid scale and economy

Source: RHP,STR and Horwath HTL India, ICICIdirect.com Research Source: RHP, STR and Horwath HTL India, ICICIdirect.com Research

Exhibit 10: Demand supply scenario in upper mid scale, mid scale and economy segments Upper mid scale Mid scale & Economy Particulars CAGR (%) FY07 to FY17 CAGR (%) FY07 to FY17 Supply 12.1 15.3 Demand 16.5 19.6 ADR -1.4 0.6 RevPAR 1.4 3.7 Period CAGR (%) FY17 to FY21 CAGR (%) FY17 to FY21 Suppply growth (E) 8.3 11.7 Demand growth (E) 15.6 18.6

Source: RHP, Horwath HTL India, ICICIdirect.com Research

Mid-priced room Lemon Tree one of the leading mid-priced hotel chains in India Inventory as on 31 Rooms as a % of total Group March 2017 mid price inventory LTH is one of the largest hotel chains in the mid-priced hotel sector and ITC Hotels 4559.0 8.6 the third largest overall, in terms of controlling interest in owned and Accor 4488.0 8.4 leased rooms, as of June 30, 2017, according to the Horwath Report. As Sarovar 4225.0 7.9 of June 30, 2017, the company’s rooms comprised 4.2% of upper- Lemon Tree 3676.0 6.9 midscale, 7.6% of midscale and 15.3% of economy rooms, aggregating to 6.9% of all mid-priced rooms, available across chain affiliated hotels in Taj-Ginger 3279.0 6.2 India. Hence, the company is well placed to benefit from the expected Wyndham 2842.0 5.3 growth in the mid-priced hotel sector in India by leveraging existing IHG 2766.0 5.2 market position in India, geographical spread, presence in key micro- Royal Orchid 2672.0 5.0 markets, hotels under development and value-for-money proposition. Carlson 2443.0 4.6 Concept Hospitality 1976.0 3.7 Berggruen 1964.0 3.7 Robust expansion plans to ensure Lemon Tree’s leadership position in Clarks Inn 1754.0 3.3 mid-prices hotel segment in India Others 16559.0 31.1 The company plans to increase its number of rooms from current 4,697 to 7735 through development of hotels, acquisition of properties and Total 53203.0 entering into leases and management agreements that complement its Source: RHP, Horwath HTL India, ICICIdirect.com, Research brand attributes. LTH undertakes business via (i) direct ownership of hotel properties, (ii) long-term lease or license arrangements for the land on which they construct their own hotels; (iii) long-term leases for existing hotels which are owned by third parties, and (iv) operation and management agreements. In the owned hotels and hotels built on leased

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or licensed land segment, the company plans to expand from 22 hotels and 2,796 rooms as of January 31, 2018 to 28 hotels and 4,230 rooms. In the leased hotels segment, it aims to increase its hotels and rooms from five hotels and 397 rooms, to seven hotels and 572 rooms. In the management contract segment, the company plans to expand from 18 hotels and 1,504 rooms as of January 31, 2018 to 38 hotels and 2,933 rooms.

Exhibit 11: Expansion plans of company Exhibit 12: LTH to expand its room by 3038 to 7735 Upper Existing Rooms Midscale Midscale Economy Particulars Rooms Rooms rooms rooms Rooms Total Owned/Leased Managed Owned 2796.0 Mumbai 875.0 0.0 875.0 875.0 Leased 397.0 NCR 0.0 260.0 260.0 0.0 260 Management Contract 1504.0 Kolkata 142.0 0.0 142.0 142.0 Total 4697.0 Hyderabad 0.0 84.0 84.0 84.0 Pune 199.0 0.0 199.0 199.0 Under Development rooms Others 310.0 1077.0 91 1478.0 309.0 1169 Particulars Rooms Total 1526.0 1421.0 91 3038.0 1609.0 1429 Owned 1434.0 Leased 175.0 Source: RHP, ICICIdirect.com Research Management Contract 1429.0

Total 3038.0

Total of existing and under development rooms 7735.0

Source: RHP, ICICIdirect.com Research

Low cost of operation a key positive Lemon Tree has significant experience as a developer and operator of hotels. This has enabled the company to develop hotels within budgeted costs and timelines while adhering to quality standards. The company’s development cost per room across its three brands have been lower than the industry. Further, focus on domestic guests, controlling operating Staff per room Company Industry expenses through employee engagement and productivity have enabled Upper Mid scale 1.1 1.7 the company to improve its occupancy and margins. Further, going Mid scale 1.2 1.6 forward, the company intends to improve margins through the following Economy 0.8 1.3 measures 1) improve staff productivity and efficiency to reduce payroll

Source: RHP, Horwath HTL India, ICICIdirect.com, costs per room through the use of new technology, streamlined Research management systems, comprehensive training and performance-linked compensation, 2) implement energy saving initiatives that are both cost- efficient and environmentally friendly, 3) improve margins in revenue generating departments such as telecommunications, restaurants, laundry, spa operations and transportation and 4) reduce average per room costs for head office operations, sales and marketing, loyalty program expenses, among others, through the expansion of network, hotels and rooms. The company also intends to maintain low hotel development costs for owned hotels and conversion costs for leased hotels, through efficient project management and oversight. It also aims to ensure that it maintains competitive average development cost per room, through innovative yet easily replicable product designs to lower procurement costs and expedite installation and fit-out time.

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Financials Exhibit 13: Revenues (| crore)

450.0 411.9 368.0 400.0 290.4 352.3 350.0 221.7 300.0 214.8 250.0 200.0

| crore | 150.0 100.0 50.0 - FY13 FY14 FY15 FY16 FY17 9MFY18

Revenues

Source: RHP, ICICIdirect.com Research

Exhibit 14: EBITDA & EBITDA margins (%)

140.0 30.0 116.4 120.0 25.0 101.2 98.0 100.0 20.0 80.0 15.0 50.7 (%)

| crore | 60.0 37.5 10.0 40.0 23.3 20.0 5.0 - - FY13 FY14 FY15 FY16 FY17 9MFY18

EBITDA EBITDA margins

Source: RHP, ICICIdirect.com Research

Exhibit 15: Net profit trend (| crore)

10.0 2.9 - (10.0) (8.2) (20.0) (20.7)

| crore | (30.0) (31.2) (40.0) (50.0) (49.3) (53.4) (60.0) FY13 FY14 FY15 FY16 FY17 9MFY18

Net Profit

Source: RHP, ICICIdirect.com Research

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Exhibit 16: Return ratios (%)

4.0 3.5 3.5 3.0 2.7 2.5 2.0 1.5

(%) 1.0 1.1 0.5 (0.4) - 0.0 (0.5) FY13 FY14 FY15 FY16 FY17 (1.0)

RoCE

Source: RHP, ICICIdirect.com Research

Exhibit 17: Debt to equity

0.9 0.8 0.8 0.7 0.6 The company’s current debt is | 975 crore, which is 0.6 0.5 0.5 0.5 expected to increase further by | 400 crore to fund its 0.5 0.4 future expansion plans 0.4 0.3 0.2 0.1 - FY13 FY14 FY15 FY16 FY17 9MFY18

Debt/Equity

Source: RHP, ICICIdirect.com Research

Exhibit 18: Asset turnover

450.0 411.9 0.3 Heavy capital expenditure in owned hotel rooms has kept 400.0 368.0 asset turnover lower at 0.2x 350.0 0.2 290.4 300.0 0.2 250.0 214.8 221.7 200.0 (x) | crore | 0.1 150.0 100.0 0.1 50.0 - - FY13 FY14 FY15 FY16 FY17

Revenues Asset Turnover

Source: RHP, ICICIdirect.com Research

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Key concerns Heavy capex by company has led to negative FCFF Over the years, Lemon Tree has expanded through owned hotels (~47% of overall rooms are owned by the company). This strategy has enabled the company to gain access to strategic location. However, it has also led incurring of heavy capital expenditure. This, in turn, has resulted in negative FCFF generation in FY13-17. In addition, heavy capital expenditure has kept the company’s asset turnover lower, adversely impacting return ratios. Going forward, the company will continue to expand through owned hotels (~28% of overall planned expansion), which will keep FCFF generation and asset turnover subdued. Potential dilution of shareholding in subsidiaries (Carnation) Total 11 of the owned operational hotels and 1512 rooms of the company are held through subsidiaries (Fleur, Begonia and Nightingale). These subsidiaries are under a joint venture between APG Strategic Real Estate Pool NV (APG) and Lemon Tree. These subsidiaries under a joint venture accounted for 48% of total revenues as of 9MFY18. Under the JV, LTH holds majority equity interest and operational control while APG has the remaining minority interest. However, the agreement entered into by the company and APG has provided APG with rights to increase its shareholding in these subsidiaries and reduce the company’s shareholding in the subsidiaries. Further, a 25% stake in Lemon Tree’s high cash flow generating management contract business will be divested to Rattan Keswani at higher of book value or face value on or before March 31, 2019.

Intensifying competition, higher bargaining power of B2B players may restrict ARR growth The company operates in the mid scale and economy segment, which is facing with competition from branded and unbranded players. As a result of such high competition and ever increasing supply from branded and unbranded players in this space, the company’s ARR growth has been restricted despite operating at occupancies of over 70%. Further, the company derives ~55% of its revenues from corporate players that have higher bargaining power compared to other customers. Hence, higher dependence on corporate customers could further restrict the company’s ability to increase ARR.

Downturn in economy, higher leverage may impact financials The company’s debt/equity has increased from 0.4x in FY13 to 0.8x in 9MFY18 primarily due to heavy capital expenditure incurred for setting up of owned rooms. Further, over the next few years, the company intends to raise debt of | 400 crore to fund its expansion plans, which will lead to higher debt/equity and interest cost. The company has been cash positive over the past two years mainly due to improvement in demand and slowdown in room supply. Any downturn in the economy, higher room supply from unbranded players and lower demand from corporate customers could adversely impact the company’s cash flow, leverage position and expansion plans.

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Valuations Lemon Tree is one of the largest hotel chain in the mid-priced hotel sector and one of the most cost efficient players in the segment. However, despite being operationally & capex efficient and occupancy of over 70% in each of it’s brands the company has low RoCE. This is mainly due to high capex oriented nature of expansion, which has kept its turnover ratios lower (at 0.2x). Further, although the EBITDA margin has improved from 17.4% in FY13 to 28.2% in FY17 leading to robust operating cash flow generation, the FCFF has remained negative. Going forward, considering the company intends to expand through owned hotels, we expect the capex intensity to remain higher. This will impact FCFF generation. In addition, with higher share of B2B segment and higher competition from branded and unbranded hotels, we believe there is limited room for ARR upside. Further, the company’s current valuation of EV/EBITDA of 44-46x is at 25-30%, higher than comparable peers. Hence, we have an AVOID rating on the offering.

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Exhibit 19: Profit and Loss Statement

Income statement (| crore) FY13 FY14 FY15 FY16 FY17 9MFY18

Total Income 214.8 221.7 290.4 368.0 411.9 352.3 Cost of food and beverages consumed 22.1 24.4 28.4 34.6 35.3 32.1 Employee benefits 56.4 64.6 78.2 85.4 96.9 79.0 Other expenses 98.9 109.3 133.0 146.8 163.4 143.2 Total Expenditure 177.3 198.4 239.7 266.8 295.6 254.3 EBITDA 37.5 23.3 50.7 101.2 116.4 98.0 Other Income 2.6 1.2 1.2 2.1 6.2 0.6 Financial charges 38.9 29.2 60.3 68.3 74.0 54.1 Depreciation 23.7 31.0 51.7 52.3 51.0 39.8 PBT (22.6) (35.6) (60.1) (17.3) (2.5) 5.3 Extraordinary items ------Taxation (2.6) 3.7 3.2 12.5 4.7 2.4 Reported PAT (20.0) (39.3) (63.2) (29.8) (7.2) 2.8 Share of Minority Interest 0.7 10.0 (9.8) 1.4 1.0 (0.0) PAT (20.7) (49.3) (53.4) (31.2) (8.2) 2.9 Source: RHP, ICICIdirect.com Research

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Exhibit 20: Balance Sheet Balance Sheet (| crore) FY13 FY14 FY15 FY16 FY17 9MFY18 Equity Attributable to owners of parent 837.9 799.2 810.2 809.9 808.6 803.3 Minority Interest 209.4 289.5 422.3 427.7 428.4 428.2 Total Equity 1,047.3 1,088.8 1,232.5 1,237.6 1,236.9 1,231.6 Total Debt 460.3 564.4 572.7 626.9 799.6 975.3 Deferred tax liability (net) 4.9 0.3 - 6.9 6.8 4.8 Other long term liability 3.5 5.1 8.1 14.3 20.8 25.6 Long term provisions 0.5 0.7 0.9 1.2 1.4 1.4 Total Non-current liabilities 469.3 570.5 581.7 649.3 828.6 1,007.1 Trade Payables 11.4 45.9 33.4 51.1 60.4 73.3 Other current liabilities 52.9 25.8 47.5 66.1 83.5 70.7 Short term provisions 0.9 1.0 1.1 1.7 2.3 2.5 Total current liabilities 65.2 72.6 82.0 119.0 146.2 146.5 Total Liabilities 1,581.8 1,731.9 1,896.2 2,005.9 2,211.7 2,385.2 Fixed Assets Tangible assets 812.4 1,153.4 1,234.6 1,230.1 1,409.7 1,456.6 Intangible assets 1.7 2.1 1.6 1.3 1.9 1.8 Capital work-in-progress 306.9 134.9 167.1 259.2 350.8 475.2 Total 1,121.0 1,290.5 1,403.4 1,490.7 1,762.4 1,933.6 Goodwill - 8.8 - - 6.7 6.8 Deferred tax assets - - 0.4 - - - Long term loans & advances 5.5 10.6 9.2 7.6 10.9 16.0 Non-current Investments 0.0 0.0 0.0 0.0 0.0 1.4 Other non-current assets 224.9 279.4 388.4 436.9 348.1 298.9 Total non-current assets 1,351.3 1,589.3 1,801.4 1,935.2 2,128.1 2,256.6 Investments 186.0 38.4 31.2 5.8 6.3 7.8 Inventories 4.3 4.7 4.8 5.4 4.9 5.3 Trade receivables 14.8 16.0 17.9 24.5 31.4 51.7 Cash and bank balances 13.6 72.4 30.0 13.8 17.6 22.5 Short-term loans and advances 0.8 0.6 0.8 0.6 0.5 0.3 Other current assets 10.9 10.5 10.0 20.6 22.8 40.9 Total Current assets 230.5 142.6 94.8 70.7 83.6 128.5 Source: RHP, ICICIdirect.com Research

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Exhibit 21: Ratio Key ratios FY13 FY14 FY15 FY16 FY17 EPS (1.6) (3.1) (0.8) (0.4) (0.1) Cash EPS 0.3 (0.6) (0.1) 0.3 0.6 BV 82.6 84.7 15.9 15.9 15.8 Dividend per share - - - - - Operating Ratios EBITDA Margin 17.4 10.5 17.5 27.5 28.2 PAT Margin NA NA NA NA NA Return Ratios RoE NA NA NA NA NA RoCE 1.1 (0.4) 0.0 2.7 3.5 RoIC 1.4 (0.5) (0.1) 3.0 3.9 Valuation Ratios EV / EBITDA 124.5 208.1 96.9 49.5 44.5 P/E (35.5) (18.3) (68.8) (146.2) (610.2) EV / Net Sales 21.7 21.9 16.9 13.6 12.6 Market Cap / Sales 20.5 19.9 15.2 12.0 10.7 Price to Book Value 0.7 0.7 3.5 3.5 3.5 Turnover Ratios Asset turnover 0.1 0.1 0.2 0.2 0.2 Debtors days 25.2 26.3 22.5 24.3 27.9 Inventory days 7.3 7.7 6.0 5.3 4.4 Creditors days 19.4 75.6 42.0 50.7 53.5 Solvency Ratios Debt / Equity 0.4 0.5 0.5 0.5 0.6 Current Ratio 4.0 4.4 5.3 4.2 2.9 Quick Ratio 3.9 4.4 5.2 4.1 2.8 Source: RHP, ICICIdirect.com Research

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RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

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ANALYST CERTIFICATION We /I, Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

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