Investment Ideas Cox & Kings Ltd. 21 April 2016

INITIATING COVERAGE CMP: `190.45/- st 21 April, 2016 SECTOR: TRAVEL & TOURISM ACCUMULATE

COX & KINGS LTD.

Shivani V. Vishwanathan Tel: +9122-66638956 [email protected] Pooja Doshi Tel: +9122-66638959 [email protected]

Way2Wealth Brokers Pvt. Ltd. (CIN U67120KA2000PTC027628) SEBI Rgn. No. : INH200002739 No. 14, Frontline Granduer, Walton Road, Bangalore-560001; Website: www.way2wealth.com Email: [email protected] Way2wealth Research is also available on Bloomberg WTWL KEY STOCK DATA CMP `190.45 Market Cap (` Crs.) 3218.6 52W High/Low `331.2/140.5 Shares o/s (crs.) 16.9 3-m daily average vol 643713 Bloomberg COXK:IN NSE Code COX&KINGS BSE Code 533144

SHAREHOLDING PATTERN Promoters 48.73% FIIs & DIIs 37.38% Public & Others 13.89%

Over the years the stock has been de-rated on account of investor perception about the company’s aggressive acquisition strategy; which has not paid the requisite dividends. All the acquisitions were in developed economies which are now victims of the ongoing financial crisis. We concede to the market opinion and concerns regarding the debt on the books; but we believe that there is a perception – valuation mismatch with similar companies having operations in these geographies. Agreeably the market is granting a discount to valuations from comparables on account of the above stated concerns, but we believe these valuations are a deep discount to a deserved multiple given the positive triggers over the next few years. The company has the following positive triggers going for it:  The recent acquisition of LateRooms and subsequent sell off along with SuperBreak to Malvern Enterprises is a positive step in the restructuring of the business. The company’s strategy when they acquired LateRooms was to add synergistic value to the existing online business in UK and Europe, SuperBreak, in terms of cross selling as well as margin improvement as there would be an increase in the B2C business in lieu of existing mix of higher B2B business. But with the sale of these two businesses to the private equity the company wanted to reap the benefits of the merger and hence acquired 49% in the same private equity. Hence assuring that it would enjoy the benefits of these two business combined in the future.  Apart from the online business gaining traction, India outbound is witnessing healthy growth in the range of 12-15%.  Meininger, the company’s budget lodging offerings, is expected to double capacity by FY19 and hence contribute to the growth of the company.  On the balance sheet front, the management is focused on improving its working capital cycle in India coupled with debt reduction targets of `300-500crs. yearly for the next few years.  We expect profitability to improve on account of higher capacity utilization as well as lower interest costs.  Keeping in mind these positive triggers for the company we believe that the stock is available at cheap valuations. At the CMP of `190.5/-the stock trades at an EV/EBIDTA of 7x and 6.3x its estimated EBIDTA of `894crs & `910 crs for FY16E& FY17E respectively. We believe this stock holds good long term potential and hence advise investors with a 2 to 3 year investment horizon to ACCUMULATE the stock.

 Cox & Kings is one of the largest established travel company in the world, with legacy dating back to 1758 in UK. Bound by strong ties to India, the company stayed on and flourished even after independence.  The Indian business started as a franchisee of the then parent company. Its primary business was Air Ticketing. Post this, it ventured into inbound tour operations and then outbound and lastly Foreign Exchange.  In 2004, Cox & Kings acquired ETN a destination management company in Europe in order to capture the back-end destination management services enabling it to backward integrate its operations. In 2007, Cox & Kings India reversed acquired its parent company in UK. Two years post the company became a publically listed company by launching its IPO in the securities market.  Today, Cox & Kings is a premium brand in all travel related services in the Indian subcontinent, employing over 5000 trained professionals. Its India operations are headquartered in Mumbai It has over 12 fully owned offices in India across key areas and offices worldwide located in UK, USA, Japan, Russia, Singapore and Dubai. It has associate offices in Germany, Italy, Spain, South Africa, Sweden and Australia. The company works on a franchisee model in India and currently has a distribution strength of 142 Franchisee, 12 owned stores & 90 preferred sales agents. The mix between principal business segments are: REVENUE MIX Others EBITDA MIX Others Meininger Meininger 4% -3% Leisure India 14% 16% 22% Education 29% India Leisure Leisure 26% Education International International 29% 29% Leisure 26% Source: Company, Way2Wealth Research

Acquisition of Acquisition of Cox & Acquisition of Tempo IPO `591.9crs Clearmine Ltd and Kings Ltd. (UK) - Holidays Pty Ltd FY2008 FY2010 FY2006 ETN (UK) - `39.0crs FY2009 Australia $27mn Acquisition of East India `15.6crs Quoprro Global Travel Company Inc. Acquisition of Cox & Services Pvt. Ltd. - (USA) - $22mn Kings (Japan) - `0.2crs `2.0crs Acquisition of MyPlanet Australia Pty Ltd. (Australia)

Acquisition of Holidaybreak Ltd. Acquisition of LateRooms for GBP8.5mn (UK) - GBP323.4mn Sale of Explore Worldwide Ltd. for FY2012 FY2016 GBP25.8mn

Sale of LateRooms for GBP20mn and Super Break for GBP9.25mn to Malvern PE.

49% stake buy in Malvern PE for GBP6.37mn.

Source: Company, Way2Wealth Research

 Leisure India is the fastest growing business for the company, clocking 12-15% growth consistently over the last few years. The company is very positive on maintaining this growth rate on account of increasing number of outbound travellers. Outbound travel constitutes 3/4th of this business and is growing at a faster rate. Approximately 55-60% of the business in India is through corporates hence entailing heavy working capital requirements. Currently at the ~50% EBIDTA margins the company is clocking a 17% ROCE with `700crs of working capital. The company intends to bring this down by `100crs. To `600crs. hence improve ROCE in the India operations to 20%. Company is working on bringing down its working capital cycle to a month from its current 45-50 days. We believe the business growth will ride on the back of outbound travel as awareness and aspirations rise amongst the bourgeoning middle class and the youth backed by better affordability and increasing disposable income.  Leisure International which constitutes 30% of the revenues encompasses the inherited ultra luxury travel consultancy business of the parent company which the Indian business reversed acquired back in 2007. It also includes the online website businesses of SuperBreak & LateRooms (both of which were recently sold). The mix between the online and offline business is 50:50 and 10:90 in terms of EBIDTA contribution. With an aim to restructure its online business the company had acquired LateRooms in Oct 2015 so as to re-organise the online business to create a common platform for both the sites with an aim to cross-sell. But recently the company got an exciting offer from a private equity player Malvern. The company sold Both LateRooms & SuperBreak for a net consideration of GBP22mn and reversed acquired 49% in the private equity firm. Hence ensuring to enjoy the future positives arising out of the synergies of both the websites. Historically this segment contributed~20% to the operating profits of the company with margins in the range of 25-30%. The continuing business is expected to grow at a steady rate of 3-4% over the next few years with margins moving up to ~40%+ over the next few years.  Education Experiential Travel is ~26% of the revenues and contributes a third to the operating profits while clocking 40- 41% EBIDTA margins. This is a niche travel segment targeted at students. There are 2 offerings under this segment PGL & NST. PGL is the larger business targeted at mid school students and has 25 campuses spread across 1262 acres in UK, France and the recent foray in Australia. Majority of the business is driven by the UK markets where PGL has 40% market share. it has 10,200 beds to which the company plans to add 500 beads yearly. Way2Wealth Brokers Pvt. Ltd. (CIN U67120KA2000PTC027628) SEBI Rgn. No. : INH200002739 No. 14, Frontline Granduer, Walton Road, Bangalore-560001; Website: www.way2wealth.com Email: [email protected] 21 April 2016 Way2wealth Research is also available on Bloomberg WTWL 6 Cox & Kings Ltd. INVESTMENT RATIONALE

 Education Experiential Travel (Cont.) It is a cash upfront business and is currently working at 33% capacity utilisation which is up from 27% in 2011 when the company was acquired. This business is cyclical and hence cannot work at more than 35-40% capacity utilisation. This year the business was negatively impacted due to the Paris attacks where the company has 7 campuses. Hence it is expected to clock ~6-7% growth in FY17 and pick up pace in FY18 to ~10% growth. NST is a similar proposition targeted at higher school standards. Over the years Cox & Kings has not only increased utilisation but also taken away market share from its competitors and will continue to do so in the future on account of better value propositions.  Meininger is an exciting budget offering by Cox & Kings in Europe with bed per night rate at as low as Euro 15. This business contributes ~16% to the topline and ~17% to EBIDTA with margins at ~35-38%. The company currently has a capacity of 7000 beds across Europe & UK with a capacity utilisation of ~78%. The company plans to add another 7000 beds by the end of FY18. The average realisation per bed has also gone up to Euro 30 per night vs. Euro 26 in FY15. The expansion entails an `105crs over next 2 years. We believe the "Poshtels" proposition is going to drive healthy demand growth for the Meininger offering hence the company's capacity expansion is coming at a time which will help it secure higher market share. EBIDTA is expected to double by FY19.  Improving financials- The Company has historically been very aggressive in acquisitions and hence is heavy leveraged with goodwill for brands acquired sitting in the books. From gross debt level of `5600crs. in FY14 the company has brought it down by `1600crs. over the last 18 months to `4000crs. The company has cash on books to the tune of `1700crs. Hence with a net debt of `2300crs. the company has reduced net debt/shareholder ratio from 1.6x in FY14 to 0.7x in FY15. The company doesn't intend to increase debt and is working to reduce debt by `300 - `500crs yearly leading to a reduction in interest cost. We believe interest cost will come down by approximately a third over the next 3 years. On the currency front while majority of the business has a natural hedge for currency the company is actively managing the currency risk in open positions to reduce adverse impacts. Apart from this the company plans to improve its working capital cycle in its India operations leading to better ROCEs. We believe the deleveraging of the balance sheet will enable profitability to grow at 15-18% over the next 3-4 years.

 Travel & Tourism’s direct contribution to Global GDP and employment in 2015 was US$2.2 trillion and 108 million jobs respectively.  The sustained demand, coupled with the sector’s ability to consistently outperform in the face of shocks, continues to underline its great significance and value as a key industry for economic development and job creation throughout the world.  The travel & tourism industry’s contribution to GDP is forecasted to grow by 4% on an average annually over the next ten years, continuing to outperform the global economy throughout the forecast period. By 2026 it is expected to support 370 million jobs in total (globally), which will equate to 1 of 9 jobs in the world.  Investment in the sector is forecasted to grow by 4.7% in 2016, while domestic and international travel spending are forecasted to grow by 3.3% and 3.0% respectively.  Travel & Tourism GDP growth in 2026 is expected to be at 7.1% of which South Asia is estimated to be the fastest growing region. India is expected to grow at 7.5% and outpace China whose growth will be 7.0%.  India’s strong forecast will propel it into the top ten Travel & Tourism economies by 2026, moving from 12th place in 2015 up to 7th by 2026 in terms of total Travel & Tourism GDP.  China, USA, Germany and UK will continue remain the top four markets by 2026 for outbound spending. India, Indonesia and Singapore will make noticeable moves in this category.

Financial Summary Particulars FY13 FY14 FY15 9MFY16

Revenues (in Crs.) 327 419 481 432 Growth( %) 28.1% 14.8% Mix(%) 29.1% 29.3% 28.9% EBIDTA (in Crs.) 186 207 236 229 EBIDTA Margins (%) 56.9% 49.4% 49.1% 53.01% Source: Company, Way2Wealth Research

 Nature Of Business : Leisure India the fastest growing business segment for the company. It is an integrated travel enterprise, offering the best and widest range of travel options to individuals, groups and businesses in the fastest-growing major economy in the world. It is an asset light business using a franchisee based model. Cox & Kings is the market leader in the organized domestic travel market with a 33% market share. This business has shown a consistent growth of 12-15% over the last few years.  Strength & Differentiators vs. Competitors is its Investment in it’s Distribution network: o The company has focused on expanding its franchisee network in Tier II and Tier III cities. As on FY15 Cox & Kings operated through 12 owned stores, 142 franchisees and 90 preferred sales agents. o Using the franchisee model has enabled the company to rapidly expand its distribution network while utilizing existing infrastructure and real estate, which they would have otherwise taken time to build. Franchising thus helps them to augment their brand name for an economical cost, gain local market knowledge from franchisers and also promote entrepreneurship. The next largest competitor (Thomas Cook) has more of a branch driven model and hence heavier on cost. The company plans to strengthen its franchise network judiciously within India.

 Business Growth Drivers:

o Outbound Travel: Indian citizens travelling abroad constitutes Outbound Travel. This category constitutes ~74% of revenues of Leisure India segment. Over the last five years, the number of Indian travelers have more than doubled and this is reflected in the strong growth in outbound travel from India. The main growth drivers for this category are: a) Rising aspiration as well as awareness amongst the middle class and youth. b) Better affordability and increasing disposable income.

o We believe Cox & Kings’ business will ride on the back of these trends given its aggressive expansion of distribution network and competitive pricing. This segment has been growing at 12-15% over the last few years and is expected to pick up pace with the revival of the economy. We also believe that the oligopolistic organized market (post the merger of No.2 & No.3 Thomas Cook & Kouni) in which Cox & Kings is present bodes well for price stability.

o MICE & Business Travel: This entails end-to-end management of corporate or individual programs including out bound junkets, conferences, weddings etc. Being corporate/ institutional part of the business, it is working capital driven. Major growth drivers for this category are: a) Corporate India expanding markets both locally and globally. b) Corporate events, business interest from ‘Make In India’ attracting foreign investors and innovative incentive programmes by Corporate India.

o Global : In 2014, the world generated USD1384bn in visitor exports (money spent by foreign visitors to a country). In 2015, this was expected to grow by 2.8%, and the world was expected to attract 1.2bn foreign tourist arrivals. By 2025, foreign tourist arrivals are forecasted to total 1.8bn, generating expenditure of USD2140bn, an increase of 4.2% pa.

o India: However in India, growth in foreign tourists arrival dropped to a five-year low of about 4% with a total of around 8 million visiting the country by the end of last year. Similarly foreign exchange earnings saw negligible growth of just 0.1% at $19676mn, the lowest since 2010. In the previous year, both foreign tourist arrivals and foreign exchange earnings saw a growth of 10.6% and 6.6%, respectively. Experts have attributed the decline to the global financial slowdown, particularly in key source markets like Russia, Germany, France and many Far East Asian countries.

o Government initiatives: We expect government initiatives like the launching of ‘Incredible India’ campaign or providing electronic visa on arrival to foreign travelers to India to aid in the growth of this segment, however it may remain low unless the global economy shows signs of improvement. o Other Businesses: Apart from this the company is also into visa-processing & foreign exchange.

Cox & Kings Online Leisure (parent business – International inherited Super Break (30% of business) & LateRooms Revenues)

Particulars FY13 FY14 FY15 9MFY16 Revenues (in Crs.) 608 611 650 510 Growth( %) 0.5% 6.4% Mix(%) 34% 31% 29% EBIDTA (in Crs.) 208 216 236 151 EBIDTA Margins (%) 34.2% 35.4% 36.3% 29.6%

Source: Company, Way2Wealth Research

 Nature of Business: Leisure international is an asset light business which encompasses the heritage travel consultancy business of the parent company (this was reverse acquired by the Indian subsidiary in 2007) and the erstwhile online businesses.  This segment contributes 29% to the topline with revenue split equally between the agency business and the online business.

OFFLINE ONLINE

SuperBreak : was acquired with HolidayBreak in 2012 and Cox & Kings UK, Australia, Japan, USA subsequently sold in April 2016 at a consideration of GBP9.25mn

Explore : was acquired with HolidayBreak in 2012 and Cox & Kings Destination Management Services subsequently sold in Dec 2015 at a consideration of GBP25.8mn

Ben Tours Weekendjeweng.nl

LateRooms : was acquired in October 2015 for GBP 9mn and Tempo Holidays subsequently sold in April 2016 at a consideration of GBP20mn

East India Company USA Source: Company, Way2Wealth Research The exit of the online business translates well for this segment as this business was dragging down the profitability of the segment. While the inherited business of the parent company is mostly luxury driven with margins in the range of ~40-45%, the online segment struggled and dragged down segment margins.

 LateRooms Acquisition & the its recent sell-off along with SuperBreak: The company acquired the LateRooms portal from the grandmaster in travel management in the world, TUI in October of 2015 for a consideration of ~GBP9mn.  But recently the company sold both of these two online businesses for a net consideration of ~GBP22mn. They sold 100% of LateRooms (which they acquired few months back at GBP9mn) for GBP20mn, and their existing online business SuperBreak where the own 68.58% equity for GBP9.25mn to Malvern PE. Cox & Kings has reversed acquired 49% stake in Malvern for GBP6.37mn, which entails a net cash inflow of `215crs (~GBP22mn).  Our Perspective on this Deal : This decision is very strategic for the company. Firstly, LateRooms has more than 10 times ( FY16 - ~82mn) the visitor traffic on its website vs. Super Break ( FY16 - ~7mn). The cross selling of Super Break packages on LateRooms portal gives the business ample growth prospects. Secondly, SuperBreak sold ~60% of the business through third party agents. This synergistic opportunity of cross selling will enable more B2C sales hence improve margins going forward. The company has strategically taken 49% stake in the acquiring company and hence ensured it’ll enjoy the synergistic benefits going into the future.A“ have your cake and eat it too” situation wherein we expect meaningful contribution to profitability from this associate to start flowing in from FY18.  We expect this segment to grow between 3 to 4% over the next years (existing business only) with margins improving meaningfully to ~40%+.

Financial Summary Particulars FY13 FY14 FY15 9MFY16

Revenues (in Crs.) 491 534 640 563 Growth( %) 8.8% 19.9% Mix(%) 27.3% 26.8% 28.7% EBIDTA (in Crs.) 198 225 262 286 EBIDTA Margins (%) 40.3% 42.1% 40.9% 50.8%

PGL UK Operational Metrics FY14 FY15 Owned Beds (nos.) 6917 7267 Leased Beds (nos.) 1604 1604 Total Bed Capacity (nos.) 8521 8871 Occupied Bed Nights (nos.) 967116 1112549 No. Of Passengers (nos.) 301213 339662 Average Revenue/ Bed Nights (GBP) 65.7 66.2

Source: Company, Way2Wealth Research

 Nature Of Business: It is an asset based cash generating business segment for the company. It has 25 campuses spread across 1262 acres in UK, France and Australia.  This segment contributes ~26% to the topline. The Education segment provides experiential travel experience and is a niche travel segment targeted at students. There are 2 offerings under this segment: PGL and NST.  PGL: is the larger business targeted at middle school students. Majority of the business is driven by the UK markets where PGL has 40% market share. o Currently it has 10,200 beds to which the company plans to add 500 beds yearly. It is a cash upfront business and is currently working at 33% capacity utilisation which is up from 27% in 2011 when the company was acquired. This business is seasonal and hence cannot work at more than 35-40% capacity utilisation. o PGL’s biggest competitor is the UK Government with a market share of 45% with 193 campuses. However PGL is gaining market share as campuses run by local educational authorities are facing budget cuts. The company, simultaneously, is also targeting state-funded schools to gain market share and enhance capacity utilization at its campuses.  NST: is a similar model which conducts experiential learning tours mainly for secondary school children in the UK. They conduct more than 60 types of trips which may be within the country or international.  In the last quarter the business was negatively impacted due to Paris attacks where the company has 7 campuses. Hence it is expected to clock ~6-7% growth in FY17 and pick up pace in FY18 to ~10% growth.  We believe that the outlook is robust over the medium term. The Department for Education, UK sees a 12% increase in the pupil population over the period 2014-2023.

Financial Summary Particulars FY13 FY14 FY15 9MFY16 Revenues (in Crs.) 270 329 356 291 Growth( %) 17.93% 7.58% Mix(%) 15.03% 16.51% 15.99% EBIDTA (in Crs.) 88 99 124 127 EBIDTA Margins (%) 32.59% 30.09% 34.83% 43.64%

Meininger Operational Metrics FY14 FY15 No. Of Rooms 2079 2127 No. Of Beds 6877 7023 No. Of Bed Nights 1778238 1897258 Bed Occupancy Rate (%) 71.2 75.0 Average Revenue/ Bed (Euro) 18.9 26.2

 Nature Of Business: It is an asset-light model where in the company leases properties and converts them into budget hotels (branding it as a “"poshtels"”). Its USP is to deliver a clean, safe stay in the heart of the city at a great price. The company has 16 Meininger hotels in Europe with ~ 70% concentration in Germany, Austria & Netherlands. The company signs lease rental agreements with landlords for 15-20 year periods. Their main capital investment is only in the soft furnishings at the hotel, including the beds which comes to ~Euro2000 per bed.  Meininger is an exciting budget offering by Cox & Kings in Europe with bed per night rate at as low as Euro15. The average realisation per bed has gone up in the last few years, to Euro30 per night by end of 9MFY16 vs. Euro26 in FY15 and Euro19 in FY14.  The company currently has a capacity of 7,023 beds across Europe & UK with a capacity utilisation of ~78%. The company plans to double its capacity by FY19 to 14,000 beds. The capacity is expected to ramp up by FY19. The expansion entails a capex of `105crs over the next 2 years.  We believe Meininger will play a pivotal role in the renaissance of travel experience in Europe. This segment will be a significant growth driver for the company over the medium to long term. There is a large vacuum in the branded hotel rooms market in Europe. The hybrid hotel sector is attracting investors after seeing the size of the opportunity. The business has also proved to be resilient in the face of the European recession.  Europe is the world’s largest lodging market and we expect the “poshtels" proposition is going to drive healthy demand growth. The company's capacity expansion is coming at a time which will help it garner higher market share.  We expect this segment to clock 15-18% CAGR growth over the next 2-3 years while doubling its EBITDA by FY19.

(` Cr) CONSOLIDATED BALANCE SHEET FY18E FY17E FY16E FY15 FY14 Share Capital 88.3 88.3 84.7 84.7 68.3 Reserves and Surplus 2,976.6 2,671.2 2,448.2 2,462.2 1,686.7 Money Received against Share Warrant - - 56.2 56.2 - Minority Interest 895.0 812.0 900.4 754.1 820.5 Shareholder’s Equity 3,959.8 3,571.4 3,489.4 3,357.2 2,575.5 Long-term borrowings 2,426.7 2,726.7 3,026.7 3,306.5 4,739.5 Other non-current liabilities 37.0 35.0 37.0 45.9 94.5 Non-Current Liabilities 2,463.7 2,761.7 3,063.7 3,352.4 4,833.9 Short-term borrowings 350.0 380.0 400.0 150.0 346.3 Other current liabilities 2,058.0 2,228.0 2,432.0 2,133.5 2,725.0 Current Liabilities 2,408.0 2,608.0 2,832.0 2,283.5 3,071.4 TOTAL LIABILITIES 8,831.6 8,941.1 9,385.1 8,993.1 10,480.8 Fixed assets 4,841.4 4,895.8 5,605.8 5,294.2 6,665.4 Non-current investments 34.0 34.0 30.0 32.4 32.1 Long term loans and advances 25.0 25.0 25.0 14.2 15.1 Non-current assets 4,900.4 4,954.8 5,660.8 5,344.0 6,712.7 Current investments 28.0 28.0 28.0 28.0 28.1 Inventories 31.0 30.0 29.0 23.6 19.9 Trade receivables 1,120.0 1,159.0 1,277.0 1,180.5 1,135.6 Cash and Cash Equivalents 1,629.2 1,555.3 1,272.3 1,405.7 1,378.6 Short-term loans and advances 1,120.0 1,211.0 1,116.0 1,009.6 1,204.2 Other current assets 3.0 3.0 2.0 1.7 1.7 Current assets 3,931.2 3,986.3 3,724.3 3,649.0 3,768.1 TOTAL ASSETS 8,831.6 8,941.1 9,385.1 8,993.1 10,480.8

(` Cr) CONSOLIDATED PROFIT & LOSS FY18E FY17E FY16E FY15 FY14 Net Sales 2,376.9 2,168.6 2,355.1 2,569.1 2,307.6 Other Income 28.0 24.0 20.0 53.5 43.1 Total Income 2,404.9 2,192.6 2,375.1 2,622.6 2,350.7 Employee Expenses 831.9 737.3 847.8 914.0 874.8 Other Expenses 522.9 520.5 612.3 643.6 322.2 Total Expenses 1,354.8 1,257.8 1,460.1 1,557.6 1,197.0 EBIDTA 1,022.1 910.8 894.9 1,011.5 1,110.6 EBIDTA Margins 43.0% 42.0% 38.0% 39.4% 48.1% Depreciation 175.0 150.0 135.0 198.3 171.1 Interest 189.0 210.0 250.0 324.4 323.6 PBT before Exceptional Items 686.1 574.8 529.9 542.3 659.0 Exceptional Items - - (286.5) (308.7) (45.6) PBT after Exceptional 686.1 574.8 243.4 233.7 613.3 Taxes 178.4 149.4 137.8 143.3 164.3 PAT 507.7 425.4 105.6 90.4 449.1 Share in Profit/Loss of Subsidairies 18.0 2.0 (1.5) (1.8) (1.6) Minority Interest 89.4 72.7 110.0 (3.1) 64.3 Reported PAT 436.3 354.7 (5.9) 91.8 383.2 Adj. PAT 436.3 354.7 280.6 400.4 428.8 Reported EPS 24.7 20.1 (0.3) 5.4 28.1 Adj EPS ( Diluted) 24.7 20.1 15.9 22.7 24.3

(` Cr) CONSOLIDATED CASHFLOW STATEMENT FY18E FY17E FY16E FY15 FY14 Net Profit before Tax & Extraordinary Items 686.1 574.8 243.4 233.7 613.3 Adjustment For Depreciation & Amortisation (175.0) (150.0) (844.0) 750.2 171.1 Interest (Net) 189.0 210.0 250.0 280.5 296.1 P/L on Sales of Assets - - (200.0) (0.6) (7.8) Others (588.0) (356.0) 422.5 (247.5) - Total Adjustments (PBT & Extraordinary Items) 112.1 278.8 (128.1) 813.6 343.3 Changes in Working Capital 40.0 20.0 (64.5) (387.4) (18.0) Cash Generated from/(used in) Operations 838.2 873.6 50.8 659.8 938.7 Direct Taxes Paid (178.4) (149.4) (137.8) (161.8) (129.4) Net Cash Flow from Operating Activities 659.8 724.2 (87.0) 498.0 809.3 Capex (200.0) (200.0) 300.0 (181.3) (266.3) Interest Received 44.0 32.0 28.0 43.8 27.5 Dividend Received - - - 0.5 0.1 Canc. of Invest. in Cos Acq. - - 700.0 834.5 6.9 Acquisition of Companies - - - - - Inter Corporate Deposits - - - 214.6 (135.2) Others - - (33.0) (61.0) (625.8) Net Cash Flow from Investing Activities (156.0) (168.0) 995.0 851.1 (992.8) Proceeds from Issue of shares (incl share premium) - 168.6 - 1,056.2 - Proceed from 0ther Long Term Borrowings - - - 2,521.1 1,446.8 Payment of Debt /Dividends and Interest (507.6) (528.6) (730.7) (4,793.9) (1,565.3) Of the Long Tem Borrowings (300.0) (300.0) (463.0) (4,127.9) (1,406.4) Of the short term Borrowings - - - (196.3) 90.0 Dividend Paid (18.6) (18.6) (17.7) (16.0) (15.9) Interest Paid (189.0) (210.0) (250.0) (324.3) (336.5) Others - - - (129.4) 103.5 Net Cash Flow from Financing Activities (430.6) (273.1) (730.7) (1,216.6) (118.6) Cash and Cash Equivalents at Beginning of the year 1,555.3 1,272.2 1,094.9 962.4 1,264.5 Net Inc/(Dec) in Cash and Cash Equivalent 73.2 283.1 177.3 132.5 (302.1) Cash and Cash Equivalents at End of the year 1,628.4 1,555.3 1,272.2 1,094.9 962.4

RATIO ANALYSIS FY18E FY17E FY16E FY15 FY14 Profitability Ratios EBIDTA Margin 43.0% 42.0% 38.0% 39.4% 48.1% EBIT Margin 51.5% 50.0% 44.6% 49.2% 57.4% PAT Margin 18.4% 16.4% -0.2% 3.6% 16.6% ROCE 13.6% 12.4% 11.9% 12.9% 13.3% RONW 14.2% 12.9% 10.8% 15.4% 21.8%

Growth Ratio Net Sales 9.6% -7.9% -8.3% 11.3% 27.6% EBIDTA 12.2% 1.8% -11.5% -8.9% 54.7% PAT( Reported) 23.0% -6136.7% -106.4% -76.0% 59.2%

Valuation Ratios PE(X) 7.7 9.5 35.1 6.8 EV/EBIDTA(X) 5.3 6.3 7.0 6.1 6.4 EV/ Net Sales(X) 2.3 2.6 2.7 2.3 3.1 Mcap/Sales 1.4 1.6 1.4 1.3 1.1

Other Ratios Net Debt /Equity 0.4 0.6 0.8 0.8 2.1 Current Ratio 1.6 1.5 1.3 1.6 1.2 Receivable Days 172.0 195.1 197.9 167.7 179.6 Interest Coverage Ratio 3.6 2.7 2.1 1.7 2.0

Analyst Designation Sector Email Telephone

Mahesh Bendre AVP Capital Goods, Auto, Auto Ancillary [email protected] +9122-6146 8937 Jaisheel Garg AVP Power, Power Equipment, Coal Mining [email protected] +9122-6146 8974 Shivani V. Vishwanathan Sr. Research Analyst FMCG, Consumer Durables [email protected] +9122-6663 8956 Vijay Gyanchandani Research Associate [email protected] +9122-6633 8972 Pooja Doshi Intern [email protected] +9122-66638959

Institutional Sales Designation Email Telephone Ramanjaneyulu BV Institutional Head – Sales [email protected] +9122-6146 2913 Vinod Vijay Birla Senior Manager [email protected] +9122-4019 2998 Bhavika Ravasia Senior Manager [email protected] +9122-4019 2995

Institutional Dealing Designation Email Telephone Ajay Prabhudesai Assistant Vice President [email protected] +9122-4027 8930 Mitul Doshi Institutional Sales Trader [email protected] +9122-4027 8932

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