CMP: INR1,029 TP: INR1,359(+32%) Refinery upgrades to boost GRMs, throughputs by 65%

Transcription

1 BSE SENSEX S&P CNX 27,127 8,323 Motilal Oswal values your support in the Asiamoney Brokers Poll 2016 for India Research, Sales and Trading team. We request your ballot. Stock Info Bloomberg HPCL IN Equity Shares (m) Week Range (INR) 1050 / 636 1, 6, 12 Rel. Per (%) 13/7/27 M.Cap. (INR b) M.Cap. (USD b) M Avg Val (INR M) 1184 Free float (%) 48.9 Financials Snapshot (INR b) Y/E Mar E 2018E Net Sales 1, , ,926.9 EBITDA PAT EPS (INR) Gr. (%) BV/Sh (INR) RoE (%) RoCE (%) P/E (x) P/BV (x) Shareholding pattern (%) Mar-16 Dec-15 Mar-15 Promoter DII FII Others FII Includes depository receipts 11 July 2016 Update Sector: Oil & Gas HPCL CMP: INR1,029 TP: INR1,359(+32%) Buy Refinery upgrades to boost GRMs, throughputs by 65% Focused on increasing margins; earnings visibility high; valuations attractive We attended the HPCL analyst meet. Following are the key takeaways: Brownfield expansion to up refinery capacity by ~65%; expect stable GRM HPCL plans capex of INR558b over FY16-21, which includes ~INR257b for refineries, ~INR262b for marketing, and the remaining for renewables, R&D and JV projects. For the next two years, capex will be funded through internal accruals; could take loan in later years as refinery capex will be back-ended. Refinery capex of INR257b includes INR42b for Euro VI upgradation and brownfield expansions (a) at Vizag from 8.3 to 15mmt (~INR200b, up from INR170b) along with upgradation, (b) at Mumbai from 6.5 to 9.5mmt (INR42b) and (c) JV Bhatinda refinery from 9 to 11.3mt (INR24b) Expects overall GRM to improve by ~USD1.5-2/bbl: (a) Vizag to complete by April 2020 and expand GRM by USD4-5/bbl, (b) Mumbai to complete in three years and expand GRM by USD1-1.5/bbl and (c) Bhatinda by Jun-17. Expects GRM to remain stable in the medium term (FY16 GRM: USD6.7/bbl), at USD5-7/bbl helped by higher distillate yields. Bhatinda refinery clocking double-digit GRM; to be profitable in FY17 Bhatinda refinery (HPCL stake 49%) is expected to continue posting profits in FY17 (FY16 PAT was ~INR18b) even at the current petroleum product cracks, and expects GRM to be in double-digits. Marketing capex increased significantly; margins above regulated era Updated capex plans place high emphasis on marketing; five-year marketing capex significantly high at INR262b (~47% of total capex). Management announced plans to set up 3 new LPG plants, 3 POL depots and Lube Blending Plants at Mumbai and Kasna (UP). Mktg. margins remain strong at INR1.7/1.6/ltr for petrol/diesel (v/s regulated era of INR1.4/ltr). Volumes remain strong with FY16 POL growth at 9.3%. Already started dynamic pricing; Marketing, lubes give earnings stability Dynamic pricing (based on location, demand and competition) is already underway in some test markets, and could be rolled out on a pan-india basis. Dynamic/differential pricing will help the company to sweat the marketing assets better and improve profitability further. While refining will continue to be cyclical, marketing (including pipelines) gives earnings stability and lubes business also contributes meaningfully (10-20%). Valuation and view Of the three OMCs, HPCL s earnings are more sensitive to a change in the marketing margin, given its higher ratio of marketing-to-refining volume. On SA basis, HPCL trades at 7.3x FY18E EPS of INR140.6 and 1.4.x FY18E BV. On a consol. basis, HPCL trades at 6.1x FY18 EPS of INR169. We value HPCL at 5.5x for refining and 8x for marketing to arrive at a fair value of INR1,359, implying a 32% upside. Dividend yield is attractive at ~3-4%. Maintain Buy. Harshad Borawake (HarshadBorawake@MotilalOswal.com); Rajat Agarwal (Rajat.Agarwal@MotilalOswal.com); Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on Bloomberg, Thomson Reuters, Factset and S&P Capital.

2 Exhibit 1: FY15-20 capex plans of INR450b were focused towards Refining and JV projects JV projects 31% Renewables & RD 2% Marketing 20% Refining 47% Exhibit 2: FY16-21 capex plans of ~INR560b places increased focus on marketing projects Marketing 47% Renewables & RD 3% JV projects 4% Refining 46% Recent addition of secondary processing units and improvement in crude mix have added USD1.2/bbl to Mumbai refinery GRM and single point mooring system has added USD0.5/bbl to Vizag GRM. Exhibit 3: Summary of Profitability improvement measures by HPCL Initiative Impact Area Optimized MS block operations Increased MS production in lieu of Naphtha LOUP project at Mumbai refinery Increased production of valued added lubricants Robust LP model Optimizing Crude selection FCC with Cat Cooler at Mumbai refinery Conversion of Low value Fuel Oil to value added products Encon measures Reduced fuel consumption CDU II Revamp at Mumbai refinery Increased crude processing Flare gas recovery systems Reduced hydrocarbon losses Power purchrase through open access Reduced operating expenditure Exhibit 4: BS IV and BS VI coverage plans on track 11 July

3 Exhibit 5: High volume highway location contributes to 51% of HPCL s retail outlet locations HPCL s market share amongst PSUs is gradually increasing in marketing and retail aspects; at 25.8% in Mar 16 from 25.2% in Dec 15 Lubricants market share has increased by 2.6% in FY16 Exhibit 6: Well prepared for private competition with Loyalty programs and fleet management solutions for auto fuel customers Already automated 2,731 outlets 11 July

4 Exhibit 7: High margin automotive segment contributes 32% to lube volumes sales; has diversified OEM partnerships with automotives and industrial players Exhibit 8: Brent prices on a recovery post declining to their monthly lowest since Feb-04 in Feb WTI Brent (USD/bbl) 0 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Source: Bloomberg, MOSL 11 July

5 Exhibit 9: HPCL GRM trend 4QFY16 GRM was equivalent to benchmark Singapore GRM; GRM supported by benign crude prices (In USD/bbl) HPCL GRM Singapore GRM (2.1) (1.0) 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 Exhibit 10: Industry level gross under recoveries have come down sharply; LPG shifted to DBTL (INRb) Gross under recoveries: HPCL + BPCL + IOCL (INRb) Petrol Diesel PDS Kerosene Domestic LPG Total (7) Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY12 FY13 FY14 FY15 FY16 Source: PPAC, Industry, MoPNG Exhibit 11: Petrol and Diesel are expected to grow at 8.4%/6.9% CAGR till FY22 (mmt) MS HSD FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Source: PPAC, MOSL 11 July

6 Other key takeaways Management expects GRMs to be range bound within USD5-7/bbl in FY17 (excluding GRM movements). FY17 capex plans stand at INR68.6b (five year capex at INR558b). This includes INR14b for refining, INR46b for marketing, INR2.9b for renewables, INR4.8b for Joint ventures (refining, gas including LNG and E&P) and remaining for R&D. Capex financing: Management guided that for the next 1-2 years, the capex plans of ~INR550b will funded through internal accruals and eventually borrowings could be increased Mega refinery plans: Currently, the mega refinery is being planned in two phases with Phase I capacity of 40MMT and remaining 20MMT capacity in Phase II. Management highlighted that land acquisition remains the biggest challenge for the refinery and OMCs are currently scouting for locations. Management reiterated that Rajasthan refinery plans haven t been shelved and are under review. Management also highlighted that its subsidiary Prize Petroleum is currently screening E&P opportunities. DBT in Kerosene is expected to lead to reduction of Kerosene subsidies, as usually DBT leads to reduction in bogus accounts. HPCL has upgraded its lubes production capacity to produce better grade Group III base oils. Management re-emphasized focus on R&D as a long-term business driver. Post six years of formulation, HPCL started supply of winter diesel to the Indian army. Five years R&D spend are planned at ~INR5b. The PSU pay revision is currently expected in December 2016, and post that the employee expenses could increase FII limit currently stands at 24% and will be increased shortly to 40%. HPCL s standalone debt stands at INR212b (vs INR203b in March-15) and subsidy receivables at INR40b. Valuation and view Widening Moat: OMCs economic moat is widening, led by (1) scope for meaningful increase in marketing margins and profitability, (2) slower ramp-up by private marketers, (3) high volume growth, aided by expected GDP boost, and (4) improving balance sheet with increasing cash flow. OMCs profit normalization was delayed for a decade: OMC s deregulation and in turn their profit normalization had been derailed for a decade after an earlier brief de-regulation period in However, this time around we believe government will stay put with its deregulation decision given the hard lessons of financial stress of last decade. Increased excise duties offer some flexibility to moderate prices in event of spike in oil prices, but huge and growing India consumption volumes will make it practically impossible to again revisit the price control model. Marketing division to drive profitability: Post de-regulation, we expect marketing division profitability to grow rapidly, hence should also command a higher valuation. An INR0.5/ltr increase in petrol and diesel marketing margins increases HPCL s FY18E EPS by 27%. We model gross per liter diesel margin of 1.6/2.0 in FY17/FY July

7 Pure play marketing companies trade at higher valuations: Pure play petroleum marketing companies - US based CST Brands (CST US; M Cap: USD2.4b) and New Zealand based Z Energy (ZEL NZ; M Cap: USD1.5b) trade (1 year forward basis) at ~10x EV/EBITDA. These valuations (in-line with the underlying business dynamics) are more similar to consumer business than refining or oil & gas. Of the three OMCs, HPCL's earnings are more sensitive to a change in the marketing margin-given its higher ratio of marketing-to-refining volume. Hence, it would be the largest beneficiary of higher auto fuel margins. On SA basis, HPCL trades at 7.3x FY18E EPS of INR140.6 and 1.4.x FY18E BV. We value HPCL at 5.5x for refining and 8x for marketing to arrive at a fair value of INR1,359 implying a 32% upside. Dividend yield is attractive at ~3-4%. Maintain Buy. HPCL had a payout of ~30% of standalone profits last year and the same is likely to continue. Maintain Buy. Exhibit 12: HPCL Key Assumptions FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Exchange Rate (INR/USD) Brent Crude (USD/bbl) Market Sales (MMT) YoY (%) 3.8% 3.5% 2.9% 9.1% 2.8% 2.1% 3.2% 7.1% 6.0% 5.5% GRM (USD/bbl) HPCL Blended GRM Reuters Singapore GRM Prem/(disc) (0.58) (0.58) (0.70) (2.96) (5.62) (2.19) (3.52) (0.82) (0.75) (1.00) Refining capacity utilization (%) 118% 116% 106% 99% 98% 95% 101% 106% 109% 109% Refinery throughput (mmt) Total Refinery throughput (MMT) Under recoveries Sharing (INRb) Net sharing (0.0) Net sharing (%) 0% 12% 9% 0% 1% 1% 3% 0% 0% 0% 11 July

8 Story in charts Exhibit 13: HPCL s GRMs have underperformed Singapore GRM (USD/bbl) 3.6 Prem/(Disc) to Singapore Singapore GRM (0.6) (0.7) 5.2 (3.0) 2.1 (5.6) (2.2) (3.5) HPCL Blended GRM (0.8) (0.8) (1.0) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Exhibit 14: While refining capacity has been largely flat, marketing sales have shown steady increase Marketing Sales (mmt) Refinery Throughput (mmt) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Exhibit 15: HPCL FY16 EBITDA and PAT boosted by GRM and marketing margins; despite inventory loss EBITDA (INRb) PAT (INRb) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Exhibit 16: Expect D/E ratio to decline with increasing profitability (x) D/E Ratio FY10 FY12 FY14 FY16 FY18E Exhibit 17: Diesel deregulation to reduce working capital leading to lower interest costs 9 9 Total Debt (INRb) Interest Cost (INRb) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Exhibit 18: HPCL: 1 Year Forward P/E Chart Currently trading at 12% discount to its historical 10 year average Jun-06 Sep-07 PE (x) Peak(x) Avg(x) Median(x) Min(x) 24.6 Dec Mar Jun Sep-12 Dec-13 Mar Jun July

9 Financials and Valuations Income Statement (INR Million) Y/E Mar E 2018E Net Sales 1,309,342 1,781,392 2,065,293 2,231,454 2,063,804 1,792,811 1,825,129 1,926,920 Change (%) EBITDA 33,088 34,082 39,424 52,081 54,176 76,168 85,916 94,929 EBITDA Margin (%) Depreciation 14,070 17,129 19,315 21,884 19,712 26,668 28,925 31,525 EBIT 19,018 16,953 20,109 30,197 34,465 49,500 56,992 63,404 Interest 8,840 16,977 18,377 15,046 7,066 6,401 5,536 5,320 Other Income 13,435 12,222 12,300 11,004 14,142 14,282 14,069 13,045 Extraordinary items PBT 23,461 12,192 14,746 26,155 41,541 57,381 65,525 71,129 Tax 8,071 3,077 5,699 8,817 14,209 18,753 21,623 23,473 Tax Rate (%) Min. Int. & Assoc. Share Reported PAT 15,390 9,115 9,047 17,338 27,333 38,627 43,902 47,657 Adjusted PAT 15,390 9,115 9,047 17,338 27,333 38,627 43,902 47,657 Change (%) Balance Sheet (INR Million) Y/E Mar E 2018E Share Capital 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390 Reserves 122, , , , , , , ,022 Net Worth 125, , , , , , , ,412 Debt 250, , , , , , , ,000 Deferred Tax 31,956 30,853 35,984 39,084 41,036 48,105 54,657 61,770 Total Capital Employed 407, , , , , , , ,182 Gross Fixed Assets 296, , , , , , , ,493 Less: Acc Depreciation 110, , , , , , , ,238 Net Fixed Assets 186, , , , , , , ,255 Capital WIP 37,987 44,445 51,729 45,856 34,744 30,000 8,000 58,000 Investments 113, , , , , , , ,694 Current Assets 265, , , , , , , ,486 Inventory 166, , , , , , , ,582 Debtors 26,544 35,652 49,350 54,660 36,031 42,296 43,058 45,459 Cash & Bank 800 2,264 1, ,483 11, Loans & Adv, Others 72, , , ,444 71,796 70,995 63,695 63,695 Curr Liabs & Provns 196, , , , , , , ,253 Curr. Liabilities 178, , , , , , , ,156 Provisions 18,048 19,836 22,995 23,296 29,790 21,568 23,725 26,097 Net Current Assets 69, , ,345 94,930-65,974-85,162-81,324-91,767 Total Assets 407, , , , , , , , July

10 Financials and Valuations Ratios Y/E Mar E 2018E Basic (INR) EPS Cash EPS Book Value DPS Payout (incl. Div. Tax.) Valuation(x) P/E Cash P/E Price / Book Value EV/Sales EV/EBITDA Dividend Yield (%) Profitability Ratios (%) RoE RoCE RoIC Turnover Ratios (%) Asset Turnover (x) Debtors (No. of Days) Leverage Ratios (%) Net Debt/Equity (x) Cash Flow Statement (INR Million) Y/E Mar E 2018E Adjusted EBITDA 33,088 34,082 39,424 52,081 54,176 76,168 85,916 94,929 Non cash opr. exp (inc) 10,913 16,632 14,859 9,322 14,142 14,282 14,069 13,045 (Inc)/Dec in Wkg. Cap. -25,876-27,301-30,945 21, ,486 20,500 6, Tax Paid -5,645-2,715-1,072-3,668-7,622-11,685-15,071-16,360 Other operating activities -2,456-5,407-10,771-1,556-6,772-5,536-6,467-6,437 CF from Op. Activity 10,024 15,291 11,496 77, ,411 93,729 84,600 84,897 (Inc)/Dec in FA & CWIP -46,101-41,359-36,807-41,358-41,762-55,000-52,000-80,000 Free cash flows -36,077-26,068-25,312 35, ,649 38,729 32,600 4,897 (Pur)/Sale of Invt 5,371 6,378-2,404-1,297 4,161 2,468-5,748 0 Others 12,330 3,579 15,383 10,289-3,396 5,536 6,467 6,437 CF from Inv. Activity -28,400-31,401-23,828-32,365-40,997-46,996-51,281-73,563 Inc/(Dec) in Net Worth Inc / (Dec) in Debt 30,408 37,919 37,072-25, ,807-25,336-5,220 0 Interest Paid -8,933-14,836-22,187-17,045-7,647-6,401-5,536-5,320 Divd Paid (incl Tax) & Others -4,731-5,509-3,344-3,367-6,136-13,684-12,573-16,738 CF from Fin. Activity 16,744 17,574 11,540-46, ,590-45,421-23,329-22,058 Inc/(Dec) in Cash -1,631 1, , ,312 9,990-10,723 Add: Opening Balance 2, ,264 1, ,483 11,473 Closing Balance 800 2,264 1, ,483 11, July

11 N O T E S 11 July

12 Disclosures This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company(ies) and/sector(s), if any, covered in the report and may be distributed by it and/or its affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, HPCL invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a some companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may educate investors on investments in such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and interpreting information. Our research professionals are paid on twin parameters of performance & profitability of MOSt. MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing among other things, may give rise to real or potential conflicts of interest. MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set of customers having various objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets. Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. Most and it s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. Most and it s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, SEBI Reg. No. INH There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues Disclosure of Interest Statement HPCL Analyst ownership of the stock No Served as an officer, director or employee No A graph of daily closing prices of securities is available at and Regional Disclosures (outside India) This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions. For U.S. Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. For Hong Kong: This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) SFO. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH ) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to Professional Investors as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors. Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong. For Singapore Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited: Kadambari Balachandran kadambari.balachandran@motilaloswal.com Contact : (+65) / Office Address : 21 (Suite 31),16 Collyer Quay,Singapore Motilal Oswal Securities Ltd Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai Phone: reports@motilaloswal.com 11 July