Torrent Power Limited

Transcription

1 Absolute : ADD Torrent Power Limited Relative : Overweight 2QFY18 Update: Estimate ( ), TP ( ), Rating ( ) Spot Coverage 7% ATR in 9 months Steady cash generation to continue; higher demand key to swing in UNOSUGEN/DGEN profits Utilities 2017 Equirus All rights reserved Rating Information Price (Rs) 274 Target Price (Rs) 298 Target Date 31st Mar'19 Target Set On 7 th Nov 17 Implied yrs of growth (DCF) 15 Fair Value (DCF) 242 Fair Value (DDM) 45 Ind Benchmark BSE Power Model Portfolio Position LONG Stock Information Market Cap (Rs Mn) 85,165 Free Float (%) 46.4% 52 Wk H/L (Rs) 242/159 Avg Daily Volume (1yr) 897,710 Avg Daily Value (Rs Mn) Equity Cap (Rs Mn) 4,806 Face Value (Rs) 10 Bloomberg Code TPW IN Ownership Recent 3M 12M Promoters 53.6 % 0.0 % 0.0 % DII 18.4 % 0.3 % 0.3 % FII 6.4 % -0.2 % -0.2 % Public 21.6 % -0.1 % -0.1 % Price % 1M 3M 12M Absolute 25.2 % 36.0 % 53.5 % Vs Industry 22.8 % 38.1 % 37.9 % TATAPOWER 3.0 % 3.8 % 10.2 % CESC -5.5 % 0.7 % 65.1 % Consolidated Quarterly EPS Rs/Share 1Q 2Q 3Q 4Q EPS (16A) EPS (17A) Torrent Power (TPW) surprised positively with rising SUGEN PLFs and an all-round improvement across its Agra, Bhiwandi and renewable portfolios. Management remains optimistic on eventual adoption of the UNOSUGEN PPA by Gujarat Electricity Regulatory Commission (GERC). Rise in demand and gradual shutdown of older plants could lead to part/full revival of the 1.2GW DGEN plant. TPW s focus on renewable expansion and distribution capex would lead to a reduction in stranded gas-based plants/net fixed assets from 37% in FY17A to ~29% by FY20E. On SOTP basis, we arrive at a base case Mar 19 TP of Rs 298 (36%/40%/17% contribution from license area/power generation/ input based distribution) vs. a Mar 18 TP of Rs 243 earlier. However, further re-rating would be contingent upon resolution of UNOSUGEN and/or DGEN issues, and inorganic acquisitions. Revise to ADD (from LONG). Q2 benefits from ASG recoveries, rising SUGEN PLFs and better Agra/Bhiwandi/ renewable portfolios: The ASG circle continued to manage additional recoveries as per the mutli-year tariff (MYT) order. SUGEN operated at 71% PLFs and also sold 54 MUs in the exchange. Bhiwandi/Agra delivered a better performance with lower AT&C losses of 20%/19.5% vs. 23%/27% yoy. A higher renewable capacity base also contributed to the higher profit pool. Renewables, distribution franchisee and opportunistic generation acquisition - key cash deployment areas: TPW is set to generate Rs 18bn-20bn of cash in FY18E, and is looking to deploy this cash across renewables, distribution franchisee and in an opportunistic acquisition in the generation space. We are skeptical of renewable opportunities amidst the shift to competitive bidding in wind, and aggression in the solar space. We remain hopeful of TPW acquiring a stressed asset at lucrative valuations amidst pressure on lenders and promoters to resolve the issue. UNOSUGEN, DGEN - keys to a profit swing: We expect clarity on GERC s adoption of UNOSUGEN as a firm source of supply for Ahmedabad and Surat license areas by Mar 18E. DGEN could ramp up with rising base load demand and a growing base of renewables. We have factored 0%/35%/57% PLFs for both plants from FY18E/FY19E/FY20E. We expect losses related to these plants to swing from -Rs 6.9bn in FY18E to -Rs 2.5bn in FY19E, and to a profit of Rs. 1.9bn in FY20E. Valuation & view: TPW is trading at 1.8x FY18E P/B with 12%/11% RoEs in FY18E/FY19E, with a potential to generate >18% RoEs if UNOSUGEN and DGEN recover costs. Key risks could be reversal of LNG prices and low demand growth; key triggers would be govt. support for gas-based plants, GERC approval of UNOSUGEN tariffs, opportunistic acquisitions, scale-up at Dahej SEZ and addition of distribution franchisees. Revised Estimates % Change in Estimates FY18E FY19E FY18E FY19E Sales 104, , % -8.6% EBITDA 30,200 30, % -14.8% EBIT 19,274 19, % -19.2% Recurrin g PAT 3,911 8, % -21.0% EPS % -21.0% Consolidated Financials Rs. Mn YE Mar FY17A FY18E FY19E FY20E Sales 100, , , ,098 EBITDA 24,603 30,200 30,752 38,651 Depreciation 10,059 10,926 11,377 11,953 Interest Expense 10,580 10,301 10,682 11,138 Other Income 1,909 2,006 2,117 2,236 Reported PAT 4,234 8,635 8,627 14,286 Recurring PAT 3,013 3,911 8,250 13,804 Total Equity 68,921 74,966 81,004 91,005 Gross Debt 113, , , ,237 Cash 9,336 8,491 17,207 28,772 Rs Per Share FY17A FY18E FY19E FY20E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 6 % 12 % 11 % 17 % Core ROIC (%) 9 % 11 % 11 % 12 % EBITDA Margin (%) 24 % 29 % 25 % 27 % Net Margin (%) 3 % 4 % 7 % 10 % November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 1 of 14 Before reading this report, you must refer to the disclaimer on the last page

2 Quarterly performance, consolidated % Change of 2QFY18 over 2QFY18 1QFY18 2QFY17 1QFY18 2QFY17 Net Sales 29,151 30,590 26,776-5% 9% Comments Cost of Power Purchased 8,968 10,117 9,234-11% -3% Fuel Cost 7,946 8,435 7,329-6% 8% Employee Cost 1,158 1,154 1,069 0% 8% Other Expenditure 2,703 2,933 2,565-8% 5% Total Expenditures 20,774 22,638 20,197-8% 3% EBITDA 8,377 7,952 6,579 5% 27% Depreciation 2,801 2,777 2,410 1% 16% EBIT 5,576 5,175 4,169 8% 34% Interest 2,131 2,101 2,643 1% -19% Other Income % 73% PBT 4,295 3,429 2,018 25% 113% Tax 1,079 1, % 75% PAT before MI & Associates 3,217 2,032 1,402 58% 129% Minority Interest Profit from Assoc Recurring PAT 3,217 2,032 1,402 58% 129% Extraordinaries Reported PAT 3,261 2,013 1,339 62% 143% EPS (Rs) % 140% EBITDA Margin 28.7% 26.0% 24.6% 274 bps 417 bps EBIT Margin 19% 17% 16% 221 bps 356 bps PBT Margin 15% 11% 8% 352 bps 720 bps PAT Margin 11% 7% 5% 460 bps 618 bps Tax Rate 25% 41% 31% bps -544 bps November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 2 of 9

3 Valuation Snapshot Exhibit 1: Scenario Analysis: Power generation business the main swing factor at current levels, License area distribution remains core part of the business Segment Basis Valuation Rs./Share Remarks License Area Distribution 51, Ahmedabad, Surat and Gandhinagar P/B to RoE 51, Valued regulated equity of Rs 26.3bn at a P/B multiple of 1.86x based on consistent RoE of 18%+, cost of equity of 12% and growth of 5% Input based Franchise 23, Bhiwandi P/E 12, Expect gradual reduction in AT&C losses; valuing at 8x FY18 P/E now Agra P/E 11, Profitability to rise with further reduction in AT&C losses; considering valuation at 10x FY18E P/E now Power Generation 56, SUGEN P/B to RoE 25, Valued invested equity of Rs 9bn at a P/B multiple of 2.9x based on consistent RoEs of ~25%+, cost of equity of 12% and growth of 5% UNOSUGEN Distress 5, Considered 0.5x P/B given possibility of adoption by GERC DGEN Distress 8, Considered 0.0x P/B given low likelihood of near-term resolution but medium-term potential with higher demand Renewables P/B to RoE 17, MW of existing planned renewable capacities + further 360MW of projects expected by FY20E to cater to rising RPO requirements; expect 16%+ Equity IRR from these operations. Equity invested valued at 1.2x P/B Others 10, Torrent Power Grid P/B 1,800 4 Low downside risk to these valuations; steady annuity business Torrent Dahej P/E 1, x FY18E P/E of Torrent Energy Operations related to power distribution in Dahej SEZ Cash 7, Multiple of 1 to the cash and adjusted FY18E security deposits of Rs 10bn Bear Case Scenario [A] 97, Based on Rs 40bn debt write-offs related to UNOSUGEN and DGEN Base Case Scenario [B] 142, Based on 0.5x P/B for UNOSUGEN and 0x P/B for DGEN Bull Case Scenario [C] 162, Based on 1.0x P/B for UNOSUGEN and DGEN Source: Equirus Securities November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 3 of 9

4 Company Snapshot How we differ from Consensus EPS Sales PAT - Equirus Consensus % Diff Comment FY17E 8.1 There is not much consensus estimate FY18E 17.2 available on the stock FY17E 104,233 FY18E 121,319 FY17E 4,234 FY18E 4,234 Our Key Investment arguments: Capital allocation to distribution and renewables on the rise+ NITI AAYOG support to gas based plants possible + Bhiwandi renewal and Agra improvements support core EPS + Outside chance of UNOSUGEN adoption by GERC Key Parameters Profitability Analysis FY17A FY18E FY19E FY20E License Area Distribution 4,298 7,833 3,582 3,757 Generation -3,326-2,873 1,576 6,488 Distribution Franchise 1,860 2,779 3,294 3,690 Others 1, Total 4,066 8,346 8,250 13,804 Risk to Our View Reversal in LNG prices and long-term non-availability of gas Key Triggers Further conviction in fuel security Sensitivity to Key Variables % Change % Impact on EPS PLF -5 % -8.2% Tariff -5 % -34.3% Fuel Costs 5 % -7.4 DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 6.8 % % 2.0 % 59.1 % - FY18E FY19E FY20-22E FY23-27E FY27-31E Sales Growth 4 % 16 % 2 % 4 % 6 % NOPAT Margin 19 % 17 % 18 % 18 % 18 % IC Turnover RoIC 10.9 % 10.7 % 12.7 % 15.9 % 20.1 % Years of strong growth Valuation as on date (Rs) Valuation as of Mar' Based on DCF, assuming 15 years of 2% CAGR growth and 15% average ROIC, we derive our current fair value of Rs 232 and a 31 Mar 19 fair value of Rs 242. Company Description: Torrent Power is a power utility with a total of 3.67 GW power generation assets. This comprises 2.73 GW gas based plants MW coal based AMGEN +516 MW renewables. It is the license area distributor for Ahmedabad, Surat, Gandhinagar, and Dahej circles. It is also an input based distribution franchisee for Bhiwandi, Agra. It also has 3 major transmission lines comprising 1) 249 km 400 kv line from SUGEN to Ahmedabad, 2) multiple 220 kv lines from SUGEN to Surat and 3) 400 kv double circuit Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E Torrent Power Long , st Mar' % 12 % 11 % 2.0 % 1.3 % TATAPOWER NR ,631 NA NA % 4 % 8 % 1.6 % 1.3 % CESC NR ,536 NA NA % 7 % 6 % 1.0 % 0.7 % line from DGEN to Navsari. November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 4 of 9

5 Mar/07 Sep/07 Mar/08 Sep/08 Mar/09 Sep/09 Mar/10 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Mar/18 Sep/18 Mar/19 Mar/07 Sep/07 Mar/08 Sep/08 Mar/09 Sep/09 Mar/10 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Mar/18 Sep/18 Mar/19 Consolidated Financials Torrent Power Absolute ADD Relative Overweight 7% ATR in 09 months P&L (Rs Mn) FY17A FY18E FY19E FY20E Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E Revenue 100, , , ,098 Equity Capital 4,806 4,806 4,806 4,806 PBT 5,873 10,980 10,811 17,796 Op. Expenditure 75,933 74,033 90, ,447 Reserve 64,115 70,160 76,198 86,198 Depreciation 10,059 10,926 11,377 11,953 EBITDA 24,603 30,200 30,752 38,651 Networth 68,921 74,966 81,004 91,005 Others Depreciation 10,059 10,926 11,377 11,953 Long Term Debt 82,700 85,398 90,038 88,754 Taxes Paid -1,576-2,345-2,184-3,510 EBIT 14,544 19,274 19,376 26,698 Def Tax Liability 31,127 31,744 32,106 32,483 Change in WC 4,641-6, Interest Expense 10,580 10,301 10,682 11,138 Minority Interest Operating C/F 18,998 12,718 19,678 25,852 Other Income 1,909 2,006 2,117 2,236 Account Payables 9,054 9,459 9,421 10,939 Capex -17,938-3,064-1,993 2,868 PBT 5,873 10,980 10,811 17,796 Other Curr Liabi 15,808 16,598 17,428 18,300 Change in Invest 3, Tax 1,576 2,345 2,184 3,510 Total Liabilities & Equity 207, , , ,480 Others PAT bef. MI & Assoc. 4,298 8,635 8,627 14,286 Net Fixed Assets 168, , , ,136 Investing C/F -24,919-13,996-13,377-9,093 Minority Interest Capital WIP 3,295 3,808 3,335 2,383 Change in Debt 2,495 3,314 5, Profit from Assoc Others 6,178 6,185 6,192 6,200 Change in Equity Recurring PAT 3,244 3,375 10,444 16,726 Inventory 3,694 3,427 3,989 4,705 Others 2,574 5,756 6,039 10,000 Extraordinaires 990 2, Account Receivables 9,751 8,567 9,971 11,761 Financing C/F 5,069 9,070 11,041 9,093 Reported PAT 4,234 6,219 10,444 16,726 Other Current Assets 7,612 17,102 16,253 16,524 Net change in cash -3, ,715 11,565 FDEPS (Rs) Cash 9,336 8,491 17,207 28,772 RoE (%) 6 % 12 % 11 % 17 % DPS (Rs) Total Assets 207, , , ,480 RoIC (%) 7 % 9 % 9 % 11 % CEPS (Rs) Non-cash Working Capital -3,805 3,038 3,364 3,751 Core RoIC (%) 9 % 11 % 11 % 12 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 61 % 20 % 20 % 20 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 24 % 29 % 25 % 27 % FA Turnover P/B PATM (%) 4 % 8 % 7 % 10 % Net D/E P/FCFF Tax Rate (%) 27 % 21 % 20 % 20 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) -14 % 4 % 16 % 18 % Capital Employed/Equity EV/Sales FDEPS Growth (%) -53 % 104 % 0 % 66 % Dividend Yield (%) 2.0 % 1.3 % 1.3 % 2.2 % TTM P/E vs. 2 yr forward EPS growth TTM P/B vs. 2 yr forward RoE EPS Growth RoE % % 200% 25x 4.0x % 20x x 20% % 15x x % x 10% 1.6x 200 0% % 5x 0.8x % - 0% November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 5 of 9

6 Historical Consolidated Financials Torrent Power Absolute ADD Relative Overweight 7% ATR in 09 months P&L (Rs Mn) FY13A FY14A FY15A FY17A Balance Sheet (Rs Mn) FY13A FY14A FY15A FY16A Cash Flow (Rs Mn) FY13A FY14A FY15A FY16A Revenue 82,210 86, , ,536 Equity Capital 4,724 4,724 4,724 4,806 PBT 6,295 2,749 7,634 12,970 Op. Expenditure 68,703 73,979 83,161 75,933 Reserve 56,306 57,329 60,832 59,898 Depreciation 4,272 5,544 7,205 9,157 EBITDA 13,508 12,833 21,064 24,603 Networth 61,030 62,053 65,557 64,705 Others Depreciation 4,272 5,544 7,205 10,059 Long Term Debt 80,501 94,634 93,547 81,984 Taxes Paid EBIT 9,236 7,289 13,859 14,544 Def Tax Liability 13,858 18,642 20,161 29,349 Change in WC 17,982-23, Interest Expense 4,376 7,046 9,623 10,580 Minority Interest Operating C/F 25,020-16,941 10,188 15,652 Other Income 1,435 2,506 3,398 1,909 Account Payables 12,406 11,799 11,361 9,520 Capex PBT 6,295 2,749 7,634 5,873 Other Curr Liabi 4,673 3,832 5,392 10,295 Change in Invest Tax 2,426 1,670 3,777 1,576 Total Liabilities & Equity 172, , , ,153 Others PAT bef. MI & Assoc. 3,869 1,079 3,857 4,298 Net Fixed Assets 77, , , ,289 Investing C/F -24,599-6,729-30,519-16,943 Minority Interest Capital WIP 66,554 48,313 1,592 2,102 Change in Debt Profit from Assoc Others ,255 Change in Equity Recurring PAT 3,871 1,053 3,597 4,234 Inventory 2,446 2,902 2,597 4,202 Others Extraordinaires Account Receivables 7,561 8,036 8,924 10,570 Financing C/F 8,644 33,067 19,784-9,585 Reported PAT 3,871 1,053 3,597 4,234 Other Current Assets 3,759 5,907 6,211 5,879 Net change in cash 9,064 9, ,876 EPS (Rs) Cash 14,800 24,218 23,732 12,856 RoE (%) 7 % 2 % 6 % 14 % DPS (Rs) Total Assets 172, , , ,153 RoIC (%) 6 % 3 % 5 % 9 % CEPS (Rs) Non-cash Working Capital -3,313 1, Core RoIC (%) 6 % 5 % 8 % 13 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 29 % 28 % 24 % 29 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 16 % 15 % 20 % 26 % FA Turnover P/B PATM (%) 5 % 1 % 3 % 8 % Net D/E P/FCFF Tax Rate (%) 39 % 61 % 49 % 30 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 3 % 6 % 20 % 12 % Capital Employed/Equity EV/Sales FDEPS growth (%) -69 % -73 % 242 % 149 % Dividend Yield (%) 0.9 % 0.2 % 0.7 % 2.0 % November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 6 of 9

7 Equirus Securities Research Analysts Sector/Industry Equity Sales Abhishek Shindadkar IT Services Vishad Turakhia Ashutosh Tiwari Auto, Metals & Mining Subham Sinha Depesh Kashyap Mid-Caps Sweta Sheth Devam Modi Power & Infrastructure Viral Desai Dhaval Dama FMCG, Mid-Caps Dealing Room Manoj Gori Consumer Durables Ashish Shah Maulik Patel Oil and Gas Ilesh Savla Praful Bohra Pharmaceuticals Manoj Kejriwal Rohan Mandora Banking & Financial Services Dharmesh Mehta Associates Sandip Amrutiya Ankit Choudhary Compliance Officer Bharat Celly Jay Soni Harshit Patel Corporate Communications Meet Chande Mahdokht Bharda Parva Soni Pranav Mehta Ronak Soni Samkit Shah Shreepal Doshi Varun Baxi Vikas Jain Rating & Coverage Definitions: Absolute Rating LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies ADD: ATR >= 5% but less than Ke over investment horizon REDUCE: ATR >= negative 10% but <5% over investment horizon SHORT: ATR < negative 10% over investment horizon Relative Rating OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon BENCHMARK: likely to perform in line with the benchmark UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion. Registered Office: Equirus Securities Private Limited Unit No. 1201, 12th Floor, C Wing, Marathon Futurex, N M Joshi Marg, Lower Parel, Mumbai Tel. No: +91 (0) Fax No: +91- (0) Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad Gujarat Tel. No: +91 (0) Fax No: +91 (0) November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 7 of 9

8 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited Analyst Certification I, Devam Modi / Meet Chande, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Disclosures Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital Market (Reg. No. INB ), Futures & Options Segment (Reg. No.INF ) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB ) of Bombay Stock Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH ), as a Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg. No. INP ) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No. IN-DP ). There are no disciplinary actions taken by any regulatory authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to merchant banking services, private equity, mergers & acquisitions and structured finance. As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or Associates 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 ESPL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ESPL has not been engaged in market making activity for the subject company. The Research Analyst engaged in preparation of this Report:- (a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company. 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Thus, investors should be aware that the firm may have conflict of interest. A graph of daily closing prices of securities is available at and (Choose a company from the list on the browser and select the three years period in the price chart). November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 8 of 9

9 Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Research Analyst or Relatives financial interest No Research Analyst or Relatives actual/beneficial ownership of 1% or more No Research Analyst or Relatives material conflict of interest No Disclaimer for U.S. Persons ESPL/its affiliates are 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 Equirus 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 Equirus, including the products and services described herein are not available to or intended for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules. November 7, 2017 Analyst: Devam Modi devam@equirus.com ( ) Page 9 of 9