Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

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1 BUY CMP Target Price SWARAJ ENGINES LTD Result Update: Q3 FY13 Jan 23 rd, 2013 ISIN: INE277A01016 Stock Data Sector Auto Equipment BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg ) 3640 Market Cap ( Rs in mn ) Annual Estimated Results (A*: Actual / E*: Estimated) Years FY12A FY13E FY14E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) 1 Year Comparative Graph SYNOPSIS Swaraj Engines Ltd is primarily engaged in the manufacturing of diesel engines, diesel engines components as well as its spare parts. During the third quarter, Revenue for the quarter rose 5.94% to Rs million from Rs million, when compared with the prior year period Swaraj Engines Ltd is in development of the 50 HP+ engine. The company undertaken an expansion project to increase annual capacity to 75,000 engines in 2 phases while 1st phase of expansion to increase to 60,000 engines per annum. The engine sales volume posted a growth of 17% during the year under review & reached 55,239 units as compared to previous year sale of 47,413 units. Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 12% over 2011 to 2014E respectively. BSE SENSEX SWARAJ ENGINES LTD Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Swaraj Engines Ltd Bosch UCAL Fuel Systems Lumax Auto Technologies Ltd

2 Investment Highlights Results updates- Q3 FY13 Swaraj Engines Ltd is in business of supplying engines to swaraj division of Mahindra & Mahindra Ltd & supply of hi-tech engine components in India, reported its financial results for the quarter ended 31 st Dec, The Third quarter witnesses a healthy increase in overall sales of the company. Months Dec-12 Dec-11 % Change Net Sales % PAT % EPS % EBITDA % The company s net profit decline to Rs million against Rs million in the corresponding quarter ending of previous year, an decrease of 2.27%. Revenue for the quarter rose 5.94% to Rs million from Rs million, when compared with the prior year period. Reported earnings per share of the company stood at Rs a share during the quarter, registering 2.27% decrease over previous year period. Profit before interest, depreciation and tax is Rs millions as against Rs millions in the corresponding period of the previous year. Expenditure : During the quarter Total Expenditure rose by 8 per cent mainly on account of Increase in Depreciation along with consideration of Employee Benefit and other expenses. Total expenditure in Q3 FY13 was at million as against Rs million in Q3 FY12. Other Expenses Rs against Rs millions in the corresponding period of the previous year. Employee Benefit Expenses Rs million and Depreciation is Rs 21.2 million in Q3 FY13 is the primarily attributable to growth of expenditure. Future Plan Swaraj Engines Ltd is in development of 50 HP+ engine.

3 Company Profile Swaraj Engines (SEL) was started in 1986 in technical and financial collaboration with Kirloskar Oil Engines (KOEL) for manufacture of Diesel Engines. SEL is a joint venture between erstwhile Punjab Tractors (PTL), which has merged with Mahindra & Mahindra (M&M) and Kirloskar Oil Engines. (KOEL) which is originally set up to manufacture engines for PTL, in recent years and also supplier of hi-tech engine components to Swaraj Mazda (SML). It started commercial operations in the year , has supplied around 3,18,000 engines for fitment into Swaraj tractors. The engine business currently constitutes some 93% of the company s product revenue. The balance 7% represents value of hitech engine components being supplied to SML for assembly of commercial vehicle engines. SEL supplies 5 types of Engines from 20HP range to 50HP range to PTL. It also manufactures high-tech engine components for Swaraj Mazda. As on date more than 200,000 Swaraj Tractors fitted with engines produced at in the field. Research & Development Development of the new 23 HP single cylinder engine. Benefits derived from improvement in the fuel efficiency along with expansion of the product range. Products Domestic Swaraj 735 FE New Swaraj 978 FE New Swaraj 855 Swaraj 744 FE Swaraj 939 FE Swaraj 735 FE Swaraj 834 FE Swaraj 724FE Swaraj 722 SUPER FORKLIFT: FD 15 FORKLIFT: FD 20 FORKLIFT: FD 30 EL. FORKLIFT 15. COMBINE Swaraj 733FE

4 Overseas Swaraj 978FE 4WD Swaraj 978FE 2WD Swaraj 8554WD Swaraj 744 FE Swaraj 939FE 4WD Swaraj 939FE 2WD Swaraj 735 FE Swaraj 724 FE Swaraj 722 SUPER FORKLIFT 15 FORKLIFT 20 FORKLIFT 30 EL. FORKLIFT 15 COMBINE Swaraj 733 FE

5 Financial Highlight Balance sheet as at March31 st, 2012 (A*- Actual, E* -Estimations & Rs. In Millions) Particulars March (Rs.in.mn) FY12A FY13E FY14E 1.Shareholder s Funds a) Capital b) Reserves & Surplus Total Net worth Loan Fund a) Deferred Tax liability Total Liabilities (1+2) Fixed Assets a) Gross block b) Depreciation c) Net Block d) Capital Work in Progress Total Fixed Assets Investments Current Assets, Loans & Advances a) Inventories b) Sundry Debtor c) Cash & Bank Balance d) Loans & Advances Total Current Assets Less: Current Liabilities & Provisions a) Liabilities b) Provisions Net Current Assets Total Assets( 1+2+3)

6 Annual Profit & Loss Statement for the period of 2011 to 2014E Value(Rs.in.mn) FY11 FY12 FY13E FY14E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 30 th Jun, 2012 to 31 st Mar, 2013E Value(Rs.in.mn) 30-Jun Sep Dec Mar-13E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

7 Ratio Analysis Particulars FY11 FY12 FY13E FY14E EPS (Rs.) EBITDA Margin (%) 17.49% 18.19% 17.95% 18.02% PBT Margin (%) 17.84% 17.23% 16.40% 16.45% PAT Margin (%) 12.18% 11.77% 11.39% 11.35% P/E Ratio (x) ROE (%) 28.85% 28.36% 25.32% 23.10% ROCE (%) 44.37% 46.10% 43.22% 39.78% EV/EBITDA (x) Book Value (Rs.) P/BV Charts

8 Outlook and Conclusion The company performance for the financial year yet achieving new highs by taking the full advantage of enhanced engine demand from Mahindra & Mahindra Ltd - Swaraj Division for the first time has crossed the 50,000 mark both for production and sale of engines. The timely increase of production capacities coupled with productivity improvement initiatives enabled to achieve the milestone. At the current market price of Rs , the stock P/E ratio is at x FY13E and 9.87 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 12% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 5.90 x for FY13E and 5.39 x for FY14E. Price to Book Value of the stock is expected to be at 2.69 x and 2.28 x respectively for FY13E and FY14E. We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. Industry Overview The Indian auto component industry, which is currently valued at US$ 30 billion, will touch US$ 100 billion by 2020, according to Rajkot-based Ikon Marketing Consultants. The industry is growing at a steady pace of per cent annually. The retail market (generally called as after-sales or after-market) for auto components is valued at Rs 600 crore (US$ million) and is expected to witness a quantum jump on the back of robust domestic demand. An analysis of medium to heavy-duty Hybrid and Electric Commercial Vehicle Market in China and India estimated that the component revenues from India will reach US$ 212 million by 2020, which would account for 11 per cent of the global component market, as per Frost and Sullivan.

9 Market Structure The auto component industry has been growing at a compound annual growth rate (CAGR) of 14.6 per cent during and is expected to be a US$ 113 billion by 2020, as per data provided by Automotive Component Manufacturers Association of India (ACMA). The small and medium enterprise (SME) dominated automotive sector is among the top three sectors attracting heavy online traffic on the site, IndiaMART.com, in terms of the number of buyers who visited from other countries, both developed and developing, as per a report by IndiaMART.com. Asian countries are also key buyers for auto products from India. Among the Indian suppliers registered on IndiaMART.com, the auto component sector features in the top five categories, contributing 11.8 per cent to the whole pie. Product categories such as pumps and pumping equipments took the top slot with 8.1 per cent buy leads posted on them, followed by products such as nuts and bolts in second place and lights and accessories in third position. Polaris Industries, maker of All Terrain Vehicles (ATVs), snowmobiles and motorcycles, is set to give a fillip to the nascent motorsports market with its entry this year. Global Auto Hub Supportive Government policies, positive business environment, availability of reasonably priced talented workforce and stable outlook for the industry have made India a global hub for the international manufacturers to set up their facilities in the country. The auto components manufacturers are also reaping the benefits. Automotive components maker Piolax India, a subsidiary of Piolax of Japan, has inaugurated its first Indian facility at the Sri City multi-product Special Economic Zone (SEZ) in Andhra Pradesh (AP) Bosch Automotive Aftermarkets has launched 100 service centres in North India. These centres will provide service to multi-brand vehicles across different segments of unit repair (fuel injection systems, auto electrical units) and entire vehicular repair The joint venture (JV) between global gearing expert David Brown and Bharat Forge, manufacturer of automotive and non-automotive components, David Brown-Bharat Forge, has opened its first industrial gearbox service and assembly facility in Hosur, Tamil Nadu Panasonic Carbon India Co Ltd intends to enter the lead acid battery market for the industrial and automotive sector. The Rs 13,000 crore (US$ 2.41 billion) lead acid battery market has been growing in double digits, on back of the rapidly growing automobile sector. While, industrial batteries is a Rs 4,800 crore (US$ million) market and automotive batteries constitute a Rs 8,200 crore (US$ 1.52 billion) market annually.

10 Key Developments and Investments Hero MotoCorp plans to set up Global Parts Centre (GPC) at Neemrana, Rajasthan. With an investment of Rs 160 crore (US$ million), the GPC will be spread across 35 acres TVS and Sons Ltd plans to take its multi-brand car service solutions business to the UK, the US and Thailand. The company plans to add 65 to 70 owned outlets in India by Sandhar Technologies Ltd has acquired 100 per cent stake in Bengaluru-based Mag Engineering Pvt Ltd, one of the largest driver cabin manufacturer in India, for Rs 70 crore (US$ million) - Rs 90 crore (US$ million). Skoda is increasing localization levels and rationalizing prices across the range of products it offers in the country, in order to increase its volume in the Indian market Government Initiatives Gujarat has been one of the most proactive states in terms of investor-friendly policies and environment. Maruti Suzuki India Ltd (MSIL) has signed a state support agreement (SSA) with the State Government. MSIL plans to infuse about Rs 4,000 crore (US$ million) in the initial phase of the project and equivalent amount would be invested by the company's ancillary suppliers to set up a vendor park near the facility. The new unit is expected to commence operations by In a bid to improve safety features of vehicles, the Government has asked automobile manufacturers to develop a gadget which would be similar to the 'black box' installed in planes. The owner would not be able to turn the instrument off or on and the snapshot could be viewed by legal bodies, insurance companies and automakers. Mr C P Joshi, Minister of Road Transport and Highways, has also asked manufacturers to contemplate on the option of fixing such IT-enabled instrument to improve safety and security of the vehicles. Meanwhile, the Government of Odisha has also prepared a draft of its proposed auto component policy to attract investment in the state. Meticulously prepared, the draft policy envisages a concession of up to 50 per cent on land to be made available to auto component manufacturers and electricity duty waiver for ten years. The policy also delineates various fiscal incentives, increased reimbursements capital grants to attract manufacturers to set up their factories in the state. Road Ahead The rapid improvement in infrastructure, huge domestic market, increasing purchasing power, established financial market etc have made India a favorable destination for investment by global majors in the auto industry, according to Automotive Mission Plan (AMP ).

11 The vision of AMP aims India "to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016." In addition, the hybrid and electronic vehicles are new developments on the automobile canvas and India is one of the key markets for them. Global and Indian manufacturers are focusing their efforts to develop innovative products, technologies and supply chains. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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