F I R S T C A L L BUY R E S E A R C H. Maharastra Seamless Ltd SYNOPSIS. Nov 4 th, Year Comparative Graph

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C.M.P: Rs.423.10 Stock Data Sector Maharashtra Seamless Ltd 1 Year Comparative Graph Maharastra Seamless Ltd Construction & Engineering Face Value Rs. 5.00 52 wk.

com Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer drsastry@firstcallindia.com Target Price: Rs.500.

MSL is into Seamless division, ERW division and Power division. Net profit increased from Rs. 711 millions to Rs. 800 millions with an increase of 12.5%.

MSL is now putting up intensive marketing approach by penetrating the domestic as well as international market in order to increase market presence.

1 C.M.P: Rs Stock Data Sector Maharashtra Seamless Ltd 1 Year Comparative Graph Maharastra Seamless Ltd Construction & Engineering Face Value Rs wk. High/Low (Rs.) / Volume (2 wk. Avg.) BSE Code Market Cap (Rs.In mn) Share Holding Pattern V.S.R. Sastry Equity Research Desk vsrsastry@firstcallindiaequity.com Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer drsastry@firstcallindia.com Target Price: Rs BSE SENSEX SYNOPSIS BUY Nov 4 th, 2010 Maharashtra Seamless Limited (MSL), is one of the flagship company of Rs.3000 Crore D.P. Jindal Group. MSL is into Seamless division, ERW division and Power division. Net profit increased from Rs. 711 millions to Rs. 800 millions with an increase of 12.5%. EPS has been increased from Rs to Rs Maharashtra Seamless Ltd s order book position of the company is approximately Rs. 415 crores. MSL is now putting up intensive marketing approach by penetrating the domestic as well as international market in order to increase market presence. PAT of the company is expected to grow at a CAGR of 10% over 2009 to 2012E respectively. Financials (Rs.in.mn) FY10 FY11E FY12E Net Sales EBIDTA PAT EPS P/E F I R S T C A L L R E S E A R C H 1

2 Peer Group Comparison Name of the company CMP(Rs.) Market Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%) Maharastra Seamless Ltd Tata Steel Jindal Saw Usha Martin Investment Highlights Q2 FY11 Results Update Maharastra Seamless Ltd reported a rise of 3.15% sales to Rs million from Rs million in the same quarter previous year in the standalone net sales for the quarter ended Sept During the quarter, the company disclosed a standalone profit of Rs million as against of Rs million for the quarter ended Sep 30, Quarterly Results - standalone (Rs in mn) As At Sep-10 Sep-09 %change Net sales PAT Basic EPS

3 EPS for the quarter Sep 2010 stood at Rs against Rs for the quarter Sept

4 The expenditure for the quarter stood at Rs million as of Rs for the same quarter last year. Raw materials consumption has been increased from Rs million to Rs million for the quarter Sep Employees cost increased by 2% for the Sept quarter The operating profit margins for this quarter are 27.69% and net profit margin is 18.92% for the quarter Sept 30,

5 Company Profile Maharastra Seamless Limited (MSL), is one of the flagship company of Rs.3000 Crore D.P. Jindal Group. Due to our willingness to take on big challenges and see them through, and a persevering policy of "no compromise on quality", MSL has evolved into a Rs Crore Seamless Pipes Manufacturing Company by from Rs. 105 Crores in Business Divisions Seamless Division Incorporated in the year 1989, Maharashtra Seamless Limited (MSL) is the largest Manufacturer of Seamless Steel Pipes & Tubes in India, with a Production Capacity of over 350,000 MT per annum. The plant is located in Raigad, Maharashtra and is equipped with state-of-the-art machinery. Having technical collaboration with MANNESMANN DEMAG HUTTENTECHNIK of 5

6 GERMANY, MSL uses world renowned CPE Technology and is capable of producing size range from 3/4" OD to 7" OD in HOT FINISHED and from 10 mm OD to 108 mm OD in COLD DRAWN / COLD PILGERED condition. Originally designed to produce pipes in the size range from 2" OD to 5½" OD, the plant was totally upgraded indigenously to cater to the popular size range from 1" OD to 7" OD in hot finished condition. Heat treatment, coupling manufacturing and upsetting facilities was put up to cater to the complete requirement of oil sector pipes, tubes & casings conforming to API grade. The Company has now expanded its Production facilities, using PLUG MILL TECHNOLOGY supported by World Class Reelers, to manufacture for the first time in India, large size Seamless Pipes of diameter upto 14" and wall thickness upto 40mm. Products Hot Finished Pipes & Tubes Cold Pilgered / Cold Drawn Tubes API Oil Country Tubular Goods (OCTG) Range Line Pipe ERW Division The Jindal Group's progressive business strategy Maharashtra Seamless Limited has established ERW pipe manufacturing facilities alongside its seamless manufacturing plant. Maharashtra seamless limited has diversified into large diameter ERW pies from size 8" to 20", wall thickness from 3.2 mm to mm. This plant of Mannesmann, Germany is India's first and par excellence "largest outer diameter" ERW pipe facilities with installed capacity of MT per annum. It can achieve wielding speed of 33 Meters per minute. 6

7 Products ERW LINE PIPE CONFORMING TO API 5L, IS: 1979, IS: 1978 & WATER GAS & SEWAGE LINE STEAM, WATER GAS AND AIR LINE ERW PIPES CONFORMING TO ASIM A - 53/API 5L ERW CASING PIPES CONFORMING TO API 5CT Power Division They are constantly looking for renewable resources, and wind is something that we are not going to run out of for a long time to come. All round the globe power companies are trying to tap inexhaustible resources that are not a strain on our growing fragile eco-system and can sustain the enormous power requirements of the growing population. As per our underlying commitment to environment, we have set up wind power generation plant at Vankusawade Distt. Satara Maharashtra. This is a commissioned project, which we are using to produce 7 MW of power. 7

8 Financials Results 12 Months Ended Profit & Loss Account (Standalone) Value(Rs. in million) FY09A FY10A FY11E FY12E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure -16, Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Profit after Tax Equity Capital Reserves 12, Face Value EPS

9 Quarterly Ended Profit & Loss Account (Standalone) Value(Rs. in million) 31-Mar Jun Sep-10A 31-Dec-10E Description 3m 3m 3m 3M Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Profit after Tax Equity Capital Face Value Total No. of Shares EPS

10 Key Ratio Particulars FY09 FY10 FY11E FY12E No of Shares Market Price EPS (Rs.) EBITDA Margin (%) 20.08% 28.08% 28.18% 27.61% PAT Margin (%) 12.59% 17.60% 18.77% 18.36% P/E Ratio (x) ROE (%) 19.89% 17.83% 16.65% 15.19% ROCE (%) 31.14% 28.22% 24.95% 22.91% EV/EBITDA (x) Debt-Equity Ratio Book Value (Rs.) P/BV PBT Margin (%) 18.65% 26.69% 26.82% 26.23% Charts: 1. Net Sales & PAT 10

11 2. P/E Ratio 3. EV/EBDITA 11

12 4. Debt Equity Ratio 5. P/Bv 12

13 Outlook and Conclusion At the current market price of Rs , the stock is trading at 9.40 x FY11E and 8.74 x FY12E respectively. Price to Book Value of the stock is expected to be at 1.56 x and 1.32 x respectively for FY11E and FY12E. Earning per share (EPS) of the company for the earnings for FY11E and FY12E is seen at Rs and Rs respectively. PAT of the company are expected to grow at a CAGR of 10% over 2009 to 2012E respectively. On the basis of EV/EBITDA, the stock trades at 6.26 x for FY11E and 5.81 x for FY12E. We expect that the company 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. 13

14 Industry Overview Steel Sector structure/market size The steel industry in India has been moving from strength to strength and according to the Annual Report by the Ministry of Steel, India has emerged as the fifth largest producer of steel in the world and is likely to become the second largest producer of crude steel by Led by strong demand for autos and engineering services, the domestic steel demand in India remains robust, as per Moody's sectoral analysis on Asia's steel sector. According to the analysis, the outlook for the domestic operating environment is positive, driven by robust growth in infrastructure, autos and construction and constrains on additional supply by Recently, Mr Virbhadra Singh, Minister for Steel, said that India will become the world's second-largest steel producer by 2012, with a capacity of 124 million tonnes (MT) as part of the push being given to assist overall infrastructure development. Production India's steel production during was million tonne (MT), up 11 per cent from a year ago, according to Mr A Sai Pratap, Minister of State for Steel. During the second quarter ended September 2010, steel majors Tata Steel and Steel Authority of India Ltd (SAIL) reported a high growth in steel sales. SAIL registered sales of 3.17 MT in the period under review, while Tata Steel's total sales for the quarter stood at 1.66 MT which is around 14 per cent higher than the corresponding quarter last year. 14

15 Meanwhile, JSW Steel's production during the quarter grew by 8 per cent to 3.14 MT on the back of a steady rise in demand. Consumption The domestic steel consumption grew by 9.8 per cent to MT during April- September 2010 over the year-ago period, on the back of steady demand from sectors like automobile and consumer durables. As per the provisional data from the Ministry of Steel, consumption was at MT in the same period a year ago. In September 2010, steel consumption rose 4.1 per cent to 4.72 MT, against 4.53 MT in the year-ago period. Investments A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments. The domestic steel sector has attracted a staggering investment of about US$ 238 billion, according to Mr A Sai Prathap, Minister of State for Steel. This consists of nearly 222 MoUs signed between the investors and various state governments mostly in the states of Orissa, Jharkhand, Chhattisgarh and West Bengal. Tata Steel plans to invest US$ million to commission its proposed ferroalloys plant and bar mill at its industrial park at Gopalpur and a greenfield steel plant at Kalinga Nagar. Essar Steel plans to expand its exclusive steel showrooms, Hypermart and retail outlet, Expressmart in Madhya Pradesh. JSW Steel plans to invest US$ 17 billion over the next 10 years to ramp up capacity from 7.8 million tonne per annum (MTPA) to 32 mtpa through greenfield and brownfield projects. 15

16 Jindal Steel has completed the acquisition of Oman-based Shadeed Iron and Steel Co LLC for US$ 464 million. Japan's Nippon Steel will begin a manufacturing operation in India making steel pipes for use in automobiles and plans to invest US$ 37 million on production and sales operations. Government Initiative As per the Press Information Bureau (PIB), during 2009, the government took a number of fiscal and administrative steps to contain steel prices. Central value added tax (CENVAT) on steel items was reduced from 14 per cent to 10 per cent with effect from February Moreover, in the Union Budget , the government has allocated US$ 37.4 billion to the infrastructure sector and has increased the allocation for road transport by 13 per cent to US$ 4.3 billion which will further promote the steel industry. Power As the Indian economy continues to surge ahead, its power sector has been expanding concurrently to support the growth rate. The demand for power is growing exponentially and the scope for the growth of this sector is immense. According to the Ministry of Power, India's total installed capacity as on March 31, 2010 is 159, mega watt (MW). Thermal power plants account for 102, MW, followed by hydro power plants with a capacity of 36, MW. Renewable energy sources provide 15, MW of power and the remaining 4,560 MW comes from nuclear energy. Growth Potential As per the Economic Survey , the Eleventh Five Year Plan envisaged an additional capacity of 78,700 MW of which 19.9 per cent was hydro, 75.8 per cent 16

17 thermal and the rest was nuclear. As of December 31, 2009, 43,282 MW was under construction. Government Initiatives The government has initiated several proactive steps to open the sector for the private players and realize the full potential of the country in the power sector: Introduction of the Electricity Act 2003 and the notification of the National Electricity Policy 2005 Constitution of Independent State Electricity Regulatory Commissions in the states Providing income tax holiday for a block of 10 years in the first 15 years of operation and waiver of capital goods' import duties on mega power projects (above 1,000 MW generation capacity) 100 per cent FDI is permitted under the automatic route for generation and transmission of electric energy produced in hydro-electric, coal/lignite-based thermal plants, oil-based thermal plants and gas-based thermal plants; nonconventional energy generation and distribution, distribution of electric energy to households, industrial commercial and other users; and power trading The government has also taken up some ambitious programmes like the Ultra Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY), Accelerated Rural Electrification Programme and the goal of Power for All by 2012 among others, to rapidly increase the installed capacity In the Union Budget of , the Finance Minister, Pranab Mukherjee has announced the following initiatives: Plan allocation for the power sector excluding RGGVY has been doubled from US$ million in to US$ 1.2 billion in Government proposes to introduce a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks. 17

18 A "Coal Regulatory Authority" is proposed to be set up to create a level playing field in the coal sector. Plan outlay for Ministry of New and Renewable Energy increased by 61 per cent from US$ million in to US$ million in Solar, small hydro and micro power projects at a cost of US$ million to be set up in the Ladakh region of Jammu and Kashmir. Looking ahead A study by McKinsey called "Powering India: Road to 2017" released in 2007 estimates India's power demand to increase to 315 giga watt (GW)-335 GW by 2017, if India grows at an average of 8 per cent during This would require a five- to tenfold rise in power production, entailing investments worth US$ 600 billion. The Ministry of Power and Central Electricity Authority (CEA) have projected a total investment of US$ 4.3 billion for renovation and modernisation, as well as extending the life span of various old power plants during 11th and 12th Five-Year Plans. Of this, US$ 1.5 billion is planned for the 11th Plan and US$ 3 billion for the 12th Plan. This would be over and above the investment of US$ billion proposed for the capacity addition of 78,700 MW in the 11th Plan ( ) and US$ billion to add over 94,431 MW in the 12th Plan. 18

19 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. 19

20 Firstcall India Equity Research: B. Harikrishna Banking B. Prathap IT A. Rajesh Babu FMCG C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods E. Swethalatha Oil & Gas D. Ashakirankumar Auto Kavita Singh Diversified Nimesh Gada Diversified Priya Shetty Diversified Neelam Dubey Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO s, QIP s, F.P.O s,takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai Tel. : / / Telefax : info@firstcallindiaequity.com 20

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