Tata Motors BUY. New Products at JLR to Drive Profitability Favorable Exchange to Benefit Going Forward; Automobiles August 29, 2016

Transcription

1 Aug15 Oct15 Nov15 Dec15 Feb16 Mar16 Apr16 Jun16 Jul16 Aug16 Institutional Equities India Research Automobiles August 29, 2016 RESULT REVIEW Bloomberg: TTMT IN Reuters: TAMO.BO New Products at JLR to Drive Profitability Favorable Exchange to Benefit Going Forward; (TTMT) delivered strong Q1FY17 performance with healthy operating margins at JLR, post adjusting forex and incentive impact. Its consolidated Revenues/EBIDTA/PAT grew 9%/31%/60% YoY but down 18%/33%/60% QoQ to Rs 659bn/Rs76bn/Rs19bn (our estimate of Rs 618bn/Rs80bn/Rs21.5bn) in the quarter. Consolidated EBIDTA margin declined by 667bps YoY and 256 bps QoQ to 11.6%, impacted by product mix and geographical mix at JLR. JLR s reported EBIDTA margin declined 391bps QoQ and 411 bps YoY to 12.3%, while adjusted for forex impact margins stood at 14%. JLR s margin performance was supported by higher ASP on account of higher contribution of high end products and currency. TTMT s standalone business reported positive EBIDTA for the sixth consecutive time in last 15 quarters with EBIDTA of Rs.5.74bn, up22% YoY. It reported standalone net profit of Rs 0.26 bn as against net profit of Rs 2.9bn in Q1FY16. Long Term Strategy In Place to Regain Momentum: JLR s all new launches New Evoque, RR Sports, Discovery Sports, new XF, Jaguar XE, Fpace and Evoque convertible are well received in all major markets, it further plans number of new launches over next two years. It plans to launch new XFL at China JV in H We expect further improvement in Chinese market and price rationalization would get completely nullified by new products at higher ASP and favourable cross currency movement. Overall impact of Brexit would be positive. On account of favourable currency, JLR a margins would expand in FY18, as hedged position reduces. We believe that company s strategy on new products and its huge investment on R&D started paying off. It justifies company s high capex plan. Moreover, China JV has witnessed strong improvement in profitability, ahead of targeted time frame. Outlook & Valuation In view of JLR healthy volumes and margins, we increase our estimates for FY17E/FY18E. On SOTP basis, we increase our target price from Rs 550 to Rs 575, valuing its standalone business at Rs. 107, JLR at Rs. 516 and other subsidiaries at Rs. 48 based on FY18E EBITDA, post excluding net debt of Rs. 96 per share. In view of stock s attractive valuation and number of triggers indicating strong JLR performance ahead, we reiterate our BUY on TTMT. Key Financials (Consolidated) Y/E Mar (Rs. mn) FY14 FY15 FY16 FY17E FY18E Net Sales 2,301,025 2,609,672 2,731,748 2,942,831 3,251,758 EBITDA 321, , , , ,545 EBITDA margin (%) Adj. Net Profit 147, , , , ,330 EPS(Rs.) RoE (%) RoCE (%) PER (x) EV/ EBITDA Recommendation BUY CMP: Rs504 Target Price: Rs575 Previous Target Price Rs550 Upside (%) 14% Stock Information Market Cap. (Rs bn / US$ mn) 1,622/24,209 52week High/Low (Rs) 522/266 3m ADV (Rs mn /US$ mn) 4,957/74 Beta 1.4 Sensex/ Nifty 27,782/8,573 Share outstanding (mn) 2,887 Stock Performance (%) 1M 3M 12M YTD Absolute Rel. to Sensex Performance 31,500 27,500 23,500 19,500 15,500 Source: Bloomberg Earning Revision (%) FY17E FY18E Revenue EBITDA EPS Sensex (LHS) Source: Karvy Stock Broking Analysts Contact Mitul Shah mitul.shah@karvy.com (RHS)

2 Results Review Revenue Analysis TTMT s consolidated revenues grew 9.1% YoY (down 18.3% QoQ) to Rs bn in Q1FY17, as JLR s wholesale volume (excluding China JV volume) grew 9.2% YoY (down 19.4% QoQ) to 120,776 units. Despite poor geographical mix, better product mix and favorable currency benefitted JLR on realization front. JLR: Net revenue at JLR increased 9.2% YoY (down 17.2% QoQ) to 5.5 bn (JLR s revenues in INR terms rose 8.3% YoY due to translation effect of INR GBP). It reported net profit of 304 mn, due to Exceptional charge of 31 mn, forex impact of 207 mn ( 123 mn due to realized FX hedges and 84 mn due to revaluation of assets/liabilities) It realized 50 mn as a part of recovery of Tianjin port explosion claim. Standalone: TTMT s standalone revenues grew 10.7% YoY (down 17.9% QoQ) to Rs bn, as its domestic M&HCV volume rose 8.3% YoY to 35,101 units compared to overall volume increase of 6.2% YoY to 123,729 units, benefitting the average realization for the quarter to greater extent. EBIDTA Margin TTMT s consolidated EBITDA declined by 30.8% YoY and 33.1% QoQ to Rs. ~76.1 bn in Q1FY17. Its EBIDTA margins were down 667 bps YoY and 256 bps QoQ to 11.6%, due to healthy operating performance at JLR as well as improvement in standalone performance. Its Other expenses, which as a percentage of sales rose 641 bps YoY to 17.8%. Its standalone business reported positive EBIDTA for the sixth consecutive time in last 15 quarters, which reported EBIDTA margin of 11.6% in Q1FY17. JLR: JLR s EBIDTA margin declined 391 bps QoQ and by 411 bps YoY to 12.3% in Q1FY17. According to management, JLR s adjusted EBIDTA margin (adjusting forex impact of 84 mn on account of revaluation of assets/liabilities) stood at 14%, broadly in line with expectation. Its other expenses were higher due to new launches while RM/Sales was slightly negative impacting overall margins of the company. Positive currency movement and success in other markets were not sufficient to nullify impact of geographical mix Management expects JLR s EBIDTA margins to remain in 1415% range going forward. Standalone: TTMT s standalone EBIDTA margins expanded 52 bps YoY (down 157 bps QoQ) to 5.6% and reported profit at EBIDTA level to the tune of Rs bn as compared to of Rs 4.71 bn in Q1FY16 and operating profit of Rs 8.96 bn in Q4FY16. Net Profit Growth TTMT has posted consolidated net profit of Rs bn, while adjusted PAT was Rs 18.88bn declined by 60.2% YoY, and 59.8% QoQ, in Q1FY17, benefitted by margin expansion at JLR. The Company reported standalone net profit Rs 0.26bn in the quarter. Capex TTMT s Management indicated its annual capex of ~ 3.75 bn for JLR and it plans to spend standalone capex of Rs bn annually over next 2 years. 2

3 Exhibit 1: Consolidated P&L YE March (Rs. mn) Q1 FY17 Q1 FY16 YoY (%) Q4 FY16 QoQ (%) Net Sales 649, , ,261 (18.7) Other Operating Income 9,548 14,164 (32.6) 7, Total Revenue 658, , ,844 (18.3) Less: Net Raw Material consumed 390, , ,923 (15.9) Other Expenses 117,248 68, ,347 (22.0) Personnel 74,664 68, ,702 (3.9) Total Expenditure 582, , ,972 (15.9) EBIDTA 76, ,068 (30.8) 113,872 (33.1) Less: Depreciation 45,508 37, , EBIT 30,621 72,652 (57.9) 69,633 (56.0) Less: Interest 11,694 11, ,552 (6.8) Add: Other income 1,736 2,241 (22.5) 2,486 (30.2) Extraordinary Expense (net) 4,851 6,338 (23.5) 6,044 (19.7) Profit Before Tax 25,514 69,736 (63.4) 65,611 (61.1) Less: Total Tax 7,200 16,485 (56.3) 13,546 (46.8) Profit After Tax before Minority Interest 18,314 53,251 (65.6) 52,065 (64.8) Minority Interest (89) NA Profit from Associates 4,290 (708) NA (383) NA Profit After Tax 22,364 52,310 (57.2) 51,771 (56.8) Adj. PAT 18,882 47,470 (60.2) 46,975 (59.8) Reported EPS (Rs.) (58.4) (57.1) Adj. EPS (Rs.) (61.3) (60.1) Margin Analysis (%) Change in BPS Change in BPS EBIDTA Margin (667) 14.1 (256) Adj. NPM (499) 5.8 (296) Effective Tax Rate Cost Analysis RM/Net Sales Other Expenses (84) Personnel/Net Sales (7) ; NA: Not Applicable, Note: Q1FY17 and Q1FY16 financials are based on new accounting standard, while Q4FY16 financials are based on old standard. Exhibit 2: Jaguar Land Rover P&L GBP Mn Q1FY17 Q1FY16 YoY Q4FY16 QoQ Net Revenue 5,461 5, ,594 (17.2) EBITDA (18.1) 1,069 (37.1) EBITDA margin (411)bps 16.2 (391)bps PBT (45.1) 678 (59.9) PAT (38.2) (35.6) ; 3

4 Exhibit 3: Standalone P&L YE March (Rs. mn) Q1 FY17 Q1 FY16 YoY (%) Q4 FY16 QoQ (% Domestic 109, , ,631 (15.2) Exports 13,816 13, ,135 (19.4) Total Volume (units) 123, , ,766 (15.7) Net Sales 101,661 91, ,595 (18.4) Other Operating Income 1,535 1, , Total Revenue 103,196 93, ,698 (17.9) Less: Net Raw Material consumed 68,865 63, ,891 (18.9) Other Expenses 19,605 16, ,398 (19.6) Personnel 8,983 8, , Total Expenditure 97,453 88, ,734 (16.5) EBIDTA 5,743 4, ,964 (35.9) Less: Depreciation 7,122 5, , EBIT (1,380) (1,096) NA 2,823 NA Less: Interest 3,401 4,350 (21.8) 3,438 (1.1) Add: Other income 6,246 9,072 (31.2) 4, Extraordinary Expense (net) (1,087) (306) NA (289) NA Profit Before Tax 379 3,320 (88.6) 3,697 (89.8) Less: Total Tax (71.3) (953) NA Profit After Tax 258 2,898 (91.1) 4,650 (94.5) Adj. PAT 996 3,165 (68.5) 5,014 (80.1) Reported EPS (Rs.) (93.0) 1.35 (95.6) Adj. EPS (Rs.) (75.3) 1.46 (84.1) Margin Analysis (%) Change in BPS EBIDTA Margin (157) Adj. NPM (243) 4.0 (302) Cost Analysis RM/Net Sales (151) 67.5 (80) Adv.& Sales Promotion Expenses./Net Sales (41) Personnel/Net Sales ; NA: Not Applicable, Note: Volumes are as per SIAM data.q1fy17 and Q1FY16 financials are based on new accounting standard, while Q4FY16 financials are based on old standard. Change in BPS 4

5 Change in Estimates Exhibit 4: Key Financials JLR Y/E March (Rs. mn) FY17E FY18E New Old % change New Old % change Standalone Volume (units) 588, , , ,703 JLR Volumes 640, , , ,813 Net revenues 2,942,831 2,872, ,251,758 3,229, EBIDTA 387, , , , EBIDTA margin (%) (21)bps (7)bps Adj. Net Profit 130, , , , EPS (Rs.) Source: Karvy Stock Broking We maintain our standalone and JLR volumes for FY17E/FY18E. However, on account of better realization at JLR, we marginally increase consolidated revenue estimate by 2.4%/1% for FY17E/FY18E. We broadly maintain our margins and EBIDTA estimates, while assuming lower interest and higher JV income, we increase our EPS estimate by 4.7%/7% for FY17E/FY18E. Due to company s improving profitability and capex under control, we lower our Debt estimates. On SOTP basis, we increase our target price from Rs 550 to Rs 575, valuing its standalone business at Rs. 107, JLR at Rs. 516 and other subsidiaries at Rs. 48 based on FY18E EBITDA, post excluding net debt of Rs. 96 per share. Exhibit 5: SOTP Valuation Y/E Mar ( mn) Multiple Measure PAT/EBITDA FY18E Value/Share Old Values Standalone 8 EV/EBITDA FY18E 45, JLR Ex China GBP EBITDA 4,149 JLR Ex China (I) INR 3.75 EV/EBITDA FY18E 373, JLR China GBP JV PAT 378 JLR China (II) INR 10 P/E FY18E 34, JLR Total (I+II) Other Business 6.0 EV/EBITDA FY18E 26, Net Debt 323, Target price Exhibit 6: Key Financials JLR GBP Mn FY14 FY15 FY16 FY17E FY18E Volumes (Units) 429, , , , ,813 Net Revenue 19,386 21,866 22,208 25,516 28,200 EBITDA 3, , ,353 3,627 4,149 EBITDA margin PBT 3,361 2,614 1,713 2,162 2,457 PAT 1,879 2,038 1,311 1,665 1,843 5

6 JLR s Volumes Analysis Exhibit 7: Quarterly Wholesale Volume Exhibit 8: Annual Wholesale Volume ('000 units) ('000 units) Jaguar Land Rover Total Jaguar Land Rover Total Q1FY16 Q1FY17 FY15 FY16 Exhibit 9: Jaguar Product Mix Quarterly Exhibit 10: Land Rover Product Mix Quarterly 25.0 ('000 units) ('000 units) Q1FY16 Q1FY17 XF XJ XK F Type XE (35.0) Q1FY16 Q1FY17 Range Rover Sport Discovery Discovery Sports Range Rover Defender Freelander Range Rover Evoque New Range Rover New Range Rover Sport Exhibit 11: Jaguar Product Mix Annual Performance 90.0 ('000 units) FY15 FY16 XF XJ XK F Type Exhibit 12: Land Rover Product Mix Annual Performance ('000 units) FY15 FY16 Range Rover Sport Discovery Discovery Sports Range Rover Defender Freelander Range Rover Evoque New Range Rover New Range Rover Sport 6

7 JLR s MarketMix Exhibit 13: JLR s Geographical Mix Exhibit 14: JLR s Geographical Mix Asia Pacific 0.0% ROW 17.8% Q1FY16 UK 19.8% Asia Pacific 0.0% ROW 16.6% Q1FY17 UK 20.3% China 19.1% North America 18.2% China 19.4% North America 18.5% Europe 25.1% Europe 25.3% Asia Pacific 6% China 25% ROW 14% FY15 UK 19% North America 17% Asia Pacific 0% China 18% ROW 18% FY16 UK 20% North America 20% Europe 19% Europe 24% 7

8 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15 Jan16 Feb16 Mar16 Apr16 May16 Jun16 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15 Jan16 Feb16 Mar16 Apr16 May16 Jun16 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15 Jan16 Feb16 Mar16 Apr16 May16 Jun16 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15 Jan16 Feb16 Mar16 Apr16 May16 Jun16 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15 Jan16 Feb16 Mar16 Apr16 May16 Jun16 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15 Jan16 Feb16 Mar16 Apr16 May16 Jun16 August 29, 2016 Domestic Volumes and Market Share Exhibit 15: Volume trend 25,000 20,000 15,000 10,000 5,000 0 Exhibit 16: Product mix (%) M&HCV LCV Utility PV/Cars Source: SIAM, Karvy Stock Broking PV/Cars Utility LCV M&HCV Source: SIAM, Karvy Stock Broking Exhibit 17: Market share Trend: Passenger Car 60 (%) Exhibit 18: Market share Trend: UV + Vans Hyundai Maruti Other M&M Maruti Toyota Other Source: SIAM, Karvy Stock Broking Source: SIAM, Karvy Stock Broking Exhibit 19: Market share Trend: MHCV Goods 70 (%) Exhibit 20: Market share Trend: LCV (%) Ashok Leyland Eicher Motors Others Tata motors M&M Others Source: SIAM, Karvy Stock Broking Source: SIAM, Karvy Stock Broking 8

9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec August 29, 2016 Currency Movements Exhibit 21: INR per 1 GBP Monthly average Exhibit 22: GBP per 1 USD Monthly average Source: Xrate, Karvy Stock Broking Source: Xrate, Karvy Stock Broking Exhibit 23: GBP per 1 EUR Monthly average Source: Xrate, Karvy Stock Broking 9

10 Financials Exhibit 24: Profit & Loss Consolidated Y/E Mar (Rs.mn) FY14 FY15 FY16 FY17E FY18E Net revenues 2,301,025 2,609,672 2,731,748 2,942,831 3,251,758 Operating expenses 1,979,960 2,239,203 2,388,049 2,554,957 2,806,213 EBIDTA 321, , , , ,545 EBIDTA margin (%) Other income 34,423 29,710 31,866 15,298 17,984 Interest 47,338 48,615 46,234 43,239 45,416 Depreciation 110, , , , ,319 Profit Before Tax 188, , , , ,795 Tax 47,648 76,429 28,726 44,560 56,200 Minority Interest , Profit from Associates (537) ,396 3,803 Reported Net Profit 139, , , , ,330 Net Margin (%) Adjusted Net Profit* 147, , , , ,330 Adj. Net Margin (%) , Note: We have not factored in any tax credit effect on estimated financials. Exhibit 25: Balance Sheet Consolidated Y/E March (Rs.mn) FY14 FY15 FY16 FY17E FY18E Equity capital 6,438 6,438 6,792 6,792 6,792 Reserves & surplus 649, , , ,855 1,064,367 Shareholders funds 656, , , ,647 1,071,158 Minority Int. 4,207 4,333 8,883 8,943 9,010 Total Loans 549, , , , ,999 Deferred tax liability 7,748 13,900 4,397 4,397 4,397 Total Liabilities and Equity 1,202,038 1,245,167 1,452,105 1,651,986 1,895,565 Gross block 1,429,755 1,637,616 1,963,485 2,314,499 2,690,627 Depreciation 688, , , ,770 1,095,510 Net block 741, ,375 1,088,016 1,374,728 1,595,117 Capital WIP 332, , , , ,064 Investments 106, , , , ,560 Inventory 272, , , , ,971 Debtors 105, , , , ,868 Cash & Bank Bal 297, , , , ,388 Loans & Advances 319, , , , ,593 Current Assets 995,419 1,026,105 1,100,430 1,053,306 1,145,820 Sundry Creditors 573, , , , ,826 Other Current Liability 401, , , , ,171 Current Liability& Provisions 974,474 1,114,081 1,213,606 1,283,078 1,384,996 Net current assets 20,945 87, , , ,176 Total Assets 1,202,038 1,245,167 1,452,105 1,651,986 1,895,565 10

11 Exhibit 26: Cash Flow Statement Consolidated Y/E March (Rs. in mn) FY14 FY15 FY16 FY17E FY18E EBIT 210, , , , ,226 Other Income 34,423 29,710 31,866 15,298 17,984 Depreciation & Amortisation 110, , , , ,319 Interest paid() (47,338) (48,615) (46,234) (43,239) (45,416) Dividends paid() (7,504) 356 (1,281) (3,909) (7,818) Tax paid() (47,648) (76,429) (28,726) (44,560) (56,200) Extra Ord Income (8,708) (651) (19,382) 4,851 0 Operating Cash Flow 244, , , , ,095 Change in Working Capital 21, ,960 32,842 59,986 20,602 Cash flow from Operations 265, , , , ,697 Capex (427,570) (239,435) (350,986) (498,230) (456,479) Strategic Investment 3,618 (1,596) (92) (110) (113) Non Strategic Investment (19,907) (44,905) (51,202) (7,966) (20,711) Cash flow from Investing (443,860) (285,936) (402,280) (506,306) (477,302) Change in borrowing 112, ,570 (61,115) 70, ,000 Others 151,663 (240,393) 158,251 3,396 3,803 Cashflow from Financial Activities 263,985 (97,823) 97,136 73, ,803 Change in Cash 85,991 24,040 7,642 (56,610) 11,198 Opening cash 211, , , , ,190 Closing cash 297, , , , ,388 Exhibit 27: Key Ratios Y/E Mar (%) FY14 FY15 FY16 FY17E FY18E Revenue Growth EBITDA Margin Net Profit Margin ROCE ROE Exhibit 28: Valuation Parameters Y/E March FY14 FY15 FY16 FY17E FY18E EPS( Rs) P/E (x) P/ BV (x) EV/ EBITDA (x) Fixed Assets Turnover Ratio (x) Debt / Equity (x) EV/ Sales (x)

12 Stock Ratings Absolute Returns Buy : > 15% Hold : 515% Sell : < 5% Analyst certification For further enquiries please contact: research@karvy.com Tel: Disclosures Appendix The following analyst(s), Mitul Shah, who is (are) primarily responsible for this report and whose name(s) is/are mentioned therein, certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report. Disclaimer Karvy Stock Broking Limited [KSBL]is registered as a research analyst with SEBI (Registration No INH ). KSBL is also a SEBI registered Stock Broker, Depository Participant, Portfolio Manager and also distributes financial products. The subsidiaries and group companies including associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory services, insurance repository services, financial consultancy and advisory services, realty services, data management, data analytics, market research, solar power, film distribution and production, profiling and related services. Therefore associates of KSBL are likely to have business relations with most of the companies whose securities are traded on the exchange platform. The information and views presented in this report are prepared by Karvy Stock Broking Limited and are subject to change without any notice. This report is based on information obtained from public sources, the respective corporate under coverage and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of KSBL. While we would endeavor to update the information herein on a reasonable basis, KSBL is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent KSBL from doing so. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KSBL will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither KSBL nor any associate companies of KSBL accepts any liability arising from the use of information and views mentioned in this report. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Past performance is not necessarily a guide to future performance. Forwardlooking statements are not predictions and may be subject to change without notice. Actual results may differ materially from those set forth in projections. 12

13 Associates of KSBL might have managed or comanaged public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. Associates of KSBL might have received compensation from the subject company mentioned in the report during the period preceding twelve months from the date of this report for investment banking or merchant banking or brokerage services from the subject company in the past twelve months or for services rendered as Registrar and Share Transfer Agent, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory services, insurance repository services, consultancy and advisory services, realty services, data processing, profiling and related services or in any other capacity. KSBL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. Compensation of KSBL s Research Analyst(s) is not based on any specific merchant banking, investment banking or brokerage service transactions. KSBL generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. KSBL or its associates collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. KSBL or its analysts 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 and have no financial interest in the subject company mentioned in this report. Accordingly, neither KSBL nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not received any compensation from the subject company mentioned in the report in the preceding twelve months. It is confirmed that Mitul Shah, Research Analyst did not serve as an officer, director or employee of the companies mentioned in the report. KSBL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities. Karvy Stock Broking Limited Office No. 701, 7 th Floor, Hallmark Business Plaza, Opp.Gurunanak Hospital, Mumbai RegdOff : Plot No.31, 6 th Floor, Karvy Millennium Towers, Financial District, Nanakramguda, Hyderabad, , India Karvy Stock Broking Research is also available on: Bloomberg KRVY <GO>, Thomson Publisher & Reuters. 13