Greaves Cotton Ltd. Standalone Estimate Revision:

Transcription

1 Greaves Cotton Ltd. Absolute : REDUCE Relative : UNDERWEIGHT 2QFY18 Result : Estimate (), TP (), Rating () Regular Coverage 2% Upside in 14months Changing industry dynamics to shake up key business verticals - maintain REDUCE Industrials 2017Equirus All rights reserved Rating Information Price (Rs) 127 Target Price (Rs) 125 Target Date Target Set On Implied yrs of growth (DCF) 15 Fair Value (DCF) 107 Fair Value (DDM) 105 Ind Benchmark Model Portfolio Position Stock Information 31st Dec'18 7th Nov'17 BSEAUTO NA Market Cap (Rs Mn) 31,075 Free Float (%) % 52 Wk H/L (Rs) /115.2 Avg Daily Volume (1yr) 395,629 Avg Daily Value (Rs Mn) 57 Equity Cap (Rs Mn) 488 Face Value (Rs) 2 Bloomberg Code GRV IN Ownership Recent 3M 12M Promoters 51.0 % 0.0 % 0.0 % DII 25.6 % -1.3 % -5.6 % FII 7.3 % 0.1 % 3.4 % Public 16.1 % 1.2 % 2.2 % Price % 1M 3M 12M Absolute -5.0 % % -5.2 % Vs Industry % % % CUMMINSIND -2.4 % -6.0 % 6.0 % KIRLOSENG -0.7 % % 1.4 % Standalone Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (17A) EPS (18E) As highlighted in our 1QFY18 results review, we see significant challenges in GRV s 3W engine business due to the emergence and strong growth of e-rickshaws in many parts of the country. We think even the company s pump-set business will see headwinds ahead as electric pumps are gaining traction, where GRV doesn t have any offerings. We lower our growth assumptions for both 3W and pump-set volumes, leading to a 7%/9% reduction in our FY18/FY19E EPS. Due to growth uncertainties in the two large verticals which contribute ~50% of GRV s sales, a multiple contraction is possible. We therefore cut our target TTM multiple from 18x to 16x and maintain REDUCE on the stock with a Dec 18 TP of Rs 125 (Sep 18 TP of Rs 147 earlier). 3W diesel engines up for challenges from e-rickshaws, BSIV-VI shift: E-rickshaws are growing at a rapid pace in many parts of the country, and replacing diesel 3Ws as a shared mode of transportation. While diesel 3Ws plying outside city limits will not be impacted by this, a shift to e-rickshaws within city limits would curb their growth. Our industry interaction on a shift from BS-IV to VI norms from Apr 20 indicates that diesel 3Ws would see volume declines as the gap between 3Ws and 4Ws narrows. Pump-sets to see headwinds from electric pumps: Our interaction with an agri team member at GRV s major competitor suggests that with the falling level of underground water tables, demand for electric pumps will increase; demand would also be supported by improving electrification in villages. GRV doesn t have any offerings in the electric pump segment, and therefore will likely lag behind competition under this market shift. Sales up 3% yoy but 7% below EE on volume decline across segments, except gensets: 3W volumes declined 5% yoy and came in line with EE. However, a 36% decline in agri pump-set volumes surprised negatively; management attributed the decline to floods in some parts of country, a delay in government subsidies, GST impact and tightening of credit to dealers. Even aftermarket sales growth was only 4-5% vs. double-digit growth last year due to similar reasons. Aftermarket sales are now reviving and should see better growth in 2H. EBITDA down 13% yoy on volume declines: EBITDA margin contracted 270bps yoy due to a 295bps decline in gross margins as commodity prices spiralled up over last year. Other expenses however were controlled well and declined 8% yoy and 5% qoq as company had been taking measures to cut cost under rising commodity prices. Standalone Estimate Revision: Current Change from previous (%) Rs Mn FY18E FY19E FY18E FY19E Sales 17,893 19, % -4.3% EBITDA 2,591 2, % -8.1% PAT 1,839 1, % -8.7% EPS % -8.7% Consolidated Financials Rs. Mn YE Mar FY17A FY18E FY19E FY20E Sales 16,344 17,894 19,709 21,173 EBITDA 2,434 2,591 2,858 3,070 Depreciation Interest Expense Other Income Reported PAT 1,809 1,839 1,950 2,072 Recurring PAT 1,784 1,715 1,950 2,072 Total Equity 9,253 9,476 9,662 9,824 Gross Debt Cash 4,238 3,923 3,791 3,720 Rs Per Share FY17A FY18E FY19E FY20E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 20 % 18 % 20 % 21 % Core ROIC (%) 25 % 24 % 25 % 26 % EBITDA Margin (%) 15 % 14 % 14 % 14 % Net Margin (%) 11 % 10 % 10 % 10 % November 7, 2017 Analyst: Ashutosh Tiwari ashutosh@equirus.com ( , ) Page 1 of 10 Before reading this report, you must refer to the disclaimer on the last page.

2 Earnings call takeaways GRV achieved its best-ever quarterly performance in Q2 with 11.8% QoQ and 3% yoy growth. PAT for 1HFY18 was flat vis-à-vis the year-ago period. Revenue stood at Rs 4.52bn vs. Rs 4.89bn the previous quarter. Other expenses declined on account of cost-cutting measures taken by the company. Aftermarket sales grew 4-5% in 2Q as GST rollout had some impact in the first two months of the quarter; now, retail is picking up with normal growth likely in 2H. Volumes in 1QFY18: o 3Ws: 76,000 units in 2QFY18 vs. 80,000 units in 2QFY17 o 4Ws: 9,300 units in 1QFY18 vs. 8,000 units in 2QFY17 o Pumps: 15,000 units in 1QFY18 vs. 25,000 units in 2QFY17 o Power tillers: 800 units in 1QY18 vs. 1,000 units in 2QFY17 o Gensets: 1,100 units in 1QFY18 vs. 800 units in 2QFY17 Sales of pump sets were hit by floods in some parts of the country, GST rollout, delay in government subsidies and tightening of dealer credit, GRV plans to go a bit slow on the tiller market. The challenging market scenario and tightening credit norms have impacted the tiller market; thus, the company plans to launch products systematically over the next few years. GRV has already finalized the design of BS-VI engines. Many customers have signed up for BS-VI engines and the company expects some more players to join the pipeline. The company s R&D is on advanced and emerging technology to create a sustainable value proposition. GRV is evaluating technology on the Altigreen product, and plans to offer it as a retrofit solution. The company believes it would take a couple of quarters to offer the best value proposition. GRV is also working on developing electric pump-sets. Management expects normal retail growth in 2H as the impact of GST seems to have waned. November 7, 2017 Analyst: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 2 of 10

3 Quarterly performance, standalone % Change (Rs mn) 2QFY18 2QFY18E 1QFY18 2QFY17 2QFY18E 1QFY18 2QFY17 Net Sales 4,524 4,888 4,063 4,393-7% 11% 3% Comments Cost of Goods sold 3,040 3,250 2,720 2,823-6% 12% 8% Employee cost % 9% 10% Other Expenses % -5% -8% Total Expenditures 3,846 4,155 3,509 3,616-7% 10% 6% EBITDA % 23% -13% Depreciation % 18% 23% EBIT % 24% -19% Interest % -190% -212% Other Income % 6% -15% PBT % 21% -18% Tax % 20% 0% Recurring PAT % 22% -25% Extraordinaries Reported PAT % 20% -4% EPS (Rs) % 22% -25% EBITDA Margin 15.0% 15.0% 13.6% 17.7% 0 bps 137 bps -270 bps EBIT Margin 11.9% 12.4% 10.7% 15.1% -52 bps 120 bps -320 bps PBT Margin 14.3% 14.8% 13.2% 18.0% -45 bps 117 bps -365 bps PAT Margin 10.9% 10.4% 10.1% 11.7% 55 bps 78 bps -75 bps Tax Rate 33.8% 30.0% 34.3% 27.8% 385 bps -45 bps 607 bps Cost as % of Sales Raw Material 67.2% 66.5% 67.0% 64.3% 70 bps 25 bps 295 bps Employee Cost 10.0% 9.0% 10.2% 9.4% 100 bps -25 bps 64 bps Other Expenses 7.8% 9.5% 9.2% 8.7% -170 bps -137 bps -89 bps November 7, 2017 Analyst: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 3 of 10

4 Company Snapshot How we differ from Consensus - Equirus Consensus % Diff Comment EPS FY18E % We are below consensus due to lower FY19E % growth and margin estimates Sales FY18E 17,894 18,600-4 % FY19E 19,709 20,378-3 % PAT FY18E 1,715 1,974-1 % FY19E 1,950 1, % Key Assumptions: Standalone FY17 FY18E FY19E FY20E 3W Volumes 266, , , ,747 4W Volumes 30,000 32,350 35,262 38,082 Engine Segment Sales (Rsmn) 17,580 17,672 18,941 20,328 Any auto OEM planning to enter the SCV market will have to either develop engines in-house or look at an independent engine supplier. Selection of GRV as an engine supplier would be a key stock price trigger. Sensitivity to Key Variables % Change % Impact on EPS Raw material cost 5 % -16 % DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 6.8 % % 3.0 % 0.0 % - FY18E FY19E FY20-22E FY23-27E FY28-32E Sales Growth 9% 10% 7% 6% 6% NOPAT Margin 8% 8% 8% 8% 8% IC Turnover RoIC 23.6% 25.3% 26.4% 26.4% 26.4% Other Sales (Rsmn) Total Sales (Rsmn) 18,206 18,369 19,707 21,171 EBITDA Margin 14.9% 14.5% 14.5% 14.5% Risk to Our View: Rise in commodity prices and increased competition from foreign diesel engine manufacturers. Years of strong growth Valuation as on date (Rs) Valuation as of Sept' Based on DCF, assuming 15 years of 9.2% CAGR growth and 26% average ROIC, we derive our Dec 18 fair value of Rs 104. Company Description: Greaves Cotton Ltd (Greaves), incorporated in 1922, is a leading manufacturer and marketer of diesel/petrol engines, Gensets, Agro Equipments and Construction Equipments. Greaves is a key supplier of diesel engines to leading auto OEMs manufacturing small commercial vehicles (SCVs). Key Triggers 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 Greaves Cotton REDUCE , st Dec' % 18 % 20 % 4.4 % 4.4 % CUMMINSIND NR ,542 NR NR % 23 % 20 % 1.0 % - KIRLOSENG NR ,911 NR NR % 12 % 12 % 1.4 % - November 7, 2017 Analyst: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 4 of 10

5 Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18E 2Q18A 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E Revenue 4,007 4,393 4,041 3,907 4,063 4,524 4,604 4,702 4,539 5,014 4,997 5,158 16,343 17,893 19,707 21,171 Cost of Goods sold 2,630 2,823 2,596 2,606 2,720 3,040 3,062 3,127 3,032 3,349 3,338 3,445 10,601 11,949 13,164 14,142 Employee cost ,593 1,744 1,833 1,969 Selling and Admin expenses ,714 1,610 1,852 1,990 EBITDA ,434 2,591 2,858 3,070 Depreciation EBIT ,968 2,071 2,303 2,470 Interest Other Income PBT ,462 2,518 2,746 2,919 Tax Recurring PAT ,781 1,715 1,950 2,072 Extraordinary Reported PAT ,813 1,839 1,950 2,072 EPS (Rs) Key Drivers 3W Volumes 65,000 80,000 67,000 54,000 63,000 76,000 75,000 64,800 66,150 80,560 79,500 70, , , , ,747 4W Volumes 6,500 8,000 7,500 8,000 6,000 9,300 8,250 8,800 6,540 10,137 8,993 9,592 30,000 32,350 35,262 38, Sequential Growth (%) Revenue -1 % 10 % -8 % -3 % 4 % 11 % 2 % 2 % -3 % 10 % 0 % 3 % Cost of Goods sold 1 % 7 % -8 % 0 % 4 % 12 % 1 % 2 % -3 % 10 % 0 % 3 % EBITDA -3 % 29 % -22 % -12 % 4 % 23 % -1 % 2 % -4 % 10 % 0 % 3 % EBIT -4 % 34 % -26 % -16 % 6 % 24 % 1 % 2 % -6 % 12 % 0 % 3 % Recurring PAT -4 % 30 % -26 % -5 % -13 % 22 % 7 % 4 % -8 % 13 % 0 % 5 % EPS -4 % 30 % -26 % -5 % -13 % 22 % 7 % 4 % -8 % 13 % 0 % 5 % Yearly Growth (%) Revenue 5 % 3 % 0 % -3 % 1 % 3 % 14 % 20 % 12 % 11 % 9 % 10 % 1 % 9 % 10 % 7 % EBITDA -2 % 3 % -12 % -15 % -8 % -13 % 11 % 29 % 19 % 7 % 8 % 9 % -9 % 6 % 10 % 7 % EBIT -2 % 4 % -15 % -21 % -12 % -19 % 11 % 36 % 21 % 9 % 8 % 9 % -11 % 5 % 11 % 7 % Recurring PAT 21 % 1 % 18 % -12 % -20 % -25 % 8 % 18 % 25 % 16 % 8 % 9 % 2 % -4 % 14 % 6 % EPS 21 % 1 % 18 % -12 % -20 % -25 % 8 % 18 % 25 % 16 % 8 % 9 % 2 % -4 % 14 % 6 % Margin (%) EBITDA 15 % 18 % 15 % 14 % 14 % 15 % 15 % 15 % 15 % 15 % 15 % 15 % 15 % 14 % 15 % 15 % EBIT 12 % 15 % 12 % 10 % 11 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % 12 % PBT 15 % 18 % 15 % 14 % 13 % 14 % 14 % 14 % 14 % 14 % 14 % 14 % 15 % 14 % 14 % 14 % PAT 11 % 13 % 11 % 10 % 9 % 9 % 10 % 10 % 10 % 10 % 10 % 10 % 11 % 10 % 10 % 10 % November 7, 2017 Analyst: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 5 of 10

6 Mar/04 Sep/04 Mar/05 Sep/05 Mar/06 Sep/06 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/04 Sep/04 Mar/05 Sep/05 Mar/06 Sep/06 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/04 Sep/04 Mar/05 Sep/05 Mar/06 Sep/06 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 Greaves Cotton Ltd. Absolute REDUCE Relative UNDERWEIGHT 2% Upside in 14 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 16,344 17,894 19,709 21,173 Equity Capital PBT 2,464 2,519 2,746 2,919 Op. Expenditure 13,911 15,304 16,852 18,103 Reserve 8,765 8,987 9,174 9,335 Depreciation EBITDA 2,434 2,591 2,858 3,070 Networth 9,253 9,476 9,662 9,824 Others -1, Depreciation Long Term Debt Taxes Paid EBIT 1,965 2,071 2,303 2,470 Def Tax Liability Change in WC Interest Expense Minority Interest Operating C/F 1,144 1,890 2,231 2,439 Other Income Account Payables 2,199 1,539 1,695 1,821 Capex PBT 2,464 2,519 2,746 2,919 Other Curr Liabi 710 1,754 1,932 2,076 Change in Invest Tax Total Liabilities & Equity 12,435 13,048 13,568 14,000 Others PAT bef. MI & Assoc. 1,784 1,715 1,950 2,072 Net Fixed Assets 2,921 3,002 3,047 3,047 Investing C/F Minority Interest Capital WIP Change in Debt Profit from Assoc Others Change in Equity Recurring PAT 1,784 1,715 1,950 2,072 Inventory 1,294 1,128 1,242 1,334 Others -1,479-1,611-1,764-1,911 Extraordinaires Account Receivables 2,702 2,451 2,700 2,900 Financing C/F -1,479-1,611-1,764-1,911 Reported PAT 1,809 1,839 1,950 2,072 Other Current Assets 816 2,087 2,331 2,541 Net change in cash FDEPS (Rs) Cash 4,238 3,923 3,791 3,720 RoE (%) 20 % 18 % 20 % 21 % DPS (Rs) Total Assets 12,435 13,048 13,568 14,000 RoIC (%) 19 % 18 % 20 % 21 % CEPS (Rs) Non-cash Working Capital 1,904 2,372 2,645 2,878 Core RoIC (%) 25 % 24 % 25 % 26 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 89 % 88 % 90 % 92 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 15 % 14 % 14 % 14 % FA Turnover P/B PATM (%) 11 % 10 % 10 % 10 % Net D/E P/FCFF Tax Rate (%) 28 % 32 % 29 % 29 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) -24 % 9 % 10 % 7 % Capital Employed/Equity EV/Sales FDEPS Growth (%) -24 % -4 % 14 % 6 % Dividend Yield (%) 4.4 % 4.4 % 4.9 % 5.3 % TTM P/E vs. 2 yr forward EPS growth TTM P/B vs. 2 yr forward RoE TTM EV/EBITDA vs. 2 yr forward EBITDA growth EPS Growth 50% 25x 40% 20x 15x 30% 10x 20% 5x 10% 0% RoE 50% 40% 30% 20% 10% 0% 5x 4x 3x 2x 1x EBITDA Growth 40% 15x 30% 20% 12x 10% 9x 0% 6x -10% -20% 3x -30% November 7, 2017 Analyst: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 6 of 10

7 Historical Consolidated Financials P&L (Rs Mn) FY14A FY15A FY16A FY17A Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A Revenue 17,359 16,977 16,161 16,344 Equity Capital PBT 1,671 1,740 2,693 2,464 Op. Expenditure 15,482 14,986 13,487 13,911 Reserve 7,707 7,742 8,423 8,765 Depreciation EBITDA 1,877 1,991 2,674 2,434 Networth 8,196 8,231 8,911 9,253 Others ,430 Depreciation Long Term Debt Taxes Paid EBIT 1,431 1,514 2,218 1,965 Def Tax Liability Change in WC 141 1, Interest Expense Minority Interest Operating C/F 1,555 2,251 2,301 1,144 Other Income Account Payables 1,865 1,451 1,941 2,199 Capex PBT 1,671 1,740 2,693 2,464 Other Curr Liabi 1,468 1, Change in Invest 234-1, Tax Total Liabilities & Equity 12,031 11,607 11,775 12,435 Others PAT bef. MI & Assoc. 1,155 1,467 1,758 1,784 Net Fixed Assets 3,705 3,263 2,874 2,921 Investing C/F 13-1, Minority Interest Capital WIP Change in Debt Profit from Assoc Others Change in Equity Recurring PAT 1,155 1,467 1,758 1,784 Inventory 1,629 1,064 1,081 1,294 Others ,664-1,479 Extraordinaires Account Receivables 3,256 2,314 2,006 2,702 Financing C/F ,664-1,479 Reported PAT 1, ,009 1,809 Other Current Assets 953 1,092 1, Net change in cash 1, EPS (Rs) Cash 2,149 3,533 3,794 4,238 RoE (%) 15 % 18 % 21 % 20 % DPS (Rs) Total Assets 12,031 11,607 11,775 12,435 RoIC (%) 14 % 17 % 20 % 19 % CEPS (Rs) Non-cash Working Capital 2,505 1,364 1,956 1,904 Core RoIC (%) 14 % 21 % 26 % 25 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 30 % 86 % 80 % 89 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 11 % 12 % 17 % 15 % FA Turnover P/B PATM (%) 7 % 9 % 11 % 11 % Net D/E P/FCFF Tax Rate (%) 31 % 16 % 35 % 28 % Revenue/Capital Employed EV/EBITDA Sales growth (%) -32 % -27 % -29 % -24 % Capital Employed/Equity EV/Sales FDEPS growth (%) -43 % -5 % -10 % -24 % Dividend Yield (%) 1.0 % 2.0 % 4.4 % 4.4 % November 7, 2017 Analyst: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 7 of 10

8 Equirus Securities Research Analysts Sector/Industry Equity Sales Abhishek Shindadkar IT Services Vishad Turakhia Ashutosh Tiwari Auto, Metals & Mining SubhamSinha Depesh Kashyap Mid-Caps SwetaSheth Devam Modi Power & Infrastructure Viral Desai Dhaval Dama FMCG, Mid-Caps Dealing Room Manoj Gori Consumer Durables Ashish Shah Maulik Patel Oil and Gas IleshSavla PrafulBohra Pharmaceuticals Manoj Kejriwal Rohan Mandora Banking & Financial Services Dharmesh Mehta Associates SandipAmrutiya 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 November 7, 2017 Analyst: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 8 of 10 Gujarat Tel. No: +91 (0) Fax No: +91 (0) 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

9 Analyst Certification Greaves Cotton Ltd. Absolute REDUCE Relative UNDERWEIGHT 2% Upside in 14 months I, Ashutosh Tiwari, 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. This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction. This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its research report. 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: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 9 of 10

10 Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Research Analyst or Relatives financial interest Research Analyst or Relatives actual/beneficial ownership of 1% or more Research Analyst or Relatives material conflict of interest No No 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: Ashutosh Tiwari, ashutosh@equirus.com ( ) Page 10 of 10