LONG TERM SUBSCRIBE. IPO Report HINDUSTAN AERONAUTICS LTD. IPO Details. Research Analyst : Astha Jain

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1 IPO Report HINDUSTAN AERONAUTICS LTD LONG TERM SUBSCRIBE IPO Details Issue Date 16 th Mar-20 th Mar 2018 Price Band Bid Lot Face Value Listing Offer For Sale Fresh Issue ---- Pre Issue Eq Shares Post Issue Eq Shares BRLM Registrar /Share* 12 & in multiplethereof Rs 10/Share BSE, NSE 34,107,525 Eq Shares Cr Eq Shares Cr Eq shares SBI Capital Markets Ltd, Axis Capital Ltd Karvy Computershare- Private Ltd *: Discount of Rs 25/Share has been offered to retail & employees. Research Analyst : Astha Jain Co have been conferred with the "Navratna" status by the GoI in June 2007 and is the largest DPSU in terms of value of production according to the MoD Annual Report Co was the 39th largest aerospace company in the world in terms of revenue (in USD million) in 2016 according to Flight International. Co is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. Strong financial track record: Co have a strong financial track record. Its revenue from operations grew from Rs 156,480 million in the Financial Year 2015 to Rs 185,549 million in the Financial Year 2017, representing a CAGR of 8.9%. As of September 30, 2017 co had cash and cash equivalents of Rs 116,992 million. Co do not have any long-term debt in its book. As of December 31, 2017, co s order book was Rs 684,610 million, which generally includes products and services to be manufactured and delivered and excludes anticipated revenues from incomplete portions of existing contracts undertaken by its joint ventures. Strong design and development capabilities: As of December 31, 2017, co owned two trademarks, seven patents, 11 design registrations and 77 copyrights. Co s Board has mandated that 10.0% of its operating net profit from the current year can be used for Company-funded research, design and development expenditure. In addition, co have been collaborating with reputable academic and industrial institutions such as the Indian Institutes of Technology ("IITs") and Indian Institute of Science ("IISc") and have also established research chairs at IITs at Kanpur, Roorkee, Chennai, Mumbai and Kharagpur and at IISc Bengaluru which focuses on research in aeronautical engineering. Valuation: The co is bringing the issue at p/e multiple of on FY17 eps at price band of Rs /share. Co with its long credible history of research, design and development, manufacturing and maintenance has established track record in offering product life cycle support extending to periods beyond four decades. Also, co enjoys leadership Position in the Indian Aeronautical industry coupled with robust order book. Hence, looking after all this we recommend Long term subscribe on issue. For Private Circulation Only

2 Company Overview Co was the 39th largest aerospace company in the world in terms of revenue (in USD million) in 2016 according to Flight International. Co is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aeroengines, avionics, accessories and aerospace structures. Co s operations are organised into five complexes, namely the Bangalore Complex, MiG Complex, Helicopter Complex, Accessories Complex, and Design Complex, which together include 20 production divisions and 11 research and design centres ( R&D Centres ) located across India. Co rely on indigenous research as well as enter into technology transfer and licence agreements to manufacture its products. In addition, co have entered into 13 commercial joint ventures to grow its operations. In addition to sales to the Indian Defence Services, which accounted for 91.4%, 93.3%, 94.2% and 92.6% of co s total sales in the six-month period ended September 30, 2017 and in Financial Years 2017, 2016 and 2015, respectively, co sell its products and provide services to state governments, paramilitary forces and corporates. In addition, during the Financial Year 2017, co exported its products and services, primarily spares, to more than 13 countries. During the six month period ended September 30, 2017 and during the Financial Years 2017 and 2016, exports of products and services accounted for 3.0%, 2.6% and 2.7%, of its revenue from operations (net of excise duty) respectively. Company was conferred with the "Navratna" status by the GoI in June 2007 which provides it with strategic and operational autonomy and enhanced powers to make prompt investment decisions, subject to an overall investment ceiling set by the GoI. Co sign a memorandum of understanding with the MoD on a yearly basis, which outlines various targeted performance parameters for a given year. For Private Circulation Only \

3 Investment Rationale Leadership position in the Indian aeronautical industry and strong GoI support Co is the largest DPSU in terms of value of production in the Indian defence sector according to the MoD Annual Report Co have a leadership position in the Indian aeronautical industry as a result of its long-standing relationships, particularly with the Indian Defence Services and the DRDO as well as with various academic institutions and regulatory agencies. The GoI is the promoter of Company, and it also derive a substantial portion of its revenue from the Indian Defence Services. Diversified product portfolio Co have developed a range of product offerings in order to address the varied requirements of its customers. Its products portfolio includes fighter aircraft, trainer aircraft, transport aircraft, military helicopter and civil helicopters and their engines, avionics and accessories (such as special test equipment and ground handling equipment and ground support equipment), which are both indigenously designed or manufactured under licence. Co have also indigenously designed and developed a mini UAV of the eight kilogram class to meet the emerging requirements of its customers, and intend to subsequently enter into the market of larger UAVs with the RustomII medium-altitude, long-endurance UAV which co is jointly developing with the Aeronautical Development Establishment. In order to augment and diversify its portfolio of products and services, co have begun the development of other new products including the Indian Multi Role Helicopter ("IMRH") and commenced new business initiatives including its entry into the civil transport aircraft segment with the civil variant of the Dornier Do-228 aircraft. Furthermore, co began manufacturing industrial marine gas turbines in order to further diversify the range of its product offerings. Risk factors Co depend heavily on MoD contracts. A decline or reprioritisation of funding in the Indian defence budget, that of customers including the Indian Army, Indian Air Force and Indian Navy (the "Indian Defence Services"), Indian Coast Guard, Border Security Force, Central Reserve Police Force and Paramilitary forces or delays in the budget process could adversely affect co s ability to grow or maintain its sales, earnings, and cash flow. For Private Circulation only

4 Objects of Offer The objects of the Offer are: (i) to carry out the disinvestment of 34,107,525 Equity Shares by the Selling Shareholder constituting 10% of Company s Pre-Offer paid up Equity Share capital of Company; and (ii) to achieve the benefits of listing the Equity Shares on the Stock Exchanges. Company will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder. Financial Statements Rs Cr Particulars FY15 FY16 FY17 H1FY18 Total Income Operating Exp EBIDTA EBIDTA Margin (%) Other Income Depreciation EBIT Interest PBT E/O Item PBT After E/O Item Tax PAT Other Comp Inc Adjusted PAT NPM(%) Eq Capital Res & Surplus Net Worth Eq Shares ( In No) EPS ROE (%) ROCE (%) Book Value For Private Circulation only

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