News Highlights. What s Inside. Result Update: Radico Khaitan Ltd & Essel Propack Ltd

Transcription

1 Morning Insight % Chg 24-Jan 1 Day 1 Mth 3 Mths Indian Indices SENSEX Index 36, NIFTY Index 10, NSEBANK Index 27, NIFTY 500 Index 9, CNXMcap Index 17,281 (0.3) (1.7) 5.5 BSESMCAP Index 14,225 (0.6) (1.7) 3.5 World Indices Dow Jones 24,553 (0.1) 12.7 (1.7) Nasdaq 7, (3.3) FTSE 6,819 (0.3) 2.0 (2.6) NIKKEI 20,575 (0.1) 8.5 (2.3) Hangseng 20,575 (0.1) 8.5 (2.3) Shanghai 27, Value traded (Rs cr) Cash BSE 24-Jan 2,692 % Chg Day 23.3 Cash NSE 28, Derivatives 1,641, Net inflows (Rs cr) 23-Jan MTD YTD FII (1,067) (3,681) (3,681) Mutual Fund 746 6,225 6,225 Nifty Gainers & Losers Price Chg Vol 24-Jan (Rs) (%) (mn) Gainers Yes Bank Ltd Reliance Ind 1, TCS 1, Losers Bharti Infra 263 (5.1) 11.1 Tata Motors 175 (2.7) 13.5 UPL Ltd 747 (2.0) 2.1 Advances / Declines (BSE) 24-Jan A B T Total % total Advances Declines Unchanged Commodity % Chg 24-Jan 1 Day 1 Mth 3 Mths Crude (US$/BBL) (19.5) Gold (US$/OZ) 1,281.2 (0.1) Silver (US$/OZ) 15.3 (0.3) Debt / forex market 24-Jan 1 Day 1 Mth 3 Mths 10 yr G-Sec yield % Re/US$ Nifty 11,900 11,400 10,900 10,400 9,900 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 News Highlights The government is considering extending the deadline of February 1 by when recently announced changes in the foreign direct investment policy for ecommerce are to take effect. The government is considering giving an extension, but no final decision has been taken.(et) The government may fix trade margins on so-called orphan drugs used to treat rare diseases. The move, if successful, could hurt multinational pharmaceutical companies such as Sanofi Genzyme, Pfizer and Shire USA, who make these drugs.(mint) As Liberty House is dragging its feet in paying for Adhunik Metaliks, Maharashtra Seamless, the second-highest bidder, has written to the Committee of Creditors (CoC), renewing its interest in the company.(bs) Gujarat may offer an additional 50% stake in Gujarat State Petroleum Corp. (GSPC) LNG Ltd to Adani Group, which already holds a 25% stake in the company, after Indian Oil Corp. Ltd decided to opt out of the race.(mint) The CBI has named ICICI Bank s former managing director and chief executive officer (MD and CEO) Chanda Kochhar and her husband Deepak Kochhar, along with his firms, as accused in the Rs 32.50bn Videocon loan case.(bs) Ravneet Gill, a career banker with Deutsche Bank, will succeed Rana Kapoor as the managing director and chief of YES Bank. Kapoor s tenure ends on January 31.(BS) Etihad Airways wants to open the JetPrivilege loyalty programme to other carriers as it negotiates fund infusion into the cash-strapped Mumbai-based airline. Jet s loyalty programme is managed by Jet Privilege Private Limited (JPPL), a subsidiary company which is majority owned by Etihad.(BS) Titan weighs internal, external candidates to replace MD Bhaskar Bhat. External candidates may include those from Tata group firms.(et) The founders of Bengaluru-based IT services company Mindtree are looking to shore up their control of the company against a possibly hostile takeover, with 21% stakeholder VG Siddhartha s exit imminent.(et) The promoters of Zee Entertainment Enterprises have zeroed in on three companies to sell half of their holding in the entity. The three companies include Sony Pictures, which owns rival broadcast business Sony Pictures Networks India (SPN), a US-based media conglomerate, and a Chinese company. (ET) State Bank of India has deferred the sale of Essar Steel s Rs bn loans to February 11 on poor investor response even as the delay in company s insolvency resolution process was criticised by ArcelorMittal, which has been declared the highest bidder by its lenders. (ET) What s Inside Result Update: Radico Khaitan Ltd & Essel Propack Ltd Source: ET = Economic Times, BS = Business Standard, FE = Financial Express, IE = Indian Express, BL = Business Line, BQ = BloombergQuint, ToI: Times of India, BSE = Bombay Stock Exchange, MC = Moneycontrol Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.

2 Result Update Stock Details Market cap (Rs mn) : wk Hi/Lo (Rs) : 500 / 297 Face Value (Rs) : 2 3M Avg. daily vol (Nos) : 590,757 Shares o/s (mn) : 133 Financial Summary Y/E Mar (Rs mn) FY18 FY19E FY20E Revenue 18,228 20,955 23,259 Growth (%) EBITDA 2,698 3,611 4,192 EBITDA margin (%) PAT 1,235 1,957 2,453 EPS EPS Growth (%) Book value (Rs/share) Dividend per share (Rs) ROE (%) ROCE (%) P/E (x) EV/EBITDA (x) P/BV (x) Source: Company, Kotak Securities - PCG Shareholding Pattern (%) (%) Dec-18 Jun-18 Mar-18 Promoters FII DII Others , BSE Price Performance (%) (%) 1M 3M 6M Radico Khaitan Ltd Nifty (2.6) Price chart (Rs) Jan-18 May-18 Sep-18 Jan-19 Pankaj Kumar pankajr.kumar@kotak.com RADICO KHAITAN LTD PRICE RS.428 TARGET RS.460 ACCUMULATE Radico Khaitan Q3FY19 results was ahead of estimates driven by strong volume growth in prestige and above category and better than estimated EBITDA margins. Key Highlights The net revenue for the quarter grew by 14.6% yoy to Rs 5.5 bn and was ahead of our estimates, driven by 7.2% yoy growth in IMFL volume which was at 5.7 mn cases. Volume in Prestige and above category grew at 18.4% yoy while Regular category grew at a slower pace of 3.4% yoy. Volume growth in regular category slowed due to company reducing supply to Tamil Nadu and Kerala due unattractive prices in those states. EBITDA margins in the quarter grew by 160 bps yoy to 17.3% led by premiumization resulting in better realization on yoy. The company expects higher EBITDA margins based on better product mix. The company has guided for overall volume growth of 8-9% with prestige and above category expected to grow at 13-15% in volume terms in the longer run. The company targets to achieve EBITDA margins in late teens by FY21E and intends to be debt free in the next 1.5 years. Valuation & outlook We have largely maintained our EPS estimates. Based on FY19E/FY20E EPS of Rs 14.7/18.4, the stock is trading at PE of 29.1/23.2x. We maintained our Accumulate rating on the stock with target price of Rs 460, valuing the stock at 25x FY20E EPS. Quarterly performance table Year to March (INR Mn.) Q3FY19 Q3FY18 % Chg Q2FY19 % Chg Net Revenues 5,529 4, , Raw Materials Cost 2,785 2, , Gross Profit 2,744 2, , Employee Expenses (6.9) Selling & Distribution exp Other Expenses Operating Expenses 4,571 4, , EBITDA EBITDA margin (%) Depreciation (0.5) Other income (55.6) 42 (34.5) Net finance expense (54.8) 92 (16.7) Profit before tax Provision for taxes Reported net profit As % of net revenues Gross Profit Employee cost Selling & Distribution exp Other Expenses Operating expenses Reported net profit Tax rate (% of PBT) Source: Company Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 2

3 Revenue growth ahead of our estimates Net revenue grew by 14.6% yoy to Rs 5.5 bn and was ahead of our estimates of Rs 5.2 bn led by 7.2% yoy growth in volume and better product mix and was ahead of our estimates. The IMFL volume growth was driven by 18.4% yoy volume growth in Prestige and above category while regular category witnessed softness with 3.4% yoy growth. The slower growth in regular category was due to company reduced supply to states like Tamil Nadu and Kerala due to unattractive prices in those states. In terms of volume mix, prestige category contributed 27.7% of the quarterly volume and regular category contributed 72.3%. In value terms, prestige and above category contributed 50% of the IMFL sales. IMFL sales contributed 80% of the company s revenue in Q3FY19. The growth in volume is driven higher yoy growth rate with increase in market share in UP. Open market policy implemented in UP for FY19 has led to a strong industry volume growth in the state. All its brands did well in the quarter with its recently launched brands 8PM Premium Black whisky and Spirit of Victory rum also started making meaningful contribution to the volumes. In addition the company s focus on branding with increased sales and marketing spend has also positively impacted growth in prestige and above category. The management is positive on volume growth in coming quarters across both regular as well as Prestige and above category. Volume trend (mn cases) Volume Mix (%) 6.0 Prestige & Above Regular Prestige & Above Regular % % 60.0% 40.0% % 0.0% Source: Company Source: Company EBITDA margins improved by 160 bps yoy EBITDA for the quarter grew by 26.8% yoy with EBITDA margins at 17.3%, improved by 160 bps yoy led by improved gross margins driven by better product mix, focus on premiumization and price hike received in some of the states on yoy. Gross margins improved by over 120 bps yoy better product mix and benign raw material prices on yoy. Gross margin on qoq has declined due to increase in ENA prices post revision in MSP. The selling and distribution expenses in the quarter grew by 22.2% yoy on company increasing investment in marketing of its brands. Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 3

4 Signed Bollywood stars for marketing campaign The company s prestige and above category did well due to robust performance of Magic Moment vodka which commands over 50% market share in its category. The company is focusing on increasing branding through marketing campaign with Bollywood star Jacqueline Fernandez and Kartik Aryan through TVC. It has also signed Tiger Shroff as brand ambassador for 8PM premium black whisky. As a result of these initiatives, the selling and distribution expenses have increased in the last few quarters. The company has kept selling and promotion expenditure budget of 7-8%. Reduced debt by Rs mn in Q3FY19, Aims to be debt free in next 1.5 years The company has reduced its debt by Rs mn in Q3FY19 and Rs 2.76 bn in 9MFY19 to Rs 2.93 bn which was driven by strong operating and free cash flows. This has also resulted in 55% yoy decline in interest expenses in Q3FY19. Based on strong margins and lower interest expenses, PAT for the quarter grew by 48.8% yoy to Rs 521 mn (Vs estimates of Rs 491 mn). The company targets to reduce its debt further Q4FY19 and intends to be debt free in the next 1.5 years. Targets 8-9% volume growth with improved margins The management has guided for 8-9% growth in overall volume in the longer run with prestige & above category expected to grow at a faster pace of 13-15%, while regular category is expected to grow at 5-6% on yoy. The growth will be driven strong performance of existing brands in prestige and above category as well as further pickup in new brands. Its recent launches like 8PM Black which is premium variant of 8PM whisky and 1965 premium rum are doing well. The company intends to launch two new brands in premium category in the next two years in brown spirits segment. Further, the management is confident of improving its margins in coming quarters based of improved realization led by better product mix. The company targets to achieve EBITDA margins in late teens by FY21 and intends to be debt free in the next 1.5 years. Other highlights Its existing brands such as 8PM whisky, Magic Moments vodka and Morpheus super premium brandy delivered sustained growth. Magic moment flavored vodka has become larger than magic moment plain vodka due to changing consumer preference and demand dynamics. The flavored vodka segment is expected to grow at faster than industry average. The gross debt of the company at the end of Q3FY19 stood at Rs 3.3bn which includes Rs 2.9 bn of working capital loan and Rs 0.4 bn of term loan. Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 4

5 Outlook and valuation We have realigned our volume and realization estimates between product categories, but these changes will not have any significant impact our earnings estimates. Based on this, we expect RKL s PAT to grow at 41% CAGR in FY18-20E. Based on FY19E/FY20E EPS of Rs 14.7/18.4, the stock is trading at PE of 29.1/23.2x respectively. We maintain our Accumulate rating on the stock with unchanged target price of Rs 460, valuing the stock at 25x FY20E EPS. Change in estimates Particulars (Rs mn) Previous Revised YoY Chg (%) FY19E FY20E FY19E FY20E FY19E FY20E Revenue EBITDA margin (%) bps 12 bps PAT EPS (Rs) Source: Kotak Securities - Private Client Research Company Background Radico Khaitan Ltd (RKL) is one of the largest players in the Indian spirits industry and owns brands like 8PM whisky, Magic Moments vodka, etc. The company was formerly known as Rampur Distillery which was established in The promoter Mr. Lalit Khaitan along with his father bought Rampur Distil3ery in The company was operating as bottler for other spirit companies till 1999, when it forayed into its own brand. Now, RKL has evolved from a distillery player to a branded IMFL player in India with presence across product categories and has 4 brands in 1mn cases annual sales category. It operates three distilleries and one JV with total capacity of 157 million litres (30 mn cases of IMFL and 7 mn cases of country liquor) and 33 bottling units spread across the country. It has strong sales network through over 55,000 retail outlets across India. It is presently the market leader in premium vodka category with its brand Magic Moments. The company is increasing focus on premium/prestige category (Price >Rs 300/750ml) which is contributing 26% of its volume and 43% in value terms while regular brands (Price <Rs300/750ml) contributes 74% in volume and 57% in value terms. Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 5

6 Financials: Standalone Profit and Loss Statement (Rs mn) Revenues 16,799 18,228 20,955 23,259 % change yoy EBITDA 2,125 2,698 3,611 4,192 % change yoy Depreciation EBIT 1,708 2,289 3,183 3,764 Other Income Interest Profit Before Tax 1,097 1,873 3,011 3,773 % change yoy Tax ,054 1,321 as % of EBT PAT 817 1,235 1,957 2,453 % change yoy Shares outstanding (mn) EPS (Rs) DPS (Rs) CEPS(Rs) BVPS(Rs) Balance sheet (Rs mn) Paid - Up Equity Capital Reserves 10,033 11,155 12,906 15,100 Net worth 10,299 11,421 13,172 15,367 Borrowings 7,990 5,925 2,925 1,225 Net Deferred tax Total Liabilities 18,982 18,271 17,022 17,517 Gross block 7,873 8,098 8,598 8,898 Depreciation 835 1,244 1,672 2,100 Net block 7,038 6,854 6,927 6,798 Capital work in progress Investments 2,054 2,054 2,054 2,054 Inventories 2,936 3,109 3,158 3,505 Sundry debtors 6,240 6,300 5,741 6,118 Cash and equivalents Loans and advances & Others 2,660 3,322 3,322 3,488 Total current assets 11,978 12,898 12,355 13,279 Sundry creditors and others 2,726 3,819 4,478 4,779 Provisions ,033 1,033 Total CL & provisions 3,134 4,733 5,511 5,812 Net current assets 8,843 8,165 6,844 7,467 Other net assets 1, Total Assets 18,982 18,271 17,022 17,517 Cash flow Statement (Rs mn) Pre-Tax Profit 1,086 1,873 3,011 3,773 Depreciation Change in WC ,288 (589) Other operating activities (98) (377) (1,054) (1,321) Operating Cash Flow 1,934 2,609 3,672 2,293 Capex (164) (405) (500) (300) Free Cash Flow 1,770 2,205 3,172 1,993 Change in Investments Investment cash flow (164) (405) (500) (300) Equity Raised Debt Raised (1,607) (2,065) (3,000) (1,700) Dividend & others -149 (113) (206) (258) CF from Financing (1,756) (2,178) (3,206) (1,958) Change in Cash Opening Cash Closing Cash Ratio Analysis Profitability Ratios EBITDA margin (%) EBIT margin (%) Net profit margin (%) Adjusted EPS growth (%) Balance Sheet Ratios: Receivables (days) Inventory (days) Loans & Advances Payable (days) Cash Conversion Cycle Asset Turnover Net Debt/ Equity Return Ratios: RoCE (%) RoE (%) Valuation Ratios: P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 6

7 Result Update Stock Details Market cap (Rs mn) : wk Hi/Lo (Rs) : 159 / 85 Face Value (Rs) : 2 3M Avg. daily vol. (Nos) : 205,244 Shares o/s (mn) : 315 Financial Summary Y/E Mar (Rs mn) FY18 FY19E FY20E Revenue 24,464 26,339 29,431 Growth (%) EBITDA 4,648 5,004 5,739 EBITDA margin (%) PAT 1,716 1,930 2,502 EPS EPS Growth (%) BV (Rs/share) Dividend/share (Rs) ROE (%) ROCE (%) P/E (x) EV/EBITDA (x) P/BV (x) Source: Company, Kotak Securities - PCG Shareholding Pattern (%) (%) Dec-18 Jun-18 Mar-18 Promoters FII DII Others , BSE Price Performance (%) (%) 1M 3M 6M Essel Propack Ltd (15.7) (19.3) (33.6) Nifty 2.0 (7.4) (0.9) Price chart (Rs) Oct-17 Feb-18 Jun-18 Oct-18 Jatin Damania jatin.damania@kotak.com ESSEL PROPACK LTD PRICE RS.116 TARGET RS.130 BUY Essel Propack 3QFY19 operating performance was above estimates, with EBITDA margin of 70bps sequentially, supported by improvement in non-oral care revenue composition. Indian operations continue to get impacted by lower pharma category volume. However, Management expects volume in India to pick up, as Pharma regulation issues have been addressed by the industry. Key Highlights Revenue during the quarter grew 16.7%/1.6% YoY/QoQ to Rs6.94bn, driven by both oral and non-oral care categories. AMESA, EAP, EUROPE and America registered 13.5%, 22.7%, 21.1% and 17% YoY growth respectively. Oral care accounted for 56.5% down from 57.6% in 2QFY19 of the revenue and non-oral contribution stood at 43.5%. The Indian Pharma regulation issues have been addressed by the industry and the management expect volumes to see an uptick going forward. Order pipeline in India continues to remain strong. Valuation With the regulatory framework in place in pharma, volume in India business likely to grow in the coming quarters, this coupled with commissioning of new laminator is expected to support margin. In addition to this, the company s focus on the increasing contribution from non-oral care segment across geographies, we expect EBITDA margin to remain in the range of %. Large non-oral care market and better utilisation of assets at Europe, make ESEL a good investment opportunity. At CMP, the stock is trading at 19x/14.7x FY19E/FY20E. We reiterate BUY rating, with an unchanged target price of Rs130. Quarterly table Particulars (Rs Mn) 3QFY19 3QFY18 % YoY 2QFY19 % QoQ Net Sales 6,944 5, , Raw Material 2,916 2,541 2,937 Stock Adjustment 78 (32) 45 Employee Expenses 1,305 1,095 1,227 Other Expenses 1,333 1,203 1,379 TOTAL EXPENDITURE 5,632 4, , EBITDA 1,313 1, , EBITDA Margin (%) Depreciation Exceptional Items (50) EBIT Interest Other Income PBT Tax Deferred Tax 65 (38) (1) Reported Profit After Tax Minority Interest After NP Profit/Loss of Associate Company NP after Minority Int & P/L Asso.Co (14.8) Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 7

8 India business registered growth, but volume in pharma yet to pick up Essel Propack s India operations got impacted by the change in pharma regulation, lower offtake by key customer and also by transporter strike in 1HFY19. However, with the change in regulations and ramp up of Assam facility (run-rate of 16mn tubes per month), India business registered 8.9%/7.8% YoY/QoQ growth in revenue. Though Indian Pharma regulation issues have been addressed by the industry, volume for the same is yet to reflect. We expect India business to report strong volume growth from Q4FY19 onwards. EBITDA margin during the quarter improved 70bps sequentially to 19.4%, but down 30 bps YoY due to exchange rate fluctuations, which offset the benefit of 4.9% YoY growth in non-oral care category in Egypt. However, in terms of contribution per tube, EBITDA was higher in absolute numbers. We expect margin in India business to improve going ahead with the commissioning of new laminator in the month of Dec 18 and is expected to yield strong results. Revenue grew across region The revenue growth during the quarter was supported by all the regions and change in product mix towards non-oral care category (though marginally). EAP registered 22.7% growth, driven by an increase in the non-oral care revenue composition by 7.3%. Revenue in Europe was up 21.1%, 17% in America and 13.5% in AMESA. EAP region seen improvement in EBIT margin YoY on back of change in customer mix, however, the EBIT margin in America was impacted by an increase in costs and volume mix, which offset the benefit coming from Egypt (revenue growth of 58% YoY). Growth in America was aided by contributions from new shot line (500 tube per minute), which enabled the company to gain more business from an existing as well as new customer. Spare capacity in the U.S is shifted to Mexico. In Columbia, impact of low margin order no more persist and new orders are coming at higher margins, which will support the operating performance in the coming quarter. Region wise Revenue contribution (Rs Mn) 3,000 AMESA EAP AMERICAS EUROPE 2,500 2,000 1,500 1, Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 8

9 Region wise EBIT contribution (Rs Mn) 500 AMESA EAP AMERICAS EUROPE Region wise EBIT margin (%) 25.0 AMESA EAP AMERICAS EUROPE Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 9

10 Financials: Consolidated Profit and Loss Statement (Rs mn) Net sales 23,023 24,464 26,339 29,431 growth (%) Operating expenses 18,810 19,817 21,335 23,692 EBITDA 4,213 4,648 5,004 5,739 growth (%) Depreciation &amortisation 1,415 1,671 1,712 1,766 EBIT 2,798 2,977 3,292 3,973 Other income Interest paid Exceptional items PBT 2,743 2,631 2,910 3,719 Tax ,153 Effective tax rate (%) Net profit 1,956 1,742 1,979 2,566 Minority interest Reported Net profit 1,903 1,716 1,930 2,502 growth (%) 10.6% -20.0% 16.5% 29.7% Balance sheet (Rs mn) Cash & Bank balances 991 1,736 1, Other Current assets 9,037 9,740 10,255 11,346 Investments Net fixed assets 11,846 12,258 13,267 14,493 Other non-current assets Total assets 22,497 24,492 25,934 27,497 Current liabilities 3,749 4,300 4,555 4,896 Borrowings 7,984 7,340 6,977 6,157 Other non-current liabilities Total liabilities 12,050 11,943 11,834 11,355 Share capital Reserves & surplus 9,762 11,878 13,347 15,389 Shareholders' funds 10,390 12,507 13,975 16,017 Minority interest Total equity & liabilities 22,497 24,492 25,934 27,497 Cash flow Statement (Rs mn) Net profit before tax 2,743 2,631 2,910 3,719 Depreciation 1,415 1,671 1,712 1,766 Interest Others (427) (98) (240) (399) Opt Profit before WC Changes 4,306 4,753 4,976 5,578 WC Changes 185 (308) (260) (751) Cash Gene from Op. 4,492 4,445 4,716 4,827 Direct Taxes Paid ,153 Cash from Ope act 3,705 3,556 3,785 3,674 Purchases of F.A (3,284) (1,375) (2,435) (2,551) Investment Others Cash from Inv Act (2,961) (1,151) (2,435) (2,551) Ratio Analysis Profitability and return ratios (%) EBITDAM EBITM NPM RoE RoCE Per share data (Rs) O/s shares (mn) EPS FDEPS CEPS BV DPS Proc from Issue of Eq Shares Net loans 1,757 (632) (364) (820) Dividend Paid Others 1, Cash from Fin Act (606) (1,659) (1,431) (1,876) Valuation ratios (x) PE P/BV EV/EBITDA EV/Sales Net Increase in Cash (81) (755) Cash at Beginning ,736 1,655 Cash at End 991 1,736 1, Other key ratios D/E (x) DSO (days) Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 10

11 RATING SCALE Definitions of ratings BUY We expect the stock to deliver more than 12% returns over the next 12 months ACCUMULATE We expect the stock to deliver 5% - 12% returns over the next 12 months REDUCE We expect the stock to deliver 0% - 5% returns over the next 12 months SELL We expect the stock to deliver negative returns over the next 12 months NR Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for information purposes only. SUBSCRIBE We advise investor to subscribe to the IPO. RS Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. NA Not Available or Not Applicable. The information is not available for display or is not applicable NM Not Meaningful. The information is not meaningful and is therefore excluded. NOTE Our target prices are with a 12-month perspective. Returns stated in the rating scale are our internal benchmark. FUNDAMENTAL RESEARCH TEAM Rusmik Oza Arun Agarwal Amit Agarwal Nipun Gupta Deval Shah Head of Research Auto & Auto Ancillary Transportation, Paints, FMCG Information Tech, Midcap Research Associate rusmik.oza@kotak.com arun.agarwal@kotak.com agarwal.amit@kotak.com nipun.gupta@kotak.com deval.shah@kotak.com Sanjeev Zarbade Ruchir Khare Jatin Damania Cyndrella Carvalho Ledo Padinjarathala, CFA Cap. Goods & Cons. Durables Cap. Goods & Cons. Durables Metals & Mining, Midcap Pharmaceuticals Research Associate sanjeev.zarbade@kotak.com ruchir.khare@kotak.com jatin.damania@kotak.com cyndrella.carvalho@kotak.com ledo.padinjarathala@kotak.com Teena Virmani Sumit Pokharna Pankaj Kumar Krishna Nain K. Kathirvelu Construction, Cement, Buildg Mat Oil and Gas, Information Tech Midcap M&A, Corporate actions Support Executive teena.virmani@kotak.com sumit.pokharna@kotak.com pankajr.kumar@kotak.com krishna.nain@kotak.com k.kathirvelu@kotak.com TECHNICAL RESEARCH TEAM Shrikant Chouhan Amol Athawale Faisal Shaikh, CFTe Siddhesh Jain shrikant.chouhan@kotak.com amol.athawale@kotak.com Research Associate Research Associate faisalf.shaikh@kotak.com siddhesh.jain@kotak.com DERIVATIVES RESEARCH TEAM Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas, CMT, CFTe sahaj.agrawal@kotak.com malay.gandhi@kotak.com prashanth.lalu@kotak.com prasenjit.biswas@kotak.com Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 11

12 Disclosure/Disclaimer Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house. Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock Exchange of India Limited (MSE), National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management. Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). We are registered as a Research Analyst under SEBI (Research Analyst) Regulations, We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise/warning/deficiency letters/ or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time. We offer our research services to clients as well as our prospects. This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Kotak Securities Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed. Neither Kotak Securities Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Price and value of the investments referred to in this material may go up or down. Past performance is not a guide for future performance. Certain transactions - including those involving futures, options and other derivatives as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a stock's price movement and trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on a company's fundamentals. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of Research Report or at the time of public appearance. Kotak Securities Limited (KSL) may have proprietary long/short position in the above mentioned scrip(s) and therefore may be considered as interested. The views provided herein are general in nature and does not consider risk appetite or investment objective of particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with KSL. Kotak Securities Limited is also a Portfolio Manager. Portfolio Management Team (PMS) takes its investment decisions independent of the PCG research and accordingly PMS may have positions contrary to the PCG research recommendation. Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take professional advice before investing. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. No part of this material may be duplicated in any form and/or redistributed without Kotak Securities' prior written consent. Details of Associates are available on 1. Note that the research analysts contributing to the research report may not be registered/qualified as research analysts with FINRA; and 2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc. (Member FINRA/SIPC) and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc. (Member FINRA/SIPC)at 369 Lexington Avenue 28th Floor NY NY USA (Tel: ). Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. This research 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. Accordingly, any brokerage and investment services including the products and services described are not available to or intended for Canadian persons or US persons. Research Analyst has served as an officer, director or employee of subject company(ies): No We or our associates may have received compensation from the subject company(ies) in the past 12 months. We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months: No We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report. Our associates may have financial interest in the subject company(ies). Research Analyst or his/her relative's financial interest in the subject company(ies): No Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report. Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No. Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No By referring to any particular sector, Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take professional advice before investing. Such representations are not indicative of future results. Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report. "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" icon in the price chart)." Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai CIN: U99999MH1994PLC134051, Telephone No.: , Fax No.: Website: Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai Telephone No: SEBI Registration No: INZ (Member of NSE, BSE, MSE, MCX & NCDEX), AMFI ARN 0164, PMS INP and Research Analyst INH NSDL/CDSL: IN-DP-NSDL Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing. Investments in securities market are subject to market risks, read all the related documents carefully before investing. Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts. Compliance Officer Details: Mr. Manoj Agarwal. Call: , or ks.compliance@kotak.com. In case you require any clarification or have any concern, kindly write to us at below ids: Level 1: For Trading related queries, contact our customer service at 'service.securities@kotak.com' and for demat account related queries contact us at ks.demat@kotak.com or call us on: Toll free numbers / Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at ks.escalation@kotak.com or call us on and if you feel you are still unheard, write to our customer service HOD at ks.servicehead@kotak.com or call us on Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Mr. Manoj Agarwal) at ks.compliance@kotak.com or call on 91- (022) Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at ceo.ks@kotak.com or call on 91- (022) Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 12