VIP INDUSTRIES LTD (VIP)

Transcription

1 PRIVATE CLIENT RESEARCH SEPTEMBER 21, 2017 Amit Agarwal Stock details BSE code : NSE code : VIPIND Market cap (Rs bn) : 35.7 Free float (%) : wk Hi/Lo (Rs) : 266/ 112 Avg daily volume : 676,000 Shares (o/s) (mn) : Summary table (Rs mn) FY17 FY18E FY19E Sales 12,752 15,581 17,734 Growth (%) EBITDA 1,319 1,957 2,264 EBITDA margin (%) PBT 1,244 1,874 2,177 Net profit 849 1,302 1,512 EPS (Rs) Growth (%) CEPS (Rs) Book value (Rs/share) Dividend per share (Rs) ROE (%) ROCE (%) Net cash (debt) NW Capital (Days) EV/EBITDA (x) P/E (x) P/Cash Earnings P/BV (x) Source: Company, Kotak Securities Private Client Research Share holding pattern Public 23% Corporate bodies 3% Domestic Institutions 17% Source: Capitaline FIIs 5% Promoter 52% VIP INDUSTRIES LTD (VIP) PRICE: RS.248 RECOMMENDATION: BUY TARGET PRICE: RS.325 FY19E PE: 21.5X We initiate coverage on VIP Industries (VIP) which is the market leader in the organized luggage industry in India with more than 50% market share, manufacturing and supplying a wide range of hard sided and soft-sided luggage. We expect the company to maintain a strong growth momentum with increasing penetration of luggage bags and back-packs, healthy GDP growth, improving disposable income, increased air and rail travel and with increased use of luggage as a gifting tool. We estimate revenue CAGR of 17% and earnings CAGR of 28% over FY17 to FY20E with improvement in operating margins and return ratios. We believe VIP would be one of the major beneficiaries of healthy GDP growth, rising income level, changing life style and implementation of GST. We initiate coverage on the stock with a TP of Rs 325 valued at 30x FY19 earnings. Key Investment arguments Increasing penetration of luggage bags - The penetration of luggage for travel in India is significantly low, while the comparable figure of developed countries is much higher. We estimate the penetration of luggage to increase within the country with healthy GDP growth, growing income level, changing life-style growing leisure and business travel, new luggage and backpacks advertising campaigns, strong new product launches by companies and new distribution schemes. Shift towards branded products to propel growth - The Indian luggage industry is currently valued at Rs 80 bn and is partially dominated by the unorganized sector with ~50% market share. As per Industry estimates, the luggage sector is expected to grow at a CAGR of ~11% over FY17 to FY20E within which, the organized segment is expected to grow at a faster pace. This would be on the back of implementation of GST, increase in disposable income, improved brand visibility of established players and increasing fashion consciousness and aspiration levels of people. All of the above would be beneficial for branded players like VIP. Substantial brand visibility with wide distribution network - VIP has been constantly working on improving its brand visibility and product reach for the entire range of products across various VIP brands and across price points. It has been spending around 5-6% of its sales on advertising and promotions to increase its brand visibility and we expect the trend to continue over FY17 to FY20E. It also markets and sell its product through a wide network of dealers and stores, through modern trade, through various online platforms and through various canteens which has substantially improved the brand visibility, reach and sales of VIP. One-year performance (Rel to Sensex) Diversified product portfolio - VIP has a well-diversified product bouquet, which caters to consumers from all income groups. The company s brands like Aristocrat and Alfa cater to the mass segments while, brands like Carlton, Caprese and VIP cater to the high-end segments. The company is also targeting the youth through its trendy brand Skybags. The company s VIP brand contributes ~45% of net sales, followed by Skybags, which contributes ~27%, brands like Aristocrat and Alfa contribute ~20% and the balance is from brands like Carlton and Caprese. Diversified product portfolio enables the company to cater to consumer of every age and every income group. Source: Capitaline 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 Sourcing soft luggage from Bangladesh - The company wants to reduce dependency for soft luggage on China due to factors like rising labour cost in China and toughening environmental norms. It has setup a manufacturing facility in Bangladesh through its wholly owned subsidiary for soft luggage. China now forms 70% (down from 90% in FY15) of the soft luggage requirement, with Bangladesh forming 20% and the rest manufactured indigenously. Going forward, we expect the sourcing of soft luggage to fall further from China to 50% with share of Bangladesh increasing to 40%, which would aid margins going forward. Outlook and valuation We believe VIP would be one of the largest beneficiaries of lifestyle change in the country. With improving luggage penetration in a populated country like India, healthy GDP growth and increasing purchasing power, increasing leisure and business related travel and desire to use branded luggage, would drive the growth of VIP. We estimate volumes for VIP to grow at 12% CAGR and revenues at 17% CAGR over FY17 to FY20E with improvement in margins and return ratios. We value VIP at 30x FY19E earnings which is at 30% discount to consumer companies in the paint industry having similar earnings profile and growth. Initiate coverage with a BUY rating and a TP of Rs 325. Risk and concerns Unpredictable consumer behavior. Continued competition from unorganized sector. Depreciation of rupee. Increase in prices of raw material like polypropylene and polycarbonate. Slow GDP growth and weak income levels. Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 2

3 COMPANY BACKGROUND VIP Industries, established in the year 1971, is a leading luggage maker in India offering a wide range of products in hard luggage and soft luggage segments including school bags, trolleys, backpacks, suitcases, executive cases, duffels and overnight travel solutions. Some of its brands include VIP, Caprese, Alfa, Aristocrat, Buddy and Carlton. The company is Asia s No.1 luggage manufacturer and transforming its business strategy from time to time. The company has manufacturing facilities located at Haridwar in Uttarakhand, Jalgaon, Nagpur and Nashik in Maharashtra. The company has set up a subsidiary in Bangladesh to manufacture and market luggage and bags. The company is maintaining its market share of 50% in the organized luggage industry by offering wide range of product mix like Carlton and VIP catering to high-end segment, Aristocrat caters to midsegment, Skybags cater to mid and sub-mid segment and Alfa for lower-end price segment. The company sells moulded furniture Moderna, which is of superior quality but the furniture business is declining due to intense pressure from competitors. The company is planning to restructure the moderna business to optimize sales. Brands within the VIP ambit Source: Company Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 3

4 INDUSTRY GROWTH POTENTIAL In recent years In India, luggage and handbags have managed to shed their traditional utilitarian tag and have now evolved as lifestyle products. Increasing business and leisure travels coupled with rising disposable income and organized retailing have led to increased demand for luggage. Within this category, the demand for brand names has grown, as consumers aspire for goods that are branded, durable and count as status symbol. Several factors have provided impetus to the growth of luggage industry. We see the following as sector specific factors that would stimulate the growth of the industry: a) As per Ministry of Tourism, India will account for 50 million outbound tourists by 2020, thereby presenting favourable prospects for the luggage industry b) Indian economy is expected to grow at ~7% per annum over the next 3 years creating business opportunities both in the private as well as the public sector. This would stimulate business travel translating into demand for business related bags. c) Big youth population in the country translate into healthy demand for backpacks and duffel bags d) Modern retailing and new fashion trends are also expected to drive the sale of casual bags and travel luggage bags category over the next few years e) Luggage has also become an important part of the wedding trousseau, with even people in tier II and III cities buying branded suitcases and strollers during the wedding season f) Millennial who constitute a considerable portion of Indian population, travel and like to travel hands free, which in turn have initiated growth for the backpack-duffle bag category g) Lower penetration of luggage bags within the country is estimated to increase the overall size of the market Despite such strong prospects, the overall luggage market in the country stands at Rs 80 bn, according to market estimates and approximately 50 percent of this is dominated by organized players with VIP having a 50% market share, with fierce competition from Samsonite and American Tourister. It is imperative for all the luggage players to actively design their strategy to be part of the growth story of the luggage Industry and here we believe VIP has fundamentally done lot of things right. As per Industry estimates, the luggage sector is expected to grow at a CAGR of ~11% over FY17 to FY20E within which, the organized segment is expected to grow at a faster pace. This would be on the back of implementation of GST, increase in disposable income, improved brand visibility of established players and increasing fashion consciousness and aspiration levels. All of the above would be beneficial for branded players like VIP. Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 4

5 INVESTMENT ARGUMENTS Up-trading to propel growth Industry reports indicate that the luggage sector is expected to grow at ~1.5x GDP or at 11% CAGR over FY18 to FY22E, within which, the organized segment is expected to grow at a faster pace compared to the unorganized segment. With the implementation of GST, the pricing gap between the organized and unorganized players has narrowed down significantly, which has equated the pricing of organized and unorganized players creating a level playing field. With this we estimate the share of organized players to improve from current levels, which would help VIP to grow at faster pace over unorganized players. Broadly, we believe that VIP is best placed to gain market share on the back of better product quality, strong brands, and wide distribution network. Currently, the company has 50% market share in the organized luggage industry. For VIP, we estimate the volumes to grow at 12% CAGR over FY17 to FY20E with intermittent price hikes. Hard luggage vs. Soft luggage (FY17) Organized vs. unorganized (FY17) Hard luggage 30% Organised 50% Soft luggage 70% Unorganised 50% Source: Company Level playing field post GST VIP has been paying an effective indirect tax of 20% against our estimate of 12% paid by the unorganized players. GST of 28% is applicable now to the entire luggage industry, which would increase the indirect tax burden on all players. The impact would be more felt to the unorganized players who evade indirect taxes to the tune of 40%. To recover the same, VIP has already taken a price hike of 6% in Q1FY18 with further price increase expected in Q2FY18. We also expect unorganized players to take similar or larger price increase for its products to recover the increased indirect tax impact, which would reduce the pricing gap between the organized and unorganized players creating a level playing field. This is estimated to shift some volumes from the unorganized towards branded organized players like VIP for better product quality and established brands. This would help VIP to grow at faster pace over unorganized players. GST vs. Indirect taxes Category of tax Rate for VIP Unorganized player Excise duty (%) Sales tax (%) 5 to 13 3 to 7 Effective indirect tax (%) GST (%) Source: Industry, Kotak Securities Private Client Research Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 5

6 Diversified product portfolio catering to all segment of customers VIP has a well-diversified product portfolio which caters to consumers across different demographics. The company s brands like Aristocrat and Alfa cater to the mass segments while, brands like Carlton, Caprese and VIP cater to the high-end segments. The company is also targeting the youth through its trendy brand Skybags. The company s VIP brand contributes ~45% of net sales, followed by Skybags, which contributes ~27%, brands like Aristocrat and Alfa contribute ~20% and the balance is from brands like Carlton and Caprese. Positioning of VIP brands Brand Year Positioning VIP 1971 Mass, mid-premium Alfa 1971 Mass market, targeted to convert consumers purchasing unbranded luggage to VIP products Carlton 2004 Premium international brand, targeted towards young professionals Aristocrat 2007 Value for money Skybags 2012 Youth oriented, stylish Caprese 2012 Mass-premium, targeted towards fashion conscious urban women Source: Company Diversified product portfolio enables the company to cater to consumer of every age and every income group. Substantial brand visibility with wide distribution network VIP has been continuously focusing on strong brand visibility of its products. The company s brands include Carlton, VIP Bags, Skybags, Aristocrat, Alfa and Caprese. Historically, the company has been spending around 5-6% (percentage of sales) on ad spends to increase its brand visibility and we expect the trend to continue over FY17 to FY20E. Ad spends by VIP 1, Advertising and promotion expenses (Rs mn - LHS) % of sales (RHS) FY14 FY15 FY16 FY17 FY18E FY19E FY20E 4.8 Source: Company, Kotak Securities Private client Research In terms of sales and distribution, VIP is selling its product through a network of 3000 dealers, 225 exclusive stores, 260 franchise stores, military canteen, through all Supermarkets and hypermarkets and through E-com. This has improved the brand visibility and product reach for the entire range of products across various VIP brands and across price points. Product reach of VIP brands Medium of sales Details Dealers Stores Modern trade Canteen E COM Source: Industry, Kotak Securities Private Client Research Exclusive dealer and distributor Owned and Franchise model Hyper markets, Super markets and departmental stores Military canteen Flipkart, Amazon, Snapdeal, Own Portal Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 6

7 Strategic decision to shift from China to Bangladesh Soft luggage industry is a labour intensive industry with polypropylene as the key raw material. To save on cost, VIP has been sourcing 90% of its soft luggage from China (which is 70% of its revenues) with designing and quality control done by the company itself. Due to increasing labour costs and other reasons such as strengthening of the Yuan vs. INR and toughening environmental and labour laws, the company has decided to reduce dependency on China in the long run and has setup a manufacturing facility in Bangladesh through its wholly owned subsidiary for manufacturing soft luggage. It is also important to note that the Bangladesh subsidiary enjoys excise and sales tax holiday for a period of 6 years beginning FY15. China now forms 70% (down from 90%) of the soft luggage requirement, with Bangladesh forming 20% and rest manufactured indigenously. Going forward, we expect the sourcing of soft luggage to fall further from China to 50% with share of Bangladesh increasing to 40% which would aid margins going forward. Soft luggage sourcing (%) Country FY17 FY20E China Bangladesh India Source: Company, Kotak Securities Private Client Research Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 7

8 FINANCIAL ANALYSIS Revenue CAGR of 17% over FY17 to FY20E Increased luggage penetration and shift of volumes from unorganized to the organized sector would drive the volumes at a CAGR of 12% over FY17 to FY20E. Company has already taken a price increase of 6% in Q1FY18 for its products to cover the impact of GST on the company and would take another similar hike in Q2FY18. This together with intermittent price increase/decrease in sync with demand supply situation would lead to a revenue CAGR of 17% over FY17 to FY20E Trend in volumes and revenues for VIP Particulars FY16 FY17 FY18E FY19E FY20E GDP growth Volume growth Revenue (Rs mn) 12,164 12,752 15,581 17,734 20,320 Source: Company, Kotak Securities Private Client Research Favourable raw material situation to aid margins The 2 major categories of inputs - polypropylene (for hard luggage) and polycarbonate have softened in the last 2 years. Accordingly, VIP has renegotiated with suppliers in Q1FY18 fresh contracts for supply of these raw material at lower prices. The above two mentioned raw material are crude derivatives and we estimate them to remain at lower levels in near term due to excess supply in the market. This coupled with strong demand environment for end product should aid margins going forward for VIP. Polypropylene - Asia price Index Source: Bloomberg EBIDTA margin trend for VIP (%) FY15 FY16 FY17 FY18E FY19E FY20E Source: Company, Kotak Securities Private Client Research Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 8

9 Improving margins to improve the return ratios of the company over FY17 to FY20E DuPont Analysis Parameter Ratio FY16 FY17 FY18E FY19E FY20E EBIT margin EBIT/ Revenue Asset Turn over Revenue /Capital employed Financial Leverage Capital Employed/ Equity Interest Burden PBT/EBIT Tax burden PAT/PBT ROE (%) PAT/Equity EBIT Margin EBIT/ Revenue Capital Turnover Revenue/ Capital Employed ROCE (%) EBIT/Capital Employed Source: Kotak Securities Private Client Research Modest capex of Rs 250 mn per annum over FY17 to FY20E to improve BS quality The company manufactures hard luggage at Haridwar and Nashik and imports 90% of its soft luggage requirement. It is very difficult to measure the capacity of the plants in terms of no of units manufactured, as it involves a mix of multiple category of products. VIP currently operates at 70% utilization (can be increased to 100%) and capacity enhancement can be done by just putting up an additional machinery of around Rs 150 mn. Accordingly we estimate the company to spend around Rs 250 mn per annum over FY17 to FY20E toward capital and maintenance capex. With Operational cash flow generation of Rs 1 bn, we estimate the BS quality of VIP to improve further going forward. Balance sheet health analysis Debt and cash-flow for VIP (Rs mn) FY16 FY17 FY18E FY19E FY20E Gross Debt Networth 3,569 4,046 4,834 5,747 6,818 Cash ,031 Operating cash flow ,203 1,384 Free cash flow ,134 Capex Source: Company, Kotak Securities Private Client Research Company posted strong numbers for Q1FY18 VIP reported very strong set of numbers for Q1FY18 on the back of price hike taken in the month of June 2017 of 6% average across categories, 2) Renegotiated contracts for raw material at lower prices and 3) Strong demand momentum. Management indicated that there would be another price increase of similar quantum in Q2FY18, primarily to counter the impact of higher GST rate which should translate in higher revenue figure for the company in future quarters. We expect the strong quarterly performance to continue for the company with improving luggage penetration in the country, implementation of GST and soft raw material prices. Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 9

10 Consolidated quarterly performance (Rs mn) Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Net sales Raw material cost Employee cost Other expenses Total Expenditure EBIDTA EBIDTA % Depreciation Other income Interest cost PBT Taxes Reported PAT Source: Company VALUATION AND RECOMMENDATION We believe VIP would be one of the largest beneficiaries of lifestyle change in the country. With improving luggage penetration in a populated country like India, healthy GDP growth and increasing purchasing power, increasing leisure and business related travel and desire to use branded luggage, would drive the growth of VIP. We estimate volumes for VIP to grow at 12% CAGR and revenues at 17% CAGR over FY17 to FY20E with improvement in margins and return ratios. We value VIP at 30x FY19E earnings which is at 30% discount to consumer companies in the paint industry having similar earnings profile and growth. Initiate coverage with a BUY rating and a TP of Rs 325. Comparison with consumption companies in the paint sector Company MKt Cap PE (x) EV/EBIDTA (x) P/B (x) RoE (%) (Rs bn) FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E Asian Paints Berger Paints Kansai Nerolac VIP industries Source: Kotak Securities Private Client Research Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 10

11 FINANCIALS Profit and Loss Statement (Rs mn) FY17 FY18E FY19E FY20E Net sales 12,752 15,581 17,734 20,320 Raw material cost 6,759 7,946 9,026 10,323 Employee cost 1,415 1,636 1,844 2,113 Other expenses 3,259 4,042 4,599 5,245 - Operating expenses 11,433 13,624 15,469 17,681 Operating profit 1,319 1,957 2,264 2,640 + Other income Depreciation Interest Tax PAT 849 1,302 1,512 1,756 + (Associates-Minorities) Consolidated PAT 849 1,302 1,512 1,756 Source: Company, Kotak Securities - Private Client Research Cash Flow Statement (Rs mn) (Rs mn) FY17 FY18E FY19E FY20E Consolidated PAT 849 1,302 1,512 1,756 + Non-cash items Cash profit 977 1,445 1,660 1,913 - Inc. in working capital (12) Operating cash flow ,203 1,384 - Capital expenditure Free cash flow ,134 - Dividends Equity raised Debt raised (145) (10) (3) - + Inc. in minority interests Investments 679 (79) (100) - - Miscellaneous items Net cash flow (271) Opening cash Closing cash balance ,031 Source: Company, Kotak Securities - Private Client Research Balance Sheet (Rs mn) FY17 FY18E FY19E FY20E Equity Capital Reserves 3,763 4,551 5,464 6,535 Networth 4,046 4,834 5,747 6,818 Debt Minority interests Capital employed 4,059 4,837 5,747 6,818 Fixed Assets Investments Working capital 2,692 3,387 3,844 4,373 Cash ,031 Capital deployed 4,059 4,837 5,747 6,818 Source: Company, Kotak Securities - Private Client Research Ratio Analysis (Rs mn) FY17 FY18E FY19E FY20E Topline growth (%) Bottomline growth (%) Operating margins (%) FDEPS (Rs/share) CEPS (Rs/share) DPS (Rs/share) BV (Rs/share) PER (x) P/C (x) Dividend yield (%) P/B (x) EV/Sales (x) EV/ EBITDA (x) Debt/Equity (x) Working capital turn (days) Dividend payout (%) ROE (%) ROCE (%) Source: Company, Kotak Securities - Private Client Research Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 11

12 RATING SCALE Definitions of ratings BUY We expect the stock to deliver more than 12% returns over the next 9 months ACCUMULATE We expect the stock to deliver 5% - 12% returns over the next 9 months REDUCE We expect the stock to deliver 0% - 5% returns over the next 9 months SELL We expect the stock to deliver negative returns over the next 9 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. 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 9-month perspective. Returns stated in the rating scale are our internal benchmark. FUNDAMENTAL RESEARCH TEAM Sanjeev Zarbade Ruchir Khare Amit Agarwal Nipun Gupta K. Kathirvelu Capital Goods, Engineering Capital Goods, Engineering Logistics, Paints, Transportation Information Technology Production sanjeev.zarbade@kotak.com ruchir.khare@kotak.com agarwal.amit@kotak.com nipun.gupta@kotak.com k.kathirvelu@kotak.com Teena Virmani Ritwik Rai Jatin Damania Jayesh Kumar Construction, Cement FMCG, Media Metals & Mining Economy teena.virmani@kotak.com ritwik.rai@kotak.com jatin.damania@kotak.com kumar.jayesh@kotak.com Arun Agarwal Sumit Pokharna Pankaj Kumar Ashini Shah Auto & Auto Ancillary Oil and Gas Midcap Midcap arun.agarwal@kotak.com sumit.pokharna@kotak.com pankajr.kumar@kotak.com ashini.shah@kotak.com TECHNICAL RESEARCH TEAM Shrikant Chouhan Amol Athawale shrikant.chouhan@kotak.com amol.athawale@kotak.com DERIVATIVES RESEARCH TEAM Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas 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 12

13 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). 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. 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. 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 our website ie 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 - Yes 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 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: NSE INB/INF/INE , BSE INB /INF , MSE INE /INB /INF , 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. 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: Online Customers (by using your city STD code as a prefix) or Toll free numbers / , Offline Customers 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- Kotak Securities Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 13 (022)