DCM Shriram Limited (DCMSHR)

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2 Industry CMP Recommendation Add on dips to Target Time Horizon Diversified Rs. 392 Buy at CMP and add on declines Rs Rs Quarters Company Background HDFC Scrip Code DCMSHREQNR BSE Code NSE Code DCMSHRIRAM Bloomberg DCMS:IN CMP - Aug Rs. 392 Equity Capital(Rscr) 32.6 Face Value (Rs) 2 Eq Share O/S(crs) 16.3 Market Cap (Rs crs) 6441 Book Value (Rs) 155 Avg. 52 Wk Week High Week Low 195 Shareholding Pattern (%) Promoters 63.9 Institutions 21.1 Non 15.0 PCG Risk Rating* * Refer Rating explanation Kushal Rughani kushal.rughani@hdfcsec.com Yellow DCM Shriram is a diversified conglomerate engaged in the business of fertilizer, sugar and caustic soda. The Company's segments include Fertilisers - which manufactures urea; Chloro-Vinyl - which manufactures polyvinyl chloride, carbide and chlor alkali products; Shriram Farm solutions - which trades di-ammonium phosphate, muriate of potash, super phosphate, other fertilizers, seeds and pesticides; Sugar- which manufactures sugar products and co-generation of power; Bioseed, which produces hybrid seeds, and Others, which includes Pre-Fabricated unplasticized polyvinyl chloride (UPVC) windows & Doors, Cement, rural retail and plaster of Paris. Its Agri-Rural Business includes urea and single super phosphate (SSP) fertilizers, and farm inputs marketing, such as crop care chemicals and hybrid seeds. Its Chlor-Vinyl Business includes caustic soda, chlorine, calcium carbide, power and cement. It has manufacturing facilities of Fertilizer, Chloro Vinyl and Cement in Kota (Rajasthan). On the back of capacity addition in the high margin Chloro Vinyl business and an expected turnaround in the Sugar Industry, DCM Shriram is expected see significant change in its margin profile going forward and is a suitable candidate for re-rating. DCM Shriram s Hariyali Kisan Bazar was involved in selling of Agriputs/ Fuels to the farmers. However, the segment had been making huge losses for the past several years. Now the company has been in process of rationalising its operations and is now limited to selling fuel to the farmers. The management is now focusing on closure and sale of assets, when the contract with BPCL expires. It will take about 3-4 years to close the segment completely. Investment Rationale Capacity addition in high margin Chloro Vinyl to aid in growth Sugar Segment continues to post strong growth Good Monsoon will lead to better growth in Agri Inputs segment Fenesta windows UPVC segment to post strong growth Expect revenues to post 13% and PAT to record 15% cagr over FY17-19E 1 P a g e

3 The company completed capacity expansion projects for Chlor-Alkali including a captive power plant at Bharuch in Gujarat and power generation in Sugar business at total investment of approximately Rs 700 crores and company completed in Q3 FY17. These plants have stabilized and have started contributing to the earnings of the company. Company will have benefits of these projects for the full year of FY18. Simultaneously, discontinuation of DAP and MOP trading business and better payment situation for fertilizer subsidy led to reducing overall debt levels over last year. Company s balance sheet and cash generation is very comfortable, which enables it to look at further growth initiatives. Company is presently implementing projects involving Chlor-Alkali capacity expansion at Kota includes setting up of 150 kilolitres per day distillery at sugar factory and expanding the fabrication capacity at Fenesta. These projects will involve investments of about Rs 300 crores and will be completed fully by the end of FY18 and will further contribute to the earnings next year onwards. Chloro Vinyl, post completion of the expansion and technology upgradation project total capacity now stands at 1,343 tonnes per day. At Bharuch there's a capacity of 1,013 tonnes per day on the latest capacity on the latest technology. The capacity utilization at Bharuch stood at 77% in Q4 FY17 and will improve with improvement in demand of chlorine. Selling prices of caustic soda are firm, in line with international prices. However, low prices of chlorine and the currency appreciation are impacting the overall price realization. We expect improvements in this situation over the next few months as the excess chlorine gets absorbed in the market. The investments in technology and increase in scale has improved the cost competitiveness. The expansion project at Kota, wherein it is expanding liquid as well as flaking capacity is progressing well and it will come online in Q4 FY18. Regarding plastics, the prices of PVC, as well as carbide are stable. Currency appreciation is creating some pressure on domestic prices. The increase in coal and carbon costs and pressure on prices will be a challenge going forward. Sugar Segment The Indian Sugar Industry has been reeling under bad monsoon and adverse Cane pricing, leading to significant losses over the past few years. This was further exacerbated by significant fall in the Sugar prices last year. A more rational Cane Policy in U.P., where Cane price subsidy is linked to sugar price has largely insulated the Sugar companies from adverse price shocks. This coupled with a Central Government policy to push Ethanol use in fuel and policies to ensure exports of the surplus sugar have started pushing the Sugar prices upward. After making a low of Rs per kg almost 2-3 years back, Sugar prices has recovered off-late to ~Rs 35 per kg. On the back of supporting government policies, Indian Sugar Industry, which has been a laggard for the past several years, is on the verge of a significant turnaround. DCM Shriram has 379,500 MT of Sugar capacity and is expected capitalize on the emerging trend. The Sugar business reported an EBIT of Rs 315cr in FY17, +259% yoy in FY17. 2 P a g e

4 Shriram Farm Solutions Shriram Farm Solution had been selling Bulk Fertilizers or MOP/DAP (Rs 7000mn in FY17), Value added products (Rs 6000mn) and SSP (Rs 4983mn). As Bulk Fertilizers has a very low EBIT margin of ~1%, the company has stopped selling it from FY17. This has led to loss of ~Rs 700cr of sales. However, overall margin will significantly improve as SSP and Value Added products have EBIT margins of 4-5% and 8-9% respectively. Bio Seeds Business DCM Shriram entered in the Hybrid seeds business in 2002 by acquiring Bio seeds. Bioseed is a Research oriented organization and believes in serving the farmers by providing high quality hybrid seeds with desired traits. It is a business with end to end integration which involves research, production, processing and marketing. The key crops that company deal in India comprises of BT cotton, Corn, Paddy, Vegetables among others. In international markets of Philippines, Indonesia and Vietnam, it deals primarily in corn and are developing market for paddy. The distribution network is wide spread across regions and continues to grow as company increase volumes. Company has research stations in all major agro-climatic regions, to cater to farmers in the respective regions. It spends about 8-10% of revenue on research activities. This has led to healthy product pipeline. The product development is not only focused on providing high yielding hybrids, but also meeting other challenges, such as pest resistance, disease tolerance, salinity and drought tolerance. The Company has got into various research alliances to further strengthen its capabilities. The company increased its presence in India and South East Asia since then. With an expectation of better monsoon, we expect this business to grow at strong growth going forward. DCM Shriram s Bioseeds business is vertically integrated with presence across Research, Production, Processing and Marketing. Company Overview DCM Shriram Ltd is a diversified Indian company, operating in Sugar, Chemicals (Cement, Chloro-Vinyl (Chlor Alkali and PVC Resins), Pre Fabricated UPVC Doors & Windows (Fenesta Building Systems)) and Agri-Input (Fertiziliers, Bioseeds, Shriram Farm Solutions and Hariyali Kisan Bazar). Business Verticals: Sugar This business comprises 4 plants in Central U.P. with a total capacity of 33,000 TCD. The business is supported by a Co-gen power capacity of 111MW (expanded in FY17 from 94.5 MW earlier). The company has announced a new project of 150 KLD distillery at the Hariawan sugar plant, which will be completed by FY18. Power segment revenues for FY17 stood at Rs 88cr vs. Rs 52cr. PAT stood at Rs 60cr vs. Rs 37cr last year. 3 P a g e

5 Sugar season the business had recorded about 47% increase in sugar cane crush. The sugar recovery stood at 11.1%, in line with last year. The sugar prices also recorded improvements over last year. Higher cane crush as well as increased power generation capacity has led to 62% higher power sales during the year. The cane planting the area has recorded almost 12% to 13% growth over the last season. With reasonable weather conditions it should enable us to achieve satisfactory growth in volumes next year also. The domestic sugar production in the current season is expected to be lower than demand. This would enable the industry to reduce the excess stocks it has been carrying over the last few years and help stabilize its prices. Company expect the central and state governments to continue a policy environment which is good for the farmer as well as the industry. The 150 kiloliters per day distillery project to produce ethanol at the Hariawan sugar factory is progressing as per plan and is expected to be completed in Q4 FY18. This will further strengthen Sugar business. Chemical: Chloro Vinyl Businesses (a) Chlor-Alkali Business - DCM Shriram s Chlor-Alkali business comprises Caustic Soda (Lye and flakes), Chlorine and associated chemicals including Hydrochloric acid, Stable Bleaching powder, Compressed Hydrogen and Sodium Hypochlorite. The Company has two manufacturing facilities located at Kota (Rajasthan) and Bharuch (Gujarat) with full coal based captive power. The company completed capacity expansion at the Bharuch plant in FY17 taking the total caustic soda capacity to 1343 TPD from 780 TPD. Chlor-Alkali (Chemicals) business produces core chemicals viz. Caustic Soda, Chlorine, Hydrogen, Hydrochloric acid and Stable Bleaching Powder, which are widely used in manufacturing processes of other industries. The growth of this business is highly correlated to the growth of GDP in the country. Caustic Soda and Chlorine are produced as Co products in the ratio of 1:0.88. Caustic Soda is used in Alumina, Paper, Textiles, Detergents, Pharmaceuticals industries etc. and Chlorine is used in Polymers, Dyes & inks, Agro-chemicals, Water treatment etc. The prices of Caustic Soda are influenced by international prices as well as domestic demand supply factors. Chlorine Prices are driven only by local demand supply factors. The company operates manufacturing facilities at Kota (Rajasthan) and Bharuch (Gujarat). It has been able to successfully complete its expansion project at Bharuch in , taking the aggregate production capacity of the Company to 1343 TPD. Caustic Soda flaking capacity was enhanced from 150 TPD to 350 TPD and an additional 60 MW captive Power Plant was commissioned to support expanded capacity. Now, DCM Shriram is the second largest manufacturer in the domestic Chlor-Alkali Industry and the Bharuch facility is the largest single location Chlor-alkali manufacturing unit in India. Both the manufacturing units have access to 100% captive power, based on coal. 4 P a g e

6 (b)pvc Resin Business - A highly integrated business, located at the Kota plant, it involves manufacturing of PVC resins and Calcium Carbide with captive production of Acetylene, Chlorine and Coal based power. The business is involved in the manufacturing of PVC Resins and Calcium Carbide. The Plastics business is an integral part of the Chlor-Vinyl manufacturing facility at Kota with integration in terms of Captive Power, Chlorine and Calcium Carbide. The Company manufactures PVC Resin through the Calcium Carbide route as against the Ethylene route which is being followed by most of the companies worldwide except in China. The Calcium Carbide manufactured by the company is partly sold and partly used for the manufacture of PVC Resins. The business has swing capability to sell more of PVC or Calcium carbide depending on the return per unit of power consumed by these products. PVC Resin is a widely used raw material owing to its safe, healthy, convenient and aesthetical advantage for applications in urban infrastructure, Electronic products, Consumer products, Irrigation etc. It is a thermoplastic with 57% chlorine and 43% carbon, making it excellent fire resistant material. More than 70% of PVC resins are used for producing PVC pipes in India. The Indian PVC market is expected to grow in line with GDP growth of India. India s PVC resin industry s capacity currently stands at around 1.3 million Metric Ton per annum (MTPA). As against this, domestic demand has been growing steadily and has reached ~2.5 MTPA. The gap of ~1.2 MTPA is being met by the import of PVC resin in India. Agri-Input Businesses (a) Fertilizer Business - The Company operates the dual feed Naphtha/LNG based Urea plant with a capacity of 3.79 lakh TPA, at its integrated manufacturing facility at Kota. The plant is currently operating on 100% Natural Gas. (b) Shriram Farm Solutions- This business provides a complete basket of Agri-inputs, viz. Bulk fertilizers, Micronutrients, Hybrid seeds, Pesticides and other Value added products, through its wide distribution network. The business also provides high quality agronomy services aimed at increasing farmer productivity. (c) Bioseeds- DCM Shriram started the business of hybrid seeds in 2002 by taking over Bioseed, with operations in India, Vietnam & Philippines and has since expanded to Indonesia, Bangladesh and Nepal. Bioseed business is present across the entire value chain, i.e. Research, Production, Processing, Extension activities and Marketing with significant presence in India, Philippines and Vietnam. The Company is present in both Field and Vegetable Crops in India. In Philippines and Vietnam the business is present primarily in Corn. The Company has started commercial operations for a Corn hybrid in Indonesia. Bioseed India business: revenues for FY17 were lower by about 6% at Rs 408 crores due to decline in cotton acreages in key markets during Kharif '16. Cotton Seed Price Control Order that capped selling price of BT cotton seeds also impacted revenues. Other crops performed better. PBIT for the year stood at Rs 51 crores, up 12% over last year. Q4 is an off-season for the business with sales restricted to mainly vegetable segments. 5 P a g e

7 Bioseed International business: FY17, international business revenues increased 18% to Rs 62 crores led by Philippines and Indonesia. Losses in Philippines and Indonesia have reduced, Vietnam had higher losses. The total losses were Rs 37 crores vs. Rs 38 crores last year. Keeping in view the longer gestation period and higher losses over the last few years due to inventory write-offs, the company had taken write down of Rs 85 crores in the value of investments in Bioseed International in its standalone accounts with no impact on the consolidated financials. (d)hariyali Kisaan Bazaar: The Company has rationalized this business and discontinued the retail operations except for sale of fuel. DCM Shriram expects to completely exit from this business in the next two-three years. Other Businesses: Fenesta Building Systems manufactures UPVC windows (Un-plasticized PVC) and door systems under the brand Fenesta. Fenesta make noise-proof windows and doors, and monsoon-proof windows. DCM is into Fenesta business since The business offers complete solutions starting from Manufacturing, Design, Fabrication to Installation at the customer s site. As a part of its marketing initiatives, the business has set up self-owned Fenesta branded showrooms in nine cities across India. In FY17, Revenues and PBIT stood higher by 20% to Rs 284cr and 56% yoy were driven by strong growth in retail segment volumes as well as projects. The fresh order booking also improved by 48% yoy, driven by 22% increase in retail bookings and 100% increase in project segment order bookings respectively. Windows and Doors Market in UPVC segment is set to grow by 25-30% in the coming years. upvc doors and windows have several intangible benefits over their counterparts as they are fire, wind, and moisture resistant, aesthetic, long lasting, thermally and acoustically insulated, and can be customized according to individual requirements. It is a low thermal conductive material and is proved to prevent loss of energy by up to 30-35% and also prevents thermal bridging, thus avoiding condensation unlike aluminium. It needs only a light soapy wash and a check of the seals for maintenance. Cement- The company s cement business is located at its Kota plant with a manufacturing capacity of 400,000 MTPA. The cement business leverages the waste generated from the Calcium Carbide production process. Revenue of the cement business stood at Rs. 211 crores vs. Rs 167 crores last year. This increase of 27% was on account of better realizations. PVC Compounding: The business operates under a 50:50 Joint Venture with Axiall LLC (subsidiary of Axiall Corporation a leading international manufacturer of Chloro-Vinyl) - April The Capacity of this business stands at 32,564 MTPA. Axiall is a North American manufacturer and international marketer of two integrated chemical product lines, chloro-vinyls and aromatics, with annualized pro forma revenues of approximately US $5 billion. Axiall's products can be found in high-performance plastics, pulp and paper production, packaging, chemical intermediates, pharmaceuticals, medical and agricultural applications, and paints, acrylics and varnishes. Under the Royal Building Products and Exterior Portfolio brands, Axiall manufactures a complete line of custom and other vinylbased building and home improvement products including window profiles, siding, pipe and fittings, mouldings and trim, and decking. 6 P a g e

8 (b)textiles: The Company had sold off its textile business that comprised 14,544 spindles spinning unit at Tonk in Rajasthan. Chloro-Vinyl Business Chemicals PVC Resins Calcium carbide Power Agri- Inputs Shriram Farm Solutions Bioseeds Fertilisers Sugar Agri Business Others Fenesta Building Systems Cement Polymer Compounds Hariyali Kisaan Bazaar 7 P a g e

9 Industry Overview Imports meet almost 50% of India's PVC demand. PVC Resin is a widely used raw material owing to its safe, healthy, convenient and aesthetical advantage for applications in urban infrastructure, Electronic products, Consumer products, Irrigation etc. It is a thermoplastic with 57% chlorine and 43% carbon, making it excellent fire resistant material. Almost 73% of PVC resins are used for producing PVC pipes in India, mainly in agriculture & construction. The other key driver for PVC Resin is the rise in micro-irrigation. This sector is expected to account for a sizeable percentage of the demand for PVC resins. Applications other than pipes such as packaging, profiles, pharmaceutical segments are also poised for higher growth. India's per capita PVC consumption is ~2.3 Kg which is low compared to ~11.8 Kg in US & over 10 Kg in China. With Steady rise in demand, high dependence on imports & promising prospects in the downstream agriculture & construction sectors, India is likely to remain at the forefront of the global PVC market. India's PVC resin installed capacity currently stands at around 1.4 million Metric Ton per annum (MTPA). As against this, domestic demand has been growing steadily and has reached ~2.95 MTPA in FY17, up 9.3% over last year. The gap in demand and supply, which currently stands at 54.5% of total demand, is being met by the import of PVC resin. The continued focus of the Govt. on building infrastructure development of smart cities, rural housing and Agri-asset creation, rapid urbanization and other initiatives like investments in rural sanitation is expected to fuel growth of the PVC industry in India over the next few years. Indian PVC demand is expected to grow at 8 to 10% CAGR for the next 4-5 years. The Calcium Carbide demand in India is around MT p.a., Company is having 25% of the market share in the country, up from 23% last year. Around 43% of India's demand is met by Imports, majorly from China which satisfies Southern & Western India's demand. The business strives to provide complete solutions to the farmer ranging from products to agronomy. The product portfolio includes Value added inputs such as Seeds (GM, Hybrid and OP), Crop Care Chemicals (Insecticide, Fungicide and Herbicide), Soluble Fertilizers, Micro- Nutrients etc and Bulk Fertilizers like SSP & NPK. The business is supported by strong extension program called the SKVP (Shriram Krishi Vikas Program). This program, apart from being an Agronomy services platform providing latest technology and practices to the farmers and the Channel, also focuses on meeting its social responsibilities. The company lays strong emphasis on strengthening its customer interface which will help in capturing the evolving trends in Agriculture and leverage technology to enhance performance of the Business, the Channel and the Farmer. The business is supported by a strong distribution network spread across 17 states, reaching out to ~ 1.0 million farmers and ~ 35,000 retailers. The Company sells these Agri-Inputs under brand 'Shriram' which is known for quality and has a strong brand image within the farming community. Q1 FY18 Results update In Q1 FY18, DCM Shriram reported robust growth in revenues largely driven by robust growth in revenues from the sugar business as well as capacity ramp-up of new Chloro-Vinyl plant. A robust profitability in the Sugar business was largely off-set by lower profitability in the Chloro Vinyl and Fertilizer business. EBITDA margin improved marginally. Net profit during the quarter stood at Rs 233cr, +39% yoy. 8 P a g e

10 Key Result Highlights 1. DCM Shriram reported 35% yoy growth in the revenues to Rs 19.5bn. 2. Chloro-Vinyl Business: On the back of commissioning of the new Chlor-Alkali facility, its sales volumes grew by a robust 42.1% yoy, while the Chlor-Alkali prices remained Y-o-Y flat during the quarter. PVC sales volumes and realizations grew 2.8% and 3.5% Y-o-Y during the quarter. Overall Chloro Vinyl revenues grew by 34.8% yoy to Rs 5bn. Higher power cost and carbon prices impacted the margin in Q1FY Sugar business reported a stupendous growth 139.1% yoy to Rs 6.6bn on account sustained high sugar price as well as robust growth in sales volumes and power sales from the augmented co-gen plant. Despite higher Sugarcane prices by ~Rs 4 per Quintal, pick-up in Sugar recovery to 11.1%, led to a robust improvement of 494bps Y-o-Y in the EBIT margin of Sugar business to Rs 16.4%. Sugar sales volumes jumped 1166% Y-o-Y to 1.58mn Quintals, while the realization improved 8.9% to Rs 36.4 per kg 4. Bharuch plant capacity utilization improved from 77% in Q4 FY17 to 80% in Q1 FY18 and is currently operating at 82%. 5. Distillary plant with 150 KLPD capacity will be commissioned in Q4FY18, leading to further improvement of base case profitability of Sugar business, in case of cyclical downturn in the Sugar business. 6. Shriram Farm Solutions was almost flat yoy to Rs 2.8bn in Q1FY18, driven by a decline of 12% yoy in the Value-Added products. The Bioseed business grew by 9.1% Y-o-Y, driven by International business, which doubled to Rs 330mn. Further, International business which had been dragging the profitability for the past several quarters reported a robust truned around and reported an EBIT of Rs 28mn in Q1FY18, compared to a loss of Rs 74mn in Q1FY17 7. In Fenesta, revenues jumped 26.9% yoy to Rs 858mn, driven by higher project sales. Orderbook by the end of FY17 stood at Rs 765mn, lower by 6.3% yoy. Retail and Project order booking grew 17% and 56% yoy in Q1FY Consolidated EBITDA margin improved marginally by 38bps yoy to 16.9% in Q1 FY18. A robust profitability in the Sugar business, which expanded by 494bps yoy to 16.4% was largely compensated by a sharp fall in the EBIT margin of Chloro Vinyl business (EBIT margin declined 404bps yoy to 28.5%. 9. EBITDA during the quarter stood at Rs 3,294mn. Company reported 39.7% yoy growth in the net profit to Rs 2,335mn. 9 P a g e

11 Valuations Despite large investments, company s debt equity ratio is at 0.3x only. We think the stock has the potential to get rerated gradually despite its exposure to commodity businesses as its performance across cycles has been healthy. Better monsoon and capacity addition in the high margin Chloro Vinyl business will largely be off-set by revenue loss on account of plan to stop selling MOP/DOP under Shriram Farm Solutions. Further, we expect 13% revenues and earnings to witness CAGR of 14.9% due to strong performance from Sugar business and improvement in the profitability of the Agri-Input business. The company is now focusing more on businesses apart from Urea and Sugar (the two regulated sectors) and expect the other sectors to grow strongly going ahead. At the CMP of Rs 392, DCM Shriram trades at EV/EBITDA of 6.4x FY19E. Based upon 8.2x FY19E EV/EBITDA, we assign DCM Shriram as BUY with TP of Rs 485. We recommend investors to BUY the stock at cmp of Rs 392 and add on dips to Rs 349 with target price of Rs 485. Risks and Concerns Monsoon has significant impact on its revenue stream DCM has a very high dependence on Monsoon as 70-75% of its revenues are from Agri-Input and Sugar businesses. Government Policies DCM Shriram s Bioseeds, Sugar and Fertilizers businesses are directly regulated by the government and it makes the company highly vulnerable to change in the government policies. Business Segment Chloro Vinyl, Carbide, Chlor Alkali Sugar (Sugar, Molasis and Power) Shriram Farm Bioseed Ferilisers (Urea) Fenesta (UPVC windows and doors) Cement Hariyali Bazaar (Fuel) Places Kota (Raj), Bharuch (Guj) Ajbapur, Rupapur, Hariawan, Loni (UP) Distribution N/W across India Various Parts of India, Phillipines, Vietnam and Indonesia Kota (Raj) Kota, Bhiwadi (Raj), Chennai (TN), Hyderabad (Telangana) Kota (Raj) Fuel Outlets in India 10 P a g e

12 Financial overview Revenues PBIT PBIT % FY16 FY17 yoy FY16 FY17 yoy FY16 FY17 Chloro Vinyl Sugar Agri Inputs Shriram Farm (DAP/MOP) Shriram Farm (Excl. DAP/MOP) Bioseed Fertilisers Others Total Segmental Revenue Expectations FY15 FY16 FY17 FY18E FY19E Chloro-Vinyl Sugar Shriram Farm Solution Bioseed Fertiliser Others P a g e

13 Revenues Trend EBITDA and EBITDA Margin (%) FY16 FY17 FY18E FY19E Revenue Growth FY16 FY17 FY18E FY19E EBIDTA EBIDTA Margin Debt/Equity (x) 0.5 Return Ratios (%) FY16 FY17 FY18E FY19E FY16 FY17 FY18E FY19E 12 P a g e

14 FY17 revenues Break up (%) Chloro-Vinyl Sugar Shriram Farm Solution Bioseed Fertiliser Others Others Mix FY17 (%) Fenesta Building Cement Hariyali Kisan Bazar 13 P a g e

15 Income (Consolidated) (Rs Cr) FY15 FY16 FY17 FY18E FY19E Net Revenue Other Income Total Income Growth (%) Operating Expenses EBITDA Growth (%) EBITDA Margin (%) Depreciation EBIT Interest PBT Tax RPAT Growth (%) EPS Balance sheet (Consolidated) As at March FY15 FY16 FY17 FY18E FY19E SOURCE OF FUNDS Share Capital Reserves Shareholders' Funds Long Term Debt Net Deferred Taxes Long Term Provisions & Others Total Source of Funds APPLICATION OF FUNDS Net Block Deferred Tax Assets (net) Long Term Loans & Advances Total Non Current Assets Current Investments Inventories Trade Receivables Short term Loans & Advances Cash & Equivalents Other Current Assets Total Current Assets Short-Term Borrowings Trade Payables Other Current Liab & Provisions Short-Term Provisions Total Current Liabilities Net Current Assets Total Application of Funds P a g e

16 Cash Flow: Consolidated (Rs Cr) FY15 FY16 FY17 FY18E FY19E Reported PBT Non-operating & EO items -48-1, Interest Expenses Depreciation Working Capital Change Tax Paid OPERATING CASH FLOW ( a ) Capex -31 1, Free Cash Flow Investments Non-operating income INVESTING CASH FLOW ( b ) -19 1, Debt Issuance / (Repaid) Interest Expenses FCFE Share Capital Issuance Dividend FINANCING CASH FLOW ( c ) NET CASH FLOW (a+b+c) Closing Cash Key Ratios: Consolidated (Rs Cr) FY15 FY16 FY17 FY18E FY19E EBITDA Margin EBIT Margin APAT Margin RoE RoCE Solvency Ratio Net Debt/EBITDA (x) D/E Net D/E Interest Coverage PER SHARE DATA EPS CEPS BV Dividend Turnover Ratios (days) Debtor days Inventory days Creditors days Working Capital Days VALUATION P/E P/BV EV/EBITDA EV / Revenues Dividend Yield (%) P a g e

17 R E T U R N HIGH MEDIUM LOW Rating Chart LOW MEDIUM HIGH RISK Ratings Explanation: RATING Risk - Return BEAR CASE BASE CASE BULL CASE IF RISKS MANIFEST BLUE PRICE CAN FALL 15% IF RISKS MANIFEST LOW RISK - LOW & IF INVESTMENT PRICE CAN FALL RETURN STOCKS RATIONALE 20% OR MORE FRUCTFIES PRICE CAN RISE BY 15% YELLOW RED MEDIUM RISK - HIGH RETURN STOCKS HIGH RISK - HIGH RETURN STOCKS IF RISKS MANIFEST PRICE CAN FALL 35% OR MORE IF RISKS MANIFEST PRICE CAN FALL 50% OR MORE IF RISKS MANIFEST PRICE CAN FALL 20% & IF INVESTMENT RATIONALE FRUCTFIES PRICE CAN RISE BY 30% IF RISKS MANIFEST PRICE CAN FALL 30% & IF INVESTMENT RATIONALE FRUCTFIES PRICE CAN RISE BY 30% IF INVESTMENT RATIONALE FRUCTFIES PRICE CAN RISE BY 20% OR MORE IF INVESTMENT RATIONALE FRUCTFIES PRICE CAN RISE BY 35% OR MORE IF INVESTMENT RATIONALE FRUCTFIES PRICE CAN RISE BY 50% OR MORE 16 P a g e

18 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 DCM Shriram Limited (DCMSHR) Price Chart Rating Definition: Buy: Stock is expected to gain by 10% or more in the next 1 Year. Sell: Stock is expected to decline by 10% or more in the next 1 Year. 17 P a g e

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