Aarti Industries Ltd KEY HIGHLIGHTS. Shareholding (As on December 31, 2010) KEY RISKS. Indexed price chart. Stock Performances vis-à-vis market

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1 GICS Industry: Chemicals l Sub Industry: Specialty Chemicals l Website : Aarti Industries Ltd Key Stock Indicators NSE Ticker: AARTIIND Bloomberg Ticker: ARTO: IN Face value / Share: 5. Div. Yield (%): 5.3 CMP (as on 1 Feb 211 Rs/share): week range up to 1 Feb 211 (Rs) (H/L): 84.3/44.1 Market Cap as on 1 Feb 211 (Rs mn): 3,579 Enterprise Value as on 1 Feb 211 (Rs mn): 7,848 Shares outstanding (mn): 76.7 Free Float (%): 5.1 Average daily volumes (12 months): 125,719 Beta (2 year):.9 Incorporated in 1984, Aarti Industries Ltd (AIL) is one of the leading suppliers to global manufacturers of dyes, pigments, agrochemicals, pharmaceuticals and rubber chemicals. It is amongst the largest producers of benzene based basic and intermediate chemicals in India. AIL has 16 manufacturing units spread across Gujarat and Maharashtra. It has customers spread across the globe in 6 countries with major presence in USA, Europe, Japan and India. Exports contributed ~36% of total revenues of the company in FY1. KEY HIGHLIGHTS Leading player in speciality chemical business AIL is a leading domestic player in nitrochlorobenzene (NCB) based speciality chemical business with the largest domestic manufacturing capacity of 6, tonnes per annum. It manufactures active pharmaceutical ingredients (API), offers over 15 products and is the market leader in more than 75% of its top 5 products. It is among the largest producers of benzene based basic and intermediaries in India. It is also among the largest integrated manufacturers of dimethyl sulphate (DMS), an organic speciality chemical which uses methanol and sulphur as feedstock. Provides variety of products to end users across the globe Key Financial Indicators Mar-8 Mar-9 Mar-1 Revenue (Rs mn) 8, , ,952. EBITDA margins (%) PAT (Rs mn) PAT margins(%) Gearing (x) EPS (Rs/share) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x) n.m.: Not meaningful 3.8 AIL has a diversified end-user base for its products with application into end-user industries such as dyes, pigments, FMCG, agrochemicals, pharmaceuticals, polymers etc. It has wide customer base of over 1, customers spread over 6 countries across the globe with major presence in USA, Europe, Japan and India. In Europe, it has been marketing its product through its subsidiary Alcemie Europe Ltd while in the rest of the world it sells mostly to direct end-users and partially through distributors. Exports contributed to 36% of FY1 revenues. Commissioned toluene based chemical plant in FY1 Shareholding (As on December 31, 21) DII 9% Others 41% AIL has widened its product mix by including value added chemicals in the speciality chemicals portfolio. The company has incurred a capex of Rs 2 mn towards setting up a manufacturing unit of toluene-based chemicals, which are derivaties of benzene and are mainly used by manufacturers of pigments, agrochemicals and dyes. Toluene-based chemicals are partially imported in India. The unit commenced its operations in the second half of FY1. KEY RISKS Volatility in raw material prices such as benzene, sulphur etc Foreign exchange fluctuations as exports contributed ~36% of total revenues in FY1 Increasing competition from domestic and international players Stock Performances vis-à-vis market Returns (%) YTD 1-m 3-m 12-m AARTIIND NIFTY Note: 1) YTD returns are since April 1, 21 to Feb 1, ) 1-m, 3-m and 12-m returns are up to Feb 1, 211. (index) Feb-1 Mar-1 Promoter 5% Indexed price chart Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-11 (') Volumes (RHS) AARTIIND NIFTY CRISIL COMPANY REPORT 1

2 BACKGROUND AIL is engaged in manufacturing of dyes, pigments, pharmaceuticals, agrochemicals and rubber chemicals. It primarily produces benzene-based basic and intermediate chemicals in India. The company operates in four segments, viz. Basic Chemicals, Specialty Chemicals, Agro Chemicals and Pharmaceuticals. Basic Chemicals segment contributed ~7% of revenues, Specialty Chemicals contributed ~17%, Agro Chemicals ~5% and Pharmaceuticals ~8% of total revenues in FY1. Exports contributed ~36% of total revenues in FY1. The company's products include para nitro chloro benzene (PNCB), ortho nitro chloro benzene (ONCB), para dichloro benzene (PDCB), ortho dichloro benzene (ODCB), nitro benzene, alkylated anilines and toluidines, chloro phenols, fluoro compounds and bulk drug intermediates. The company has 16 manufacturing facitlities spread accross Gujarat and Maharashtra. It has two API units at Dombivali and Tarapur (both in Maharashra) of which Tarapur plant was approved by US FDA in FY8. The company has installed capacity of manufacturing 6, Mt. per annum of NCB (on triple shift basis) and 2,, Mt. per annum of Sulphuric Acid & Allied Products (on triple shift basis). The company offers over 15 products to over 1, customer base spread across 6 countries with major presence in USA, Europe, Japan and India. COMPETITIVE POSITION Peer Comparison Aarti Industries Clariant Meghmani Ltd Chemicals (India) Ltd Atul Ltd. Organics Ltd. Mar-1 Dec-9 Mar-1 Mar-1 Revenue (Rs mn) 12,952. 9, , ,393.5 EBITDA margins (%) PAT (Rs mn) , PAT margins(%) Gearing (x) EPS (Rs/share) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x) n.m: Not meaningful FINANCIAL PROFILE Top-line and margins dropped in FY1 The top-line de-grew by 1.3% to Rs bn in FY1 as compared to Rs bn in FY9, mainly on account of lower realization and volumes following a correction in crude oil prices from year ago levels. Exports also declined by ~11% in absolute terms in FY1. The EBITDA margins decreased by ~16 basis points mainly on account of increase in manufacturing costs as a percentage of sales. Decline in top-line coupled with decrease in operating profitability led to drop in PAT by 16.8% to Rs 823 mn in FY1 as compared to Rs 99 mn in FY9. INDUSTRY PROFILE Key Financial Indicators Units Mar-8 Mar-9 Mar-1 Revenue Rs million 8, , ,952. EBITDA margins PAT Rs million PAT margins Revenue growth EBITDA growth PAT growth Gearing Times RoCE RoE Dyes and pigments The dyestuff industry has three sub-segments - dyes, pigments and intermediates. Dyes are soluble and essentially used in textile products. Pigments, on the other hand, are insoluble and are important inputs for products like paints. Based on product variation, the industry is divided further into basic dyes, disperse dyes, reactive dyes, sulphur dyes, vat dyes, naphthols, optical brighteners, fast colour bases and azoacids amongst others. The industry has nearly 1, small-scale units and 5 large units for manufacturing dyes, pigments and intermediates. Total capacity of the Indian dyes and pigments industry is around 4, 55, tonnes per annum (tpa). Maharashtra and Gujarat account for around 9 per cent of the country`s total dyestuff production. The dyestuff industry has forward and backward linkages with a number of industries. Some major industries that use dyes are textiles, leather, paper, printing inks and food processing. In fact, the textiles and leather processing industries consume around 85 per cent of the total dyes manufactured in the country. The industry enjoys the benefits of a large market, availability of key inputs and technology and competitiveness in the export market. However, the highly fragmented nature of the industry has given rise to intense competition. In production value terms, the unorganised sector accounts for around 35 per cent of the market. CRISIL COMPANY REPORT 2

3 ANNUAL RESULTS Income Statement Balance sheet (Rs million ) Mar-8 Mar-9 Mar-1 (Rs million ) Mar-8 Mar-9 Mar-1 Net Sales 8, , ,94.1 Equity share capital Operating Income 8, , ,952. Reserves and surplus 2, ,3.7 4,165.2 Tangible net worth 2, , ,548.8 EBITDA 1, , ,43.4 Deferred tax liablity: asset EBITDA Margin Long-term debt 1, ,2.4 1,56.6 Short-term-debt 3,52.3 2, ,824.2 Depreciation Total debt 4,312. 4, ,384.8 Interest Current liabilities 1, ,397.7 Other Income Total provisions Total liabilities 8, , ,89.3 PBT ,36.3 1,26.5 Gross block 5,11.6 6,329. 6,977.2 PAT Net fixed assets 3,355. 3, ,138.8 Investments PAT Margin Current assets 4, , ,27.9 Receivables 1, ,66.8 2,569.4 No. of shares (Mn No.) Inventories 2,1.1 2,6.3 2,646.8 Cash Earnings per share (EPS) Total assets 8, , ,89.3 Cash flow Ratio (Rs million ) Mar-8 Mar-9 Mar-1 Mar-8 Mar-9 Mar-1 Pre-tax profit ,32.7 1,28.1 Revenue growth (%) Total tax paid EBITDA growth(%) Depreciation PAT growth(%) Change in working capital -1, EBITDA margins(%) Cash flow from operating activities ,26.8 Tax rate (%) Capital Expenditure , PAT margins (%) Investments and others Dividend payout (%) Dividend per share (Rs) Cash flow from investing activities , BV (Rs) Equity raised/(repaid) Return on Equity (%) Debt raised/(repaid) Return on capital employed (%) Dividend (incl. tax) Others (incl extraordinaries) Gearing (x) Interest coverage (x) Debt/EBITDA (x) Cash flow from financing activities Change in cash position Asset turnover (x) Opening cash Current ratio (x) Closing cash Gross current assets (days) n.m : Not meaningful; QUARTERLY RESULTS Profit and loss account (Rs million) Dec-1 % of Rev Dec-9 % of Rev Sep-1 % of Rev Dec-1 % of Rev Dec-9 % of Rev No of Months Revenue 3, , , , , EBITDA , , Interest Depreciation PBT PAT CRISIL COMPANY REPORT 3

4 FOCUS CHARTS & TABLES Rs mn 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Quarterly sales & y-o-y growth Rs mn Quarterly PAT & y-o-y growth Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Sales Sales growth y-o-y (RHS) Net Profit Net profit growth y-o-y (RHS) Rs/share Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 EPS Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec Mar-8 Movement in operating and net margins Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 OPM NPM Shareholding Pattern () Mar 21 Jun 21 Sep 21 Dec 21 Promoter FII DII Others Board of Directors Director Name Chandrakant Vallabhaji Gogri (Mr.) Rajendra Vallabhaji Gogri (Mr.) Haresh Kunvarji Chheda (Mr.) Manoj Murjibhai Chheda (Mr.) Sunil Mavji Dedhia (Mr.) Parimal Hasmukhlal Desai (Mr.) Hetal Gogri Gala (Ms.) Ramdas Maneklal Gandhi (Mr.) Rashesh Chandrakant Gogri (Mr.) Laxmichand Kakubhai Jain (Mr.) Venkata Shyam Sunder Sree Ramamurthy Kalluri (Mr.) Kirit Ratilal Mehta (Mr.) Vijay Hanumant Patil (Mr.) Prem Chandra Amolak Chand Sethi (Mr.) Shantilal Tejshi Shah (Mr.) Bhavesh Rasiklal Vora (Mr.) Designation Non-Executive Chairman, Promoter- Director Vice Chairman & Managing Director, Promoter-Director Wholetime Director, Promoter-Director Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL COMPANY REPORT 4

5 CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please contact 'Client Servicing' at , or via clientservicing@crisil.com. CRISIL COMPANY REPORT 5