SUBSCRIBE to Aster DM Healthcare Ltd. Subscribe for long term

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1 SUBSCRIBE to Aster DM Healthcare Ltd. Subscribe for long term

2 Salient features of the IPO: Aster DM Healthcare Ltd. (Aster) is one of the largest private healthcare service providers, having operations in multiple GCC (Cooperation Council for the Arab States of the Gulf) states based on numbers of hospitals and clinics. The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS. Net proceeds from the fresh issue would be around Rs. 6,750mn. Of the net proceeds, around Rs. 5,641.6mn, would be utilized to prepay and/or repayment of the debts availed by the company. Another, Rs. 1,103.1mn would be utilized for the purchase of medical equipment and rest for general corporate purposes. Key competitive strengths: Long standing presence across GCC and India Diversified portfolio of service offerings Provision of high quality healthcare service Ability to attract and retain high quality medical professionals Ability to identify, adapt to and capitalize on market developments, conditions, trends and opportunities Risk and concerns: Slow ramp-up of existing and new business Unfavorable patient volume and case mix Unfavorable regulatory changes Unexpected rise in employee cost GCC seasonality business Valuation & recommendation: At the higher price band of Rs. 190 per share, Aster s share is valued at a P/B multiple of 3.6x (to its restated FY17 BVPS of Rs. 52.7), which is at a discount to the peer average of 4x. Below are few key observations of the issue: (For detailed valuation, refer to page 7 of the report) Aster operates in multiple segments of the healthcare industry, including hospitals, clinics and retail pharmacies and provides healthcare services to patients across economic segments through its various brands Aster, Medcare and Access. As of 30 th Sept. 2017, it had 323 operating facilities, including 19 hospitals with a total of 4,754 installed beds. In next 3-4 years, it is planning to commission around five hospitals each in GCC and India. Currently, Aster generates around 80% of the revenue from the GCC operations and rest from the India operations. Going forward, the company is anticipating an increased business potential in India and thus is expecting around one third of the business from India. 09 th Feb Recommendation SUBSCRIBE Price Band (Rs.) Rs per Share Face Value (Rs.) Rs. 10 Shares for Fresh Issue (mn) mn Shares Shares for OFS (mn) 13.4mn Shares Fresh Issue Size (Rs. mn) Rs. 7,250mn OFS Issue Size (Rs. mn) Rs. 2, ,551.4mn Total Issue Size (Rs. mn) Rs. 9, ,667.1mn Bidding Date 12 th Feb. 15 th Feb MCAP at Higher Price Band Rs. 95,993mn Enterprise Value at Higher Rs. 121,466mn Price Band Kotak Mahindra Capital Company Ltd., Axis Capital Ltd., Goldman Sachs (India) Book Running Lead Securities Pvt. Ltd., ICICI Manager Securities Ltd., JM Financial Ltd. and Yes Securities (India) Ltd. Registrar Link Intime India Pvt. Ltd. Sector/Industry Healthcare Facilities Promoters Dr. Azad Moopen and Union Investments Pvt. Ltd. Pre and Post - Issue Shareholding Pattern Pre - Issue Post - Issue Promoter and Promoter Group 43.28% 37.35% Public 55.93% 61.92% Non Promoter & Non Public 0.79% 0.73% Total % % Retail Application Money at Higher Cut-Off Price per Lot Number of Shares per Lot 78 Application Money Rs. 14,820 per Lot Analyst Rajnath Yadav Research Analyst ( ; Ext: 912) rajnath.yadav@choiceindia.com The Union Budget 2018 was historic for the healthcare industry. The government has proposed to launch world s largest government funded healthcare program i.e. National Healthcare protection scheme, by which beneficiaries are anticipated to be around 500mn. We feel that this will be beneficial for the sector in long run. Anticipating the future business potential post the announcement in the budget, Aster is looking to alter its current business plan of mainly focusing on Tier I cities. The company feels that there is a serious case to venture in the tier II & III cities and towns as post the budget announcement the affordability of the medical services would improve. Earlier, the Sanad hospital in the Saudi Arabia generated maximum revenue from the government. However due to fall in the crude prices in the last 2-3years, Aster in consultation with the Saudi government has taken a haircut on the receivables. In FY16 and FY17, the company has made a provision of around Rs. 5bn for the same. In the pre-ipo meet, the management has guided that, it is confident of getting the payments from the government. Thus any write back of the provision would be positive for the company. The GCC business is seasonal in nature. H1 of the fiscal year is a lean period for the company and it generates around 45% of the annual top-line and 25-27% of the annual EBITDA during this period. In H1 FY18, Aster reported a net loss of Rs mn on a top-line of Rs. 31,225.9mn. Based on our quick estimate, we are anticipating a top-line of Rs. 70,192.5mn and EBITDA of Rs. 5,764.1mn in FY18E. EBITDA and PAT margin is expected at 8.2% and 0.5%, respectively. On P/BV valuation, the demanded valuation by Aster is at discount to its peers in the domestic and GCC market. However, considering the short financial history with volatility in the performance, future growth strategy of the company and bright outlook of the healthcare sector, we assign a SUBSCRIBE rating for the issue. 1

3 About the issue: Aster is coming up with an initial public offering (IPO) with mn shares (fresh issue: mn Shares; OFS shares: 13.4mn shares) in offering. The offer represents around 10.2% of its post issue paid-up equity shares of the company. Total IPO size is Rs. 9, ,667.1mn. The issue will open on 12 th Feb and close on 15 th Feb The issue is book building with a price band of Rs per share. 50% of the issue shall be allocated on a proportionate basis to qualified institutional buyers, while rest 15% and 35% is reserved for non-institutional bidders and retail investors, respectively. The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS. Net proceeds from the fresh issue would be around Rs. 6,750mn. Of the net proceeds, around Rs. 5,641.6mn, would be utilized to prepay and/or repayment of the debts availed by the company. Another, Rs. 1,103.1mn would be utilized for the purchase of medical equipment and rest for general corporate purposes. Its promoter holds 43.28% stake in the company and post IPO this will come down to 37.35%. Public holding will increase from current 55.93% to 61.92%. Pre and Post Issue Shareholding Pattern (%) Pre Issue Post Issue (at higher price band) Promoter & Promoter Group (%) 43.28% 37.35% Public (%) 55.93% 61.92% Non Promoter & Non Public 0.79% 0.73% Source: Company RHP Unrealized IPO Process Time Line: Offer Closes on 15-Feb-2018 Unblocking of ASBA Account 22-Feb-2018 Listing on Stock Exchanges 26-Feb-2018 Offer Opens on 12-Feb-2018 Finalization of Basis of Allotment 22-Feb-2018 Credit to Demat Accounts 23-Feb

4 Company Introduction: Aster is one of the largest private healthcare service providers, having operations in multiple GCC states based on numbers of hospitals and clinics. Also, according to the Frost & Sullivan Report it is an emerging healthcare player in India. Currently, it operates in all of the GCC states, which comprise the United Arab Emirates, Oman, Saudi Arabia, Qatar, Kuwait and Bahrain & in Jordan (which it classifies as a GCC state as part of GCC operations), in India and the Philippines. The company s GCC operations is headquartered in Dubai, United Arab Emirates and the Indian operations are headquartered in Kochi, Kerala. Aster operates in multiple segments of the healthcare industry, including hospitals, clinics and retail pharmacies and provide healthcare services to patients across economic segments in several GCC states through its various brands Aster, Medcare and Access. According to the company, its Aster and other brands are widely recognized in the GCC states both by healthcare professionals and patients. It commenced operations in 1987 as a single doctor clinic in Dubai established by the founder, Dr. Azad Moopen. The company was incorporated in 2008 in a reorganization to facilitate the growth of its operations, subsequent to which operations in the GCC states and India were consolidated under Aster. The Malabar Institute of Medical Sciences hospital in Kozhikode, Kerala commenced operations in By the end of FY13, the company had 149 operating facilities, including 10 hospitals with a total of 1,419 installed beds. By 30 th Sept. 2017, it expanded it to 323 operating facilities, including 19 hospitals with a total of 4,754 installed beds. Additionally, Aster entered into an operation and management services agreement with Rashtreeya Sikshana Samithi Trust in Bengaluru effective from 25 th Feb to provide operation and management services at a hospital in J P Nagar, Bengaluru. In August 2014, it launched Aster Medcity in Kochi, Kerala, a multi-specialty hospital with a 670 bed capacity, to be positioned as a destination for medical value travel. In the GCC states, the number of its clinics increased from 41 in FY13 end to 90 as of H1 FY18, and the number of its retail pharmacies increased from 98 to 206, over the same period. The company s pharmacies in India are integrated with the hospitals and clinics. Source: Company RHP 3

5 Company Introduction (Contd ): Aster has a diversified portfolio of healthcare facilities, consisting of 9 hospitals, 90 clinics and 206 retail pharmacies in the GCC states, 10 multi-specialty hospitals and 7 clinics in India, and 1 clinic in the Philippines. Its hospitals in India are located in Kochi, Kolhapur, Kozhikode, Kottakkal, Bengaluru, Vijayawada, Guntur, Wayanad and Hyderabad and are generally operated under the Aster, MIMS, Ramesh or Prime brands. Its clinics in India are located at Kozhikode, Eluru and Bengaluru. As of 30 th Sept. 2017, the company had 17,408 employees, including 1,417 full time doctors, 5,797 nurses, 1,752 paramedics and 8,442 other employees (including pharmacists). In addition, it had 891 fee for service doctors working across various specialties in India. Majority of the hospitals and clinics provide secondary and tertiary healthcare services to patients. In addition to providing core medical, surgical and emergency services, some of its hospitals provide complex and advanced quaternary healthcare in various specialties, including cardiology, oncology, radiology, ophthalmology, neurosciences, pediatrics, gastroenterology, orthopedics and critical care services. The quality of medical care Aster provides is evidenced by the number of quality certifications and other achievements that its facilities have obtained from various local and international accreditation agencies, including from the U.S.-based Joint Commission International (JCI). Five of its hospitals, one clinic and one diagnostic center, and Aster Medcity in Kochi, Kerala, have obtained JCI accreditation. In 2006, the MIMS hospital in Kozhikode, Kerala received accreditation from the National Accreditation Board for Hospitals and Healthcare Providers (NABH). In 2007, the Medcare hospital in Dubai received JCI accreditation. In 2013, the Medcare Orthopedics and Spine hospital in Dubai received JCI accreditation. The Sanad hospital in Saudi Arabia obtained accreditation from the Saudi Central Board for Accreditation for Healthcare Institutions. Medinova Diagnostic Centre, the company s first central laboratory clinic in the GCC states, holds JCI accreditation. Source: Company RHP Competition: Aster defines its competitive environment by identifying specific providers that compete directly with it in healthcare service offerings and by geographic proximity. Its principal competitors with hospitals and clinics in multiple GCC states are Sulaiman Al-Habib Medical Group, Elaj Group, Mediclinic International, Saudi German Hospitals Group, NMC Healthcare, VPS Healthcare, Mouwasat Medical Services Company and Dallah Healthcare Holding Company. For pharmacies, the principal competitors in the GCC states are international pharmacy chains such as Planet Pharmacy, Boots Pharmacy and Al-Nahdi Medical Company among others, and regional and national pharmacy chains such as Life Pharmacy, Medseven Pharmacy, Al-Dawaa Medical Company, Alpha Med Group and Supercare Pharmacy among others, as well as standalone individually operated pharmacies. 3

6 Company Introduction (Contd ): For Indian operations, the principal competitors includes international and national players with multiple facilities, such as Apollo Hospitals, Fortis Healthcare, Narayana Health and All India Institute of Medical Sciences, as well as regional or standalone hospitals. According to the company, the healthcare provider s competitive advantage to attract and retain patients, as well as referrals by external doctors, is based on many factors, including number and quality of medical professionals, reputation, range of healthcare services offered, technology, facilities, equipment quality and efficiency of care, brand recognition, success rate of procedures. Financial performance: Over FY15-17, Aster reported a 23.7% CAGR rise in consolidated operating revenue to Rs. 59,312.9mn in FY17. This was mainly due to the increase in bed capacity from 1,419 beds in FY13 to 4,754 beds by H1 FY18. For the half year ended Sept. 2017, top-line stood at Rs. 31,225.9mn. Medicines and consumables expenses and employee cost increased by 22.3% and 33.5%, respectively, and was in-line with the expansion in the bed capacity. Other expense increased by 29.1% CAGR, mainly due to the provision for expected losses on debtors from the Saudi Arabia operations. As a result, consolidated operating expenditure increased at a faster pace as compared to the top-line, thereby leading to a contraction in EBITDA margin from 13.1% in FY15 to 5.6% FY17. Consolidated EBITDA declined by 19% CAGR over FY15-17 to Rs. 3,321.2mn in FY17. For H1 FY18, EBITDA stood at Rs. 1,781.6mn with margin of 5.7%. Depreciation charges and financial expenses increased by 49.7% and 111.5% CAGR during the period. In FY17, the company reported an exceptional gain of Rs. 5,960.7mn, comprising of net gain of Rs. 3,591.9mn arising from the extinguishment of financial liabilities and Rs. 2,368.8mn from the write back of the provisions. Consequently, PAT after minority interest increased by 22.4% CAGR to Rs. 1,987mn in FY17. PAT margin remained flat over FY15-17 to around 3.3%. Adjusted PAT (excluding exceptional items) was at loss of Rs. 3,973.7mn in FY17 as compared to a profit of Rs. 1,326.9mn in FY15. In H1 FY18, adjusted PAT was at loss of 764.3mn. Given below is the snapshot of the consolidated financial performance: Note: All data are pre-issue; Source: Company RHP FY15 FY16 FY17 H1 FY18 CAGR (%) Y-o-Y (%) Income from Hospital Services 25, , , , % 14.2% Sale of Medicines 12, , , , % 8.1% Income from Healthcare Consultancy % 85.4% Other Operating Revenue , % 49.9% Revenue from Operations 38, , , , % 13.0% EBITDA 5, , , , % -25.5% Adjusted PAT 1,326.9 (590.1) (3,973.7) (764.3) 573.3% Cash Flow from Operating Activities 2, , , , % 80.7% NOPLAT 3, (296.4) -83.3% -79.8% RoIC (%) 12.5% 1.5% 0.3% -0.8% (1,229) bps (123) bps Revenue Growth Rate (%) 35.5% 13.0% EBITDA Growth Rate (%) -11.9% -25.5% EBITDA Margin (%) 13.1% 8.5% 5.6% 5.7% (746) bps (289) bps EBIT Growth Rate (%) -44.1% -95.2% EBIT Margin (%) 9.3% 3.9% 0.2% 0.1% (918) bps (370) bps Restated Adjusted PAT Growth Rate (%) % 573.3% Reported PAT Margin (%) 3.4% -1.1% -6.7% -2.4% (1,012) bps (558) bps Inventories Turnover Ratio (x) % -12.9% Trade Receivable Turnover Ratio (x) % -4.3% Accounts Payable Turnover Ratio (x) % -13.8% Fixed Asset Turnover Ratio (x) % -12.7% Total Asset Turnover Ratio (x) % -4.5% Current Ratio (x) % -11.8% Debt to Equity (x) % -80.7% Net Debt to EBITDA (x) % 19.6% RoE (%) 8.9% -14.1% -21.2% -4.2% (3,013) bps (712) bps RoA (%) 3.0% -1.0% -5.8% -1.1% (884) bps (481) bps RoCE (%) 11.4% 5.3% 0.2% 0.1% (1,120) bps (514) bps 3

7 Competitive Strengths: Long standing presence across GCC states and India with strong brand equity Well diversified portfolio of service offerings to leverage multiple market opportunities Provision of high quality healthcare service Ability to attract and retain high quality medical professionals Ability to identify, adapt to and capitalize on market developments, conditions, trends and opportunities Business Strategy: Continue to grow the existing centers Increase presence by way of greenfield expansions Pursue inorganic growth opportunities to expand into newer service offerings or new markets Capitalize on mandatory health insurance in GCC Implementation of initiatives to improve existing operational efficiencies and profitability Risk and Concerns: Slow ramp-up of existing and new business Unfavorable patient volume and case mix Unfavorable regulatory changes Unexpected rise in employee cost GCC seasonality business CHOICE INSTITUTIONAL RESEARCH 6

8 Peer Comparison and Valuation: Company Name Currency CMP Company Name Debt Equity Ratio MCAP (mn) Fixed Asset Turnover Ratio EV (mn) Total Operating Revenue (mn) RoE (%) RoCE (%) P / E (x) P / B (x) EV / Sales (x) EV / EBITDA (x) MCAP / Sales (x) Earnings Yield (%) Aster DM Healthcare Ltd % 0.2% (24.2) % Apollo Hospitals Enterprise Ltd % 5.9% % Fortis Healthcare Ltd % 1.6% % Narayana Hrudayalaya Ltd % 11.4% % Healthcare Global Enterprises Ltd % 5.4% % Al Mouwasat Medical Services Co % 16.1% % Dallah Healthcare Co % 12.0% % National Medical Care Company JSC % 8.2% % Middle East Healthcare Co CJSC % 21.1% % Al Hammadi Development and Investment Co % 6.4% % NMC Health PLC % 11.5% % Mediclinic International PLC % 5.1% % Average % 9.5% % EBITDA (mn) PAT (mn) EBITDA Margin (%) PAT Margin (%) EPS BVPS DPS Aster DM Healthcare Ltd. INR , ,466 59, ,321.2 (3,973.7) 5.6% -6.7% (7.9) Apollo Hospitals Enterprise Ltd. INR 1, , ,308 72, , , % 3.0% Fortis Healthcare Ltd. INR ,398 75,607 45, , , % 9.2% Narayana Hrudayalaya Ltd. INR ,238 63,785 18, , % 4.4% Healthcare Global Enterprises Ltd. INR ,715 30,038 7, , % 3.2% Al Mouwasat Medical Services Co SAR 172 8,600 9, , % 22.3% Dallah Healthcare Co SAR 111 6,549 6, , % 23.6% National Medical Care Company JSC SAR 47 2,099 2, % 11.0% Middle East Healthcare Co CJSC SAR 58 5,354 5, , % 19.2% Al Hammadi Development and Investment Co SAR 37 4,416 4, % 15.2% NMC Health PLC GBX 32 6,698 7, , % 11.9% Mediclinic International PLC GBX 6 4,181 5, , % 7.8% Average 19.4% 11.9% 1.3 Note: * FY17 financials; For others it is TTM financials; Company financials are in their respective currencies Source: Choice Broking Research, Company RHP At the higher price band of Rs. 190 per share, Aster s share is valued at a P/B multiple of 3.6x (to its restated FY17 BVPS of Rs. 52.7), which is at a discount to the peer average of 4x. Below are few key observations of the issue: Aster is one of the largest private healthcare service providers GCC and an emerging healthcare player in India. The company operates in multiple segments of the healthcare industry, including hospitals, clinics and retail pharmacies and provides healthcare services to patients across economic segments in several GCC states through its various brands Aster, Medcare and Access. CHOICE INSTITUTIONAL RESEARCH 7

9 Peer Comparison and Valuation (Contd ): By the end of FY13, the company had 149 operating facilities, including 10 hospitals with a total of 1,419 installed beds. By 30th Sept. 2017, it expanded it to 323 operating facilities, including 19 hospitals with a total of 4,754 installed beds. In next 3-4 years, it is planning to commission around five hospitals each in GCC and India. Currently, Aster generates around 80% of the revenue for the GCC operations and rest from the India operations. Going forward, the company is anticipating an increased business potential in India and thus is expecting around one third of the business from India. The Union Budget 2018 was historic for the healthcare industry. The government has proposed to launch world s largest government funded healthcare program i.e. National healthcare protection scheme, by which beneficiaries are anticipated to be around 500mn. The government has also proposed to set up 24 government medical colleges by upgrading district hospitals. We feel that this will be beneficial for the sector in long run. Anticipating the future business potential post the announcement in the budget, Aster is looking to alter its current business plan of mainly focusing on Tier I cities. The company feels that there is a serious case to venture in the tier II & III cities and towns as post the budget announcement the affordability of the medical services would improve. The company has an asset light business model in GCC with most of the hospitals under leases arrangement. In GCC operations, Aster is predominantly present in UAE, which generates around 60% of the business. Moreover 80% of the UAE is covered under the insurance policy. As on H1 FY18, the company has a total debt of around Rs. 29bn, of which 65% is foreign currency loan. The cost of foreign debt is around 4.5% (including the hedging cost), while the cost of domestic debt is around %. From the fresh issue, the company is expected to raise around Rs. 6.7bn. Of which, Rs. 5.6bn will be utilized to prepay/repayment of the domestic debt availed by the company. Thus going forward, we are anticipating a huge savings from the lower finance charge. The financial performance of Aster is not encouraging. It reported a 23.7% CAGR rise in consolidated operating revenue over FY Operating expenditure increased at a faster pace as compared to the top-line, thereby leading to a contraction in EBITDA margin from 13.1% in FY15 to 5.6% FY17. Higher operating expenditure was mainly due to higher employee cost and provision for expected losses on debtors from the Saudi Arabia operations. Consolidated EBITDA declined by 19% CAGR over FY In FY17, the company reported an exceptional gain of Rs. 5,960.7mn, comprising of net gain arising from the extinguishment of financial liabilities and write back of the provisions. Consequently, PAT after minority interest increased by 22.4% CAGR to Rs. 1,987mn in FY17. PAT margin remained flat over FY15-17 to around 3.3%. Adjusted PAT (excluding exceptional items) was at loss of Rs. 3,973.7mn in FY17 as compared to a profit of Rs. 1,326.9mn in FY15. Earlier, the Sanad hospital in the Saudi Arabia generated maximum revenue from the government. However due to fall in the crude prices in the last 2-3years, Aster in consultation with the Saudi government has taken a haircut on the receivables. In FY16 and FY17, the company has made a provision of around Rs. 5bn for the same. In the pre-ipo meet, the management has guided that, it is confident of getting the payments from the government. Thus any write back of the provision would be positive for the company. However, in FY17, it has changed the business strategy of the Sanad hospital and now is concentrating more on the private patients. The GCC business is seasonal in nature. H1 of the fiscal year is a lean period for the company as there are summer holidays and festival seasons. The company generates around 45% of the annual top-line and 25-27% of the annual EBITDA during this period. In H1 FY18, Aster reported a net loss of Rs mn on a top-line of Rs. 31,225.9mn. Based on our quick estimate, we are anticipating a top-line of Rs. 70,192.5mn and EBITDA of Rs. 5,764.1mn in FY18E. EBITDA and PAT margin is expected at 8.2% and 0.5%, respectively. On P/BV valuation, the demanded valuation by Aster is at discount to its peers in the domestic and GCC market. However, considering the short financial history with volatility in the performance, future growth strategy of the company and bright outlook of the healthcare, we assign a SUBSCRIBE rating for the issue. 7 CHOICE INSTITUTIONAL RESEARCH

10 Financial Statements: Consolidated Profit and Loss Statement (Rs. mn) FY15 FY16 FY17 H1 FY18 CAGR over Annual Growth FY13-17 (%) over FY16 (%) Revenue from Operations 38, , , , % 13.0% Purchase of Medicines and Consumables (13,377.7) (17,230.4) (20,021.6) (9,903.1) 22.3% 16.2% Changes in Inventories 1, , % 15.0% Employee Benefits Expense (11,535.8) (16,289.8) (20,545.0) (11,275.9) 33.5% 26.1% Other Expenses (9,940.9) (15,522.0) (16,573.4) (8,441.5) 29.1% 6.8% EBITDA 5, , , , % -25.5% Depreciation and Amortization Expense (1,439.6) (2,430.0) (3,224.4) (1,736.0) 49.7% 32.7% EBIT 3, , % -95.2% Finance Costs (790.5) (1,894.1) (3,536.0) (892.7) 111.5% 86.7% Other Income % 44.9% Exceptional Items 5,960.7 Share of Profit / (Loss) of Equity Accounted Investees 0.7 (8.0) (2.3) (2.5) -71.2% PBT 3, , (661.81) -2.9% 666.8% Tax Expenses (341.5) (294.2) (217.9) (165.3) -20.1% -25.9% PAT Before Minority Interest 2, ,667.5 (827.1) -1.0% % Minority Interest (1,394.2) (672.3) (680.5) % 1.2% Reported PAT 1,326.9 (590.1) 1,987.0 (764.3) 22.4% % Adjusted PAT 1,326.9 (590.1) (3,973.7) (764.3) 573.3% Consolidated Balance Sheet Statement (Rs. mn) FY15 FY16 FY17 H1 FY18 CAGR over Annual Growth over FY13-17 (%) FY16 (%) Equity Share Capital 3, , , , % 0.0% Reserves and Surplus 10, , , % % Minority Interest 7, , , , % 112.0% Long Term Borrowings 6, , , , % -26.7% Non Current Derivatives Other Non Current Financial Liabilities , % -94.8% Long Term Provisions 1, , , , % 18.6% Deferred Tax Liabilities (Net) 1, , , , % 8.8% Other Long Term Liabilities % 40.0% Short Term Borrowings 2, , , , % 42.2% Trade Payables 4, , , , % 12.3% Other Current Financial Liabilities 4, , , , % -14.3% Short Term Provisions % -26.4% Current Income Tax Liabilities % 6.0% Other Current Liabilities % -12.2% Total Liabilities 44, , , , % 18.3% Tangible Assets 17, , , , % 35.8% Capital Work in Progress 1, , , , % -19.1% Other Intangible Assets % 179.9% Goodwill 4, , , , % 52.5% Equity Accounted Investees % -3.0% Non Current Investments % -99.9% Other Non Current Financial Assets , , % 125.3% Deferred Tax Assets (Net) % -76.3% Other Non Current Assets , , , % 3.3% Non Current Income Assets % 121.9% Inventories 3, , , , % 28.0% Current Investments % -42.9% Trade Receivables 8, , , , % -4.1% Cash and Bank Balances 2, , , , % -46.6% Other Bank Balances % 58.4% Other Current Financial Assets 1, , , % 34.8% Other Current Assets 1, , , , % -8.2% Total Assets 44, , , , % 18.3% Source: Company RHP CHOICE INSTITUTIONAL RESEARCH 7

11 Financial Statements (Contd ): Consolidated Cash Flow Statement (Rs. mn) Particulars (Rs. mn) FY15 FY16 FY17 H1 FY18 CAGR over Annual Growth over FY13-17 (%) FY16 (%) Cash Flow from Operations 2, , , , % 80.7% Cash Flow from Investing Activities (4,480.2) (7,858.7) (11,527.3) (2,573.0) 60.4% 46.7% Cash Flow from Financing Activities 2, , , % 12.2% Net Cash Flow (99.6) (54.9) (1,381.4) (786.4) 272.4% % Opening Balance of Cash and Bank Balances 2, , , , % 2.0% Effect of Exchange Rate Changes on Cash & Cash Equivalents (1.7) 32.7% 57.1% Closing Balance of Cash and Bank Balances 2, , , % -48.1% Source: Company RHP Consolidated Financial Ratios Particulars (Rs. mn) FY15 FY16 FY17 H1 FY18 Revenue Growth Rate (%) 35.5% 13.0% EBITDA Growth Rate (%) -11.9% -25.5% EBITDA Margin (%) 13.1% 8.5% 5.6% 5.7% EBIT Growth Rate (%) -44.1% -95.2% EBIT Margin (%) 9.3% 3.9% 0.2% 0.1% Adjusted PAT Growth Rate (%) % 573.3% Adjusted PAT Margin (%) 3.4% -1.1% -6.7% -2.4% Liquidity Ratios Current Ratio Debt Equity Ratio Net Debt to EBITDA Turnover Ratios Inventories Days Trade Receivable Days Accounts Payable Days (40.7) (39.3) (45.5) (96.5) Cash Conversion Cycle Days Fixed Asset Turnover Ratio (x) Total Asset Turnover Ratio (x) Return Ratios RoE (%) 8.9% -14.1% -21.2% -4.2% RoA (%) 3.0% -1.0% -5.8% -1.1% RoCE (%) 11.4% 5.3% 0.2% 0.1% Per Share Data Restated Adjusted EPS (Rs.) 2.6 (1.2) (7.9) (1.5) Restated DPS (Rs.) BVPS (Rs.) Restated Operating Cash Flow Per Share (Rs.) Restated Free Cash Flow Per Share (Rs.) (8.9) (6.6) Note: Pre-issue data; Source: Company RHP CHOICE INSTITUTIONAL RESEARCH 7

12 Institutional Equity Research Team Name Designation id Contact No. Ajay Kejriwal President Sundar Bhagwandas Head of Research - Fundamental sanmukhanis@choiceindia.com Sumeet Bagadia Head of Research - Technical sumeet.bagadia@choiceindia.com Amit Singh VP - Institutional Sales amit.singh@choiceindia.com Devendra Gaikwad Sr. Manager - Institutional Sales devendra.gaikwad@choiceindia.com Rajnath Yadav Research Analyst rajnath.yadav@choiceindia.com Satish Kumar Research Analyst satish.kumar@choiceindia.com Aman Lamba Research Associate aman.lamba@choiceindia.com Shrey Gandhi Research Associate shrey.gandhi@choiceindia.com Dhruv Thakkar Research Associate dhruv.thakkar@choiceindia.com Rahul Agarwal Research Associate rahul.agarwal1@choiceindia.com Sneha Research Associate sneha@choiceindia.com Kkunal Parar Sr. Research Associate kkunal.parar@choiceindia.com Ankur Lakhotia Sr. Research Associate ankur.lakhotia@choiceindia.com Vikas Chaudhri Research Associate vikas.chaudhari@choiceindia.com Janhvee Mishra Research Associate janhvee.mishra@choiceindia.com Neha Qureshi Research Associate neha.qureshi@choiceindia.com Rupak De Research Associate rupak.de@choiceindia.com Sachin Gupta Research Associate sachin.gupta@choiceindia.com Diksha Mhatre Research Advisor diksha.mhatre@choiceindia.com Sumer Purohit Research Advisor sumer.purohit@choiceindia.com Karan Bhatt Research Advisor karan.bhatt@choiceindia.com CHOICE INSTITUTIONAL RESEARCH