Tech Mahindra. CMP: INR1,036 TP: INR1,260 Buy. emerging stronger

Transcription

1 BSE SENSEX S&P CNX 19,325 5,852 Bloomberg TECHM IN Equity Shares (m) M.Cap. (INR b)/(usd b) 132/ Week Range (INR) 1,069/579 1,6,12 Rel. Perf. (%) 9/12/52 Valuation summary (INR b) Y/E March 2013E 2014E 2015E Sales EBITDA Adj. PAT Adj. EPS (INR) EPS Gr. (%) BV/Sh.(INR) RoE (%) RoCE (%) Payout (%) Valuation P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%) Shareholding pattern (%) As on Dec-12 Sep-12 Dec-11 Promoter Dom. Inst Foreign Others Stock performance (1 year) Investors are advised to refer through disclosures made at the end of the Research Report. 22 February 2013 Update Sector: Technology CMP: INR1,036 TP: INR1,260 Buy emerging stronger Benefits of integration go beyond de-risked profile Merger of TECHM with Mahindra Satyam (SCS) will derive synergies from [1] scale - qualifying the company for large sized deals, [2] cross sell of services and [3] opportunity to cut cost redundancies. Client mining potential remains a growth driver at Mahindra Satyam. Growth prospects are enhanced by increasing invitations in USD50m+ TCV deals. Expect TECHM to grow steadily despite challenges in Telecom on: [1] ramp ups in a couple of large deals, [2] continued growth in their 2nd largest account, which is ~23% of revenues and [3] traction in non BT-execution. Expect FY13-15 USD revenue CAGR of 12.2% and EPS CAGR of 12%. Buy with a target price of INR1,260 which discounts FY15E EPS by 10.5x. Integration benefits go beyond de-risking revenue profile TECHM's merger synergies with SCS go beyond de-risking revenue profile, and will potentially drive better revenue growth through: [1] cross sell of services, [2] higher scale (USD2.7b combined revenue in FY13) facilitating qualifications in much larger bids, and [3] Removal of cost redundancies, thereby enhancing the earnings potential further. SCS: growth potential from client mining after steadying the ship Having addressed its concerns around client retention, employee retention; legal battles and profitability, the management bandwidth can now focus fully on growth. With revenue per client at USD4.4m (annualized) ample growth potential exists from mining alone. Across the top-tier, the metric ranges between USD6.5m-USD11.2m. Greater number of invitations in USD50m+ TCV deals bode positively for its growth prospects. Expect double-digit growth despite onus on ~82% of the business Assuming revenues from HGS acquisition (USD169m per annum) and BT (assumed at USD370m per annum in FY14) to remain flat over FY13-15, this implies the onus of revenue growth on remaining ~82% of the business. Outside BT, TECHM grew revenues at 19-23% over FY Expect TECHM to grow steadily despite challenges in Telecom on: [1] ramp ups in a couple of large deals, [2] continued growth in their 2nd largest account, which is ~23% of revenues and [3] traction in non BT-execution, with the company chasing 5-6 large deals in advanced stages. Benefits from integration could drive the next leg of re-rating; Buy TECHM trades at 9.9x FY14E EPS and 8.6x FY15E EPS. We believe that better revenue growth opportunities following integration of SCS along with revenue de-risking will drive further re-rating in valuations. We value TECHM at a 25% discount to target multiple for HCLT, due to: [1] relatively smaller scale, [2] skew of revenues towards Telecom vertical, and [3] Increasing proportion of BPO revenues. Our target price is INR1,260, which discounts its FY15E EPS by 10.5x. Ashish Chopra (Ashish.Chopra@MotilalOswal.com)

2 Integration benefits go beyond de-risking revenue profile......offer synergies on growth and costs Integration with SCS de-risks the revenue profile with reduced dependency on top client (BT will come down to 12% as per our estimates) and Telecom vertical; and also balances the geography mix. Revenue synergies emanate from larger scale of merged entity (USD2.7b in FY13) with mature practices across diverse segments, qualifying it for larger deals. Additionally, potential exists to cross-sell of Satyam's Enterprise services and Engineering solutions to TECHM's clients. Apart from economies of scale, the merger will create some synergies on the cost front as well, with the company able to do away with redundancies in processes, facilities etc. With only procedural aspects in the way of the merger of TECHM with SCS, we see the combined entity benefit the prospects of the companies on the following fronts: De-risking business profile through diversification: The combined entity will see much more balanced mix of geography-wise revenue spread and reduction in dependency on top accounts. This de-risking bodes positively for valuations in the long run. Geographically, TECHM derives a significant portion of its revenues from Europe, while Mahindra Satyam's business is highly focused on Americas. The amalgamated entity will have a more balanced share of revenue contribution from three key geographies viz Americas, Europe and Rest of World. Well balanced geographic exposure Merger of TECHM with SCS de-risks geographic exposure and clients exposure 22 February

3 Secondly, despite contraction in absolute revenues obtained from BT, the client continues to constitute ~1/3d of the revenues for TECHM. That dependency will come down to 12% after the merger with SCS, after considering revenues from acquisition of HGS, Comviva and Complex IT. Contribution from top-10 clients will get cut from 77% at TECHM currently to 57%. BT dependency to reduce Proportion of BT revenues in 9MFY13 (%) 32.5 Stable state revenues from BT (USD m) 370 Combined entity revenues in FY14 (USD m) 3,081 BT dependency post merger (%) 12.0 Dependency on top client to reduce significantly post integration To come down to 12% after factoring acquisitions Revenue synergies from the acquisition emanate from cross-sell of services and more qualifications for larger deals Facilitate revenue growth through cross sell of services TECHM's offerings and expertise have been mainly in services like ADM, BPO, Network, ITO and Security. Integration with SCS lends company the ability to offer a wider range of offerings like Enterprise Services and Engineering Services to current and future customers. Conversely, there are services at TECHM, expertise in which would be sellable to clients at SCS as well. Working directly with companies in Telecom domain has forced TECHM's hand at continuously building capabilities in areas like Mobility, Collaboration and Cloud computing. The offerings in these areas are not restricted to the Telecom vertical alone and will find demand in other verticals as well, which are addressed by SCS. 22 February

4 Shared Services - Shared Infrastructure Telecom Cloud Services Enterprise Mobility Security Solutions Managed Services BPO Manufacturing BFSI Technology and Media Retail, T&L Healthcare & Life Science Enterprise Solutions Shared Services Shared Infrastructure Benefits of scale - costs cutting and better opportunities We expect the combined entity's revenues to be USD2.7b in FY13 and USD3.08b in FY14. The larger entity should reap some of the obvious benefits of scale. This, along with higher scale of mature practices like ADM will facilitate the combined entity invitations / qualifications / opportunities in much larger bids, competing directly with large domestic and MNC peers. This is already visible in higher number of invitations in USD50m+ deals that Mahindra Satyam is witnessing, following a joint go-to-market with TECHM that is already implemented as a merged entity. Additionally, the merger will create some synergies on the cost front as well, with the company able to do away with redundancies in processes, facilities etc. Combined entity Snapshot FY10 FY11 FY12 FY13E FY14E FY15E USD Revenue (m) 2,027 2,191 2,464 2,675 3,081 3,380 YoY (%) INR b Revenue YoY (%) EBITDA Margin (%) PAT YoY (%) Margin (%) February

5 Mahindra Satyam - growth potential from client mining......and improved prospects around large deals Revenue per client still remains well below top-tier peers at Satyam, while the company has healthy presence in IT spenders. The company is beginning to witness increasing number of invitations in deals with TCV upwards of USD50m, a key positive to its growth prospects. With the overhangs of legal hassles and removing inefficiencies behind, the management bandwidth can now focus entirely on growth. Client mining has been impressive thus far, significant room exists for more when compared to peers Client mining efforts have so far borne fruit At SCS, revenue per client has significantly lagged that at larger peers, and the company had clearly identified that as an opportunity to drive growth. Towards that end, SCS has managed to grow its annualized revenue per client from USD4m per annum in 4QFY11 by 10% to USD4.4m in 3QFY13. Client mining efforts have borne some fruits thus far, potential remains huge when compared with revenue per client metrics of top-tier peers Also, the company has managed to grow the number of clients in its top clients bucket. Number of clients annually contributing USD50m+ to revenues increased from 2 in 3QFY11 to 5 in 2QFY13. Also, number of USD20m+ clients increased to 16 in 2QFY13 from 10 in 3QFY11. Client mining efforts reflected in growth in large client buckets 22 February

6 Higher number of invitations for USD50m+ TCV deals augurs well for growth With key concerns successfully addressed, the management bandwidth and now stay fully focused on growth Seeing higher number of qualifications in larger deals: While environment may not be supporting potential signing of higher number of large deals, the turnaround at SCS has held it in good stead. The pipeline of large deals remains impressive, and the company cited marked improvement in invitations for larger opportunities. Earlier, the company faced challenges in getting invited for USD30m-USD50m deals, but that has changed now, with many invitations for deals upwards of USD50m each. Clients who left SCS during the uncertain times have started returning to the Mahindra Satyam fold. Clients that had imposed an embargo on awarding fresh projects, have since revoked their decision. This has driven confidence of the management in growing revenues in line with the industry going forward. See management bandwidth focused on growth after addressing concerns With contingencies largely dealt with, and the turnaround impressively completed, the bandwidth can now focus on growth. The company has already started seeing the number of invitations in USD50m+ TCV deals go up, which bodes positively for revenue growth, along with ample potential to drive growth through client mining. Concerns largely addressed: Mahindra Satyam has come a long way in its recovery process which was focused on addressing the concerns around the following: 1. Customer Retention: Mahindra Satyam's focus on mining existing accounts better has been a key driver of revenues over the past couple of years. SCS has managed to continue increasing its customer base despite tainted recent-past 2. Employee Retention: The company's attrition rate is down to 13.1% in 3QFY13 from 25% in 3QFY11. Although this is partly attributed to the environment, we cannot ignore the fact that attrition is now among the lowest in the industry from among the highest earlier. 22 February

7 Attrition was among the highest in the industry, is now among the lowest 3. Dispute resolution: Most of the litigations are now behind the company, with the only prominent ones being domestic in nature (companies of Raju family and Income tax). 4. Improving profitability: 21.6% EBITDA margin in 3QFY13 has been a steady improvement from 5.9% reported in 2QFY11. EBITDA margin profile has completely turned around on impressive execution 22 February

8 TECHM: Growth visibility despite a bleak outlook on Telecom Multiple growth drivers to make up for further potential declines in BT Ramp-up in large deals lend visibility to growth in the near-term. AT&T (2nd largest client) continues to be a growth account for the company. With wallet size bigger than BT, potential to penetrate further remains. Trends such as vendor consolidation, emerging technologies and under-outsourced players continue to remain additional growth drivers despite weak Telecom environment. Expect TECHM to grow steadily despite challenges in Telecom on: [1] ramp ups in a couple of large deals, [2] continued growth in their 2nd largest account, which is ~23% of revenues and [3] traction in non BT-execution, with the company chasing 5-6 large deals in advanced stages Why TECHM could match peer growth despite challenges in Telecom? Traction in second largest customer: Second largest customer grew 20%+ in FY12 and is growing in double digits in FY13. For FY14, the company expects growth to taper off v/s FY13 on ~USD300m annual base. Growth outlook is close to double digits in FY14. Growth in top accounts excluding BT: Outside of BT, TECHM has managed impressive growth in its top accounts over the past few years. Since 1QFY11, revenue growth at TECHM has been driven by top 2-10 accounts - over 1QFY11-2QFY13, top 2-5 accounts have grown at a CQGR of 5% and top 6-10 accounts have growth at a CQGR of 4.5%. Top 2-10 clients have driven growth at (3Q spike in top 2-5 on HGS acquistion) Ramp-ups in a couple of large deals won: The large deal that TECHM announced in 2Q is expected to yield only some revenues in 2HFY13. So, FY14 will be the first full year of revenues from that account. Also, the company announced a significantly large 5-year deal in 3Q, revenues from which will start flowing in FY14. Healthy large deal pipeline: The company is chasing 5-6 large deals in which it either features among the last 2 short-listed candidates or it is in contract signing stages. Moving out of headwinds from weeding of unprofitable BPO accounts: Tech Mahindra revenues have been impacted negatively by ~USD30m on account of Etisalat, order cancellation by Cox communications and some rationalization in low margin Indian BPO accounts. There will be no further impact next year from these factors. 22 February

9 Growth on a small base of multiple trends over the long run Emerging technologies have seen rapid growth in spends, albeit on a small base. The wave in mobility puts TECHM in the right place in terms of the industry serviced by its customer base, with following opportunities that could be tapped to grow: growth in mobile devices has been driving investments in mobile data networks and application development. video is increasingly taking a major share of the mobile data traffic, driving TSPs to invest in content delivery networks. IT vendors will look to help companies seeking to monetize and benefit from prominence of social networking and cloud computing While these are trends capable of driving growth more over the longer term, their base today is relatively low, and also the nature of services is largely discretionary. However, growth drivers over the near term for TECHM continue to be: [1] Under outsourced clients [2] Vendor consolidation - where the vendors that largely face the threat of losing out are local players and large MNC competition [3] Emerging markets. 22 February

10 Expect double-digit revenue and earnings CAGR......despite onus of growth on 82% of the business We expect USD revenue CAGR of 12.2% over FY13-15E and an EPS CAGR of 12% during this period at the combined entity. Assuming revenues from HGS (USD169m per annum) and BT (USD370m per annum from FY14) to remain flat over FY13-15, this implies the onus of revenue growth is on remaining 82% of the business. Outside BT, TECHM grew revenues at the rate of 19-23% over FY09-12, which should continue to grow on the back of: [1] ramp ups in a couple of large deals, [2] continued growth in their 2nd largest account, which is ~23% of revenues and [3] traction in non BT-execution, with the company chasing 5-6 large deals in advanced stages. Non-BT revenues have grown in the range of 19-23% over FY08-12, despite weak spending in Telecom Expect revenue CAGR of 12.2% over FY13-15E in the combined entity We expect USD revenue CAGR of 12.2% over FY13-15E and an EPS CAGR of 12% during this period at the combined entity. Our estimates on growth assume the following: We assume annualized revenues from BT stabilizing at USD370m going forward in FY14 and FY15. This compares with USD430m in FY12 and USD200m in 1HFY13. Revenue from acquisition of Hutchison Global Services (HGS) remains flat at USD169m per annum. Outside of acquisitions and BT, the implied CAGR in our growth estimate for Tech Mahindra is 10% over FY13-15, without assuming any growth in Comviva. Over FY08- FY12, non-bt revenues grew in the range of 19-23% in each year for the company, and we see drivers like large deals, emerging geographies, gain share in AT&T and vendor consolidation trend continue to fuel growth. Revenues outside BT have grown at a healthy rate for TECHM, despite weak Telecom vertical We note growth in non-bt revenues in FY13 is on the back of acquisitions at HGS and Comviva, and on an organic basis, revenue growth has been softer due to weeding our of some nom-profitable domestic BPO accounts and also impact of closure of operations by Telecom clients following the 2G scam revelations. 22 February

11 Earnings growth will not lag given focus on margins Declining revenue base of BT and increasing proportion of revenues from service like BPO and segments like emerging geographies have been key headwinds to operating profit margins at TECHM. The margins saw a steep fall from 25.2% in 1QFY10 to 15.3% in 2QFY12. However, impressive cost containment efforts on the part of the management, along with the currency tailwinds have helped take the EBITDA margins back to ~21%. EBITDA margin has picked up from the low of 15.3% on cost containment measures, also aided by currency Strong focus on cost control in the past helped avert potential margin crisis, will keep profitability steady going forward Over FY08-FY12, personnel costs as a % of revenue have increased from 41% to 52%, a 11pp hit on OPM. In the same period, non-personnel operating costs have improved ~600bp from 37% of revenues in FY08 to 31% of revenues in FY12. This was largely facilitated by two cost items - Travel and Communication, which declined from 15.6% of revenues in FY08 to 7.8% in FY12. Rationalization in non-personnel operating expenses have helped curtail the margin slide 22 February

12 For the combined entity, our EBITDA margin estimate for FY14 stands at 20% (-140bp) and that in FY15 is 18.9% (-110bp). The drop in margins is largely the portion of unabsorbed wage hikes, to cushion which, industry growth needs compare with the yesteryears. Stable performance on margins coupled with our expectation of healthy execution on growth drive our estimate of 12% EPS CAGR over FY Expect earnings to map revenue growth going forward 22 February

13 Benefits from integration could drive re-rating; Buy Target price discounts FY15E EPS by 10.5x; 25% discount to HCLT Potential to re-rate comes from revenue and cost synergies at the merged entity in addition to de-risking of business; and also healthy growth prospects at Satyam. We value TECHM at 25% discount to HCLT due to smaller scale, higher exposure to Telecom and BT. Buy with a price target of INR1,260 based on 10.5x FY15E EPS. TECHM currently trades at valuations that are closer to its median multiple over FY09- FY13, when the Telecom vertical has seen the most challenges in technology spend. The stock trades at 9.9x FY14E EPS and 8.6x FY15E EPS. We see re-rating potential at TECHM given the following: [1] revenue and cost synergies post integration with Satyam, [2] de-risking of business profile post the integration, and [3] increased management focus on growth after completing the turnaround at Satyam and having taken care of the contingencies enjoys the scale that compares to tier-i players and margins at the upper end of tier-ii counterparts (and comparable to HCL Tech among tier-1). Scale of the combined entity will help them qualify for greater number of multi-service bid. We value TECHM at a 25% discount to our target multiple for HCLT, due to: [1] comparatively smaller scale, [2] skew of revenues towards Telecom vertical, and [3] Increasing proportion of BPO. Our target price for TECHM is INR1,260, which discounts its FY15E EPS by 10.5x (25% discount to HCL Tech). 1 year forward P/E 1 year forward P/BV 22 February

14 : Financials and Valuation Income Statement (INR Million) Y/E March E 2014E 2015E Sales 48,413 54,897 68,588 76,532 81,206 Change (%) Total Expenses 38,518 45,703 54,065 61,343 66,248 EBITDA 9,895 9,194 14,523 15,188 14,959 % of Net Sales Depreciation 1,435 1,614 1,931 2,133 2,233 Interest 999 1,413 1,060 1,170 1,030 Other Income 1,174 1, ,293 PBT 8,635 7,535 10,978 12,632 12,989 Tax 1,315 1,438 2,409 2,969 3,117 Rate (%) PAT 7,320 6,097 8,569 9,664 9,872 Minority Interest & EO items Share of associate's profits 2,120 5,534 5,734 5,720 6,237 PAT before EO 8,788 10,918 14,178 15,153 15,845 Change (%) Effect of restructuring fees -1,695-1,618-1,561-1,285 0 PAT after RF before EO 7,093 9,299 12,617 13,868 15,845 Change (%) Extraordinary Items (EO) PAT after EO 7,722 9,978 12,617 13,868 15,845 Change (%) Balance Sheet (INR Million) Y/E March E 2014E 2015E Share Capital 1,260 1,275 1,277 1,275 1,275 Share Premium 2,374 2,374 2,374 2,374 2,374 Reserves 29,881 39,658 50,208 64,464 79,286 Net Worth 33,514 43,307 53,858 68,112 82,934 Minority Interest Loans 12,227 11,266 13,179 11,861 7,861 Deferred Revenue 5, Capital Employed 51,737 54,573 67,037 79,978 90,805 Gross Block 12,783 15,095 22,837 25,337 29,337 Less : Depreciation 6,613 8,227 10,158 12,291 14,524 Net Block 6,170 6,868 12,679 13,046 14,813 CWIP 1,105 1,629 2,126 1,500 1,500 Investments 29,080 35,876 42,258 35,298 34,913 Deferred Tax Assets ,077 1,077 1,077 Curr. Assets 23,455 20,437 33,791 50,281 60,013 Debtors 12,468 13,172 22,196 21,223 23,114 Cash & Bank Balance 2,666 2,418 7,929 14,056 21,095 Loans & Advances 8,315 4,845 6,463 13,145 13,947 Other Current Assets 6 2-2,797 1,857 1,857 Current Liab. & Prov 8,711 11,235 24,893 21,223 21,510 Creditors 5,631 10,377 10,076 9,726 10,672 Provisions 3,080 3,080 14,817 11,497 10,838 Net Current Assets 14,744 9,202 15,079 29,058 38,503 Application of Funds 51,737 54,573 67,037 79,978 90,805 E: MOSL Estimates 22 February

15 : Financials and Valuation Ratios Y/E March E 2014E 2015E Basic (INR) EPS Diluted EPS Cash EPS Book Value DPS Payout % Valuation (x) P/E Cash P/E EV/EBITDA EV/Sales Price/Book Value Dividend Yield (%) Profitability Ratios (%) RoE RoCE Turnover Ratios Debtors (Days) Fixed Asset Turnover (x) Leverage Ratio Debt/Equity Ratio(x) Cash Flow Statement (INR Million) Y/E March E 2014E 2015E CF from Operations 15,718 3,692 27,061 9,856 17,630 Change in Working Capital -11,261 7,778-10,515-6,451-1,569 Net Operating CF 4,457 11,470 16,546 3,406 16,061 Net Purchase of FA 541-2,836-8,238-1,874-4,000 Net Purchase of Invest. 1,065-6,796-1,082 6,813 0 Net Cash from Invest. 1,606-9,632-9,321 4,939-4,000 Inc./Dec in Equity & other rel. items -3, , Proceeds from LTB/STB -1, ,913-1,318-4,000 Dividend Payments ,023 Cash Flow from Fin. -5,584-2,086-1,714-2,217-5,023 Free Cash Flow 4,998 8,634 8,307 1,531 12,061 Net Cash Flow ,511 6,127 7,038 Opening Cash Balance 2,187 2,666 2,418 7,929 14,056 Add: Net Cash ,511 6,127 7,038 Closing Cash Balance 2,666 2,418 7,929 14,056 21,095 E: MOSL Estimates 22 February

16 Disclosures This report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. Disclosure of Interest Statement 1. Analyst ownership of the stock No 2. Group/Directors ownership of the stock No 3. Broking relationship with company covered No 4. Investment Banking relationship with company covered No Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues. Regional Disclosures (outside India) This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions. For U.K. This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to which this document relates is only available to investment professionals and will be engaged in only with such persons. For U.S. Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. This website and its respective contents does not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "U.S. Persons " under certain rules. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, Marco Polo, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. For Singapore Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited: Nihar Oza Kadambari Balachandran niharoza.sg@motilaloswal.com kadambari.balachandran@motilaloswal.com Contact: (+65) Contact: (+65) / Office address: 21 (Suite 31), 16 Collyer Quay, Singapore Motilal Oswal Securities Ltd Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai Phone: reports@motilaloswal.com