January 16, 2018 AMBER ENTERPRISES INDIA LIMITED. SMC Ranking (2.5/5) About the Company. Issue Highlights. Strengths. Shareholding Pattern (%)

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1 AMBER ENTERPRISES INDIA LIMITED January 16, 2018 SMC Ranking (2.5/5) Issue Highlights Industry Book Running Lead Manager Edelweiss Financial Services Limited IDFC Bank Limited SBI Capital Markets Limited BNP Paribas Name of the registrar Consumer Durables Total Issue (Shares) - Offer for sale 1,455,180 Total Issue (Shares) - Fresh Issue 5,529,686 Net Offer to the Public 6,984,866 Issue Size (Rs. Cr.) Price Band (Rs.) Offer Date Close Date 17-Jan Jan-18 Face Value 10 Lot Size 17 Issue Composition Total Issue for Sale 6,984,866 QIB 3,492,433 NIB 1,047,730 Retail 2,444,703 Shareholding Pattern (%) Objects of the Issue In shares Particulars Pre-issue Post -issue Promoters & promoters group 59.02% 44.02% QIB 35.16% 40.08% NIB 1.93% 4.92% Retail 3.89% 10.98% Total % % *calculated on the upper price band The Offer comprises a Fresh Issue by the Company and an Offer for Sale by the Selling Shareholders. The Offer for Sale The Selling Shareholders will be entitled to the proceeds of the Offer for Sale of their respective portion of the Equity Shares. Company will not receive any proceeds from the Offer for Sale. Fresh Issue Company intends to utilize the Net Proceeds from the Fresh Issue towards the following objects: Prepayment or repayment of all or a portion of certain borrowings availed by the Company; and General corporate purposes. Karvy Computer Share Pvt Ltd About the Company Incorporated in 1990, Amber Enterprises India Limited is a manufacturer of air conditioners and its component in India. With the market share of 55.4%, Amber is the market leader in the Room Air Conditioner (RAC) design and manufacturing. Amber manufacture RAC's for 8 out of the 10 top RAC brands in India including Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool. These 8 brands have over 75% of market share in India. Strengths Market leadership in the RAC OEM/ODM industry in India: The Company is a market leader in the RAC OEM/ODM industry in India with a market share of 55.4% in terms of volume in Fiscal The company has 11 manufacturing facilities with a total installed capacity as on March 31, 2017 to manufacture up to 1.59 million ODUs, 1.37 million IDUs and 0.59 million WACs annually. The company is one of the few Indian manufacturers with the capability to design and manufacture Inverter RACs. One stop solutions provider for the RAC industry with high degree of backward integration: With its experience, product development expertise and capabilities in the manufacturing of RACs and components, the company has become a one-stop solutions provider in India for the RAC industry. The company believes that its backward integrated capability to manufacture most of the critical components to be used in its manufacturing chain makes the company uniquely competitive in the RAC manufacturing industry in India. Strong customer relationships with the majority of leading RAC brands in India: The company has strong and established relationships with its customers, which includes eight out of the 10 top RAC brands in India. Its key customers include leading RAC brands such as Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool. Its customers command around 75% share in the Indian RAC market. Given its experience in supplying components to the majority of leading international and domestic RAC brands in India, the company is the well positioned to seek new clients in India and across the globe. R&D and product design capabilities leading to high proportion of ODM business: Leveraging on the experience and knowledge derived from manufacturing its products, the company has set-up a dedicated R&D centre located in Rajpura, which is approved by the Department of Scientific and Industrial Research, Ministry of Science and Technology, GoI ( DSIR ). This centre is equipped with a 3D modeling and product lifecycle management softwares and has access to equipment such as 3-D CAD, 3-D printers, psychometric lab which is accredited ISO/IEC 17025:2005 by NABL and has infrastructure and facilities for undertaking various tests such as product reliability, power consumption, sound and drop tests. Track record of financial performance: The Company has demonstrated strong financial performance in the recent years. Its revenue from operations has grown at a CAGR of 19.1%, which is higher than the industry average of listed consumer durables brands of 11.7% for the period from Fiscal 2014 to Fiscal Further, its EBITDA margin of 8.3% for Fiscal 2017 was in line with the average of EBITDA margin of listed consumer durables brands for Fiscal 2017 (Source: F&S Report). The company has managed to deleverage its balance sheet and improve its credit rating in the process. The debt to equity ratio for Fiscal 2015, Fiscal 2016 and Fiscal 2017 was 1.4, 1.3 and 1.0, respectively. The company believes that its financial stability and positive cash flow from operations position the company well to meet the present and future requirement of its customers. Economies of Scale: Its multiple manufacturing locations allow the company optimal utilisation of facilities and enables the company to distribute manufacturing across them. This helps the company to ease the pressure of seasonality and simultaneous demand 1

2 schedules of multiple customers. Further, its assembly lines are flexible and can shift from assembling WACs to ODUs of SACs within a short time. The flexibility of its assembly lines provides the company with a major competitive advantage as it is able to handle changes in market demands in an efficient manner. Risk Factor Inability to identify and understand evolving industry trends: The RAC and other consumer durables market in India is characterised by technological advancements, introduction of innovative products, price fluctuations and intense competition. Its failure to successfully and timely develop and manufacture new products in order to cater to the requirements of its customers and industry trends could have a material adverse effect on its business, financial condition, results of operations and future prospects. Do not have firm commitment agreements with its customers: The Company does not have firm commitment long-term supply agreements with all its customers and instead rely on purchase orders to govern the volume and other terms of its sales of products. Customers may demand price reductions, set-off any payment obligations, require indemnification for themselves or their affiliates, or replace their existing products with alternative products, any of which may have an adverse effect on its business, financial condition, results of operations and future prospects. Failure to compete effectively in the highly competitive RAC and equipment manufacturing industry: Its failure to compete effectively in the highly competitive RAC and equipment manufacturing industry could result in the loss of customers, which could have an adverse effect on its business, results of operations, financial condition and future prospects. Business is subject to strict quality control requirements: The company is subject to strict quality control requirements and any failure by the company to comply with quality standards may lead to cancellation of existing and future orders and product recalls, which could adversely affect its business, financial condition and results of operations. Strategy Expansion of existing product portfolio with a focus on ODM: With its R&D and innovation capabilities backed by an in-house tool room, the company has successfully designed and developed various components and RAC models. The company already manufactures RACs and Inverter RACs of various energy efficiency ratings using green refrigerant. The company will continue to add new products for the RAC industry to its offerings. Its R&D team is developing new indoor units ( IDUs ) and outdoor units ( ODUs ) chassis and the company will focus on increasing the share of ODM based manufacturing in its overall sales. Expand domestic customer base and grow export sales: The RAC demand in India is growing, owing to low penetration of RACs, rising disposable income, increased urbanisation, changing lifestyle trends, longer hot weather season and shortening of replacement cycle. The company currently exports to Saudi Arabia, Oman, Sri Lanka, Nigeria and Maldives. The company intends to leverage the low cost advantages of manufacturing in India and aims to initiate RACs exports into others countries in Middle East, South and South East Asia as the well as Europe. Continuing innovation and strengthening the R&D capacity: To enhance its R&D capabilities, the company is undertaking a number of short-term and long-term R&D initiatives. For example, the company is aiming to develop electronic R&D capacity which will focus on technologies such as internet of things ( IoT, i.e. interconnection of computing devices embedded in appliances through internet) which the company believe could be change the way RACs are monitored, analysed and controlled in the future. Further, its R&D team is working on new models of Inverter RACs, hybrid chassis and adoption of green technology and the company will continue to realign its R&D focus to the changes in technology and customer preferences. Pursue selective acquisitions, partnership opportunities and inorganic growth: The Company believes that the track record of its growth and expansion of its business coupled with its vision of expanding its operations enables the company to look for opportunities for inorganic growth in order to complement its existing businesses. Accordingly, the company continues to evaluate 2

3 opportunities, domestically and internationally, to acquire established businesses or technologies, which may be complementary to its existing business, including in the HVAC and refrigeration components sectors. Further, the company will actively seek out such opportunities that, in its assessment, are aligned with its existing product lines. Continue to focus on increasing efficiency and profitability: Increased competition and stringent regulations have prompted the players in RAC market to find innovative ways to reduce cost and increase the overall efficiency. Improving cost efficiency in its manufacturing processes continues to be one of its key strategies. The company also focuses on its relationships with vendors to ensure that its quality, costs and delivery objectives are met and the company has taken steps such as regular audits of major vendors for this purpose. The company will continue to have a centralised approach towards sourcing and vendor management to gain economies of scale in raw material procurement. Industry Outlook The Indian RAC market has been witnessing robust growth trend in the past five years with a CAGR of 9.4% by volumes. In the next five years, the market is expected to witness a CAGR of 12.8% reinforced by the surge in rural consumption, shorter replacement cycles, energy-efficient RACs and availability of multiple brands at various price points. The RAC volumes are expected to increase from 4.7 million units in Fiscal 2017 to reach 8.6 million units by Fiscal India s consumer durables market has been growing over the last few years but remains fragmented. The growth of consumer durables market is driven by the increase in disposable income including higher salaries of Government employee post seventh pay commission, urbanisation and easy consumer financing. Peer comparison As per the company, there are no listed entities in India which are similar to its line of business and comparable to its scale of operations. Valuation Considering the P/E valuation on the upper end of the price band of Rs. 859, the stock is priced at pre issue P/E of 40.75x on its annualised H1FY18 EPS of Rs Post issue, the stock is priced at a P/E of 49.45x on its EPS of Rs Looking at the P/B ratio at Rs.859 the stock is priced at P/B ratio of 6.14x on the pre issue book value of Rs and on the post issue book value of Rs the P/B comes out to 3.12x. On the lower end of the price band of Rs.855 the stock is priced at pre issue P/E of 40.56x upto its annualise H1FY18 EPS of Rs Post issue, the stock is priced at a P/E of 49.22x on its EPS of Rs Looking at the P/B ratio at Rs. 855, the stock is priced at P/B ratio of 6.11x on the pre issue book value of Rs and on the post issue book value of Rs , the P/B comes out to 3.11x. Outlook The company has 11 manufacturing facilities at 7 strategic locations and thus enjoys proximity of its prime customers. To stay tuned with the futuristic requirements, it keeps spending on R&D and backward integration. While increasing temperature will bring more demand, adequacy of power supply help for faster advancement of RAC markets domestically. Thus, it is expected that the company would see good growth going forward. 3

4 An Indicative timetable in respect of the Issue is set out below: EVENT INDICATIVE DATE (On or about) Bid/Offer Opens Date January 17, 2018 Bid/Offer Closing Date January 19, 2018 Finalisation of Basis of Allotment with the Designated Stock January 24, 2018 Exchange Initiation of refunds (if any, for Anchor Investors)/unblocking January 25, 2018 of funds from ASBA Account Credit of Equity Shares to depository accounts of Allottees January 29, 2018 Commencement of trading of the Equity Shares on the Stock January 30, 2018 Exchanges Annexure Consolidated Financials Profit & Loss Rs. in Cr. Particulars Period ended Period ended Period ended 30-Sep-17 (6 Months) 31-Mar-17 (12 Months) 31-Mar-16 (12 Months) Total Operating Income , , management fees Total expenditure , Operating Profit OPM% Other Income PBDIT Depreciation PBIT Interest PBT Tax Profit After Tax Balance sheet is on next page 4

5 Balance Sheet Rs. in Cr. Particulars As on 30-Sep-17 As on 31-Mar-17 As on 31-Mar-16 Non-current assets Property, plant and equipment Intangible assets Capital work-in-progress Intangible assets under development Goodwill Long-term loans and advances Other non-current assets Total non-current assets Current assets Inventories Trade receivables Cash and bank balances Short-term loans and advances Other current assets Total current assets Total Assets 1, , , Non-current liabilities Long-term borrowings Deferred tax liabilities Other Long term Liabilities Long term Provisions Total non-current liabilities Current liabilities Short term borrowings Trade Payables Other Current Liabilities Short term Provisions Total current liabilities Total NET Worth Net worth represented by: Share capital Other Equity Net Worth

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