Reliance Nippon Life Asset Management Ltd

Transcription

1 IPO Review Rating matrix Rating : Subscribe (Apply) Issue Details Issue Opens 25-Oct-17 Issue Closes 27-Oct-17 Issue Size ( Crore) Price Band ( ) No of Shares on Offer (crore) 6.1 QIB (%) 50 Non-Institutional (%) 15 Retail (%) 35 Minimum lot size (No. of shares) 59 Offer for sale (No. of shares) 3.7 Fresh issue (No. of shares) 2.4 Objects of the Issue Setting up new branches and relocating certain existing branches 38.3 Upgrading the IT system 40.6 Advertising, marketing and brand building activities 72.1 Lending to Subsidiary (Reliance AIF) for investment of continuing interest in the new AIF schemes managed by Reliance AIF Investing towards continuing interest in new mutual fund schemes managed by the company Funding inorganic growth and strategic initiatives General corporate purposes 75.9 Total *Usage of net proceeds for general corporate purpose is\ balancing figure Shareholding Pattern Pre-Issue Post-Issue Promoters Nippon Life 49.0% 42.9% Reliance Capital 46.6% 42.9% Public and Others 4.4% 14.2% Financial Summary Crore 3 FY15 FY16 FY17 Total revenue EBITDA PAT EPS ( ) Book value per share ( ) RoNW (%) Valuation Summary (at 252; upper price band) FY17 (x) FY15 FY16 Pre Post P/E P/BV * Ratios calculated effecting bonus issue announced in August 2017 Research Analyst Kajal Gandhi kajal.gandhi@icicisecurities.com Vishal Narnolia vishal.narnolia@icicisecurities.com Vasant Lohiya vasant.lohiya@icicisecurities.com October 24, 2017 Promoted by Reliance Capital Ltd, Reliance Nippon Life Asset Management Ltd (RAMC) is one of the largest asset management companies in India, managing total AUM of 3,62,550 crore as of June 30, It is involved in managing mutual funds (including ETFs), managed accounts, including portfolio management services (PMS), AIFs, pension funds, offshore funds and advisory mandates. The company acts as asset manager for Reliance Mutual Fund, managing QAAUM of 2,22,964 crore and 70.1 lakh investor folios, as of June 30, As of June 30, 2017, it managed 229 mutual funds schemes - 55 open ended mutual fund schemes (including 16 ETFs) and 174 closed ended schemes for Reliance Mutual Fund. RAMC has a pan-india network with 171 branches and ~58,000 distributors. For Q1FY18 and FY17, total revenues were at crore and 1, crore with PAT at crore and crore, respectively. In FY13-17, total revenues and PAT increased at 18.2% and 15% CAGR, respectively. Key business aspects Leading AMC with strong credentials RAMC is the third largest AMC in India, in terms of mutual fund QAAUM, as of June 30, 2017, according to Icra. As of June 30, 2017, it has a diversified investor base, and manages assets for 70.1 lakh investor folios, which comprised 67.2 lakh retail folios. According to Icra, monthly average AUM (MAAUM) of retail investors managed was the second largest (with a total market share of 13.6%) among AMCs in India. As of June 30, 2017, it had branches across 145 districts in India. Multi-channel distribution network RAMC has a strong presence across India, has set up subsidiaries in Singapore and Mauritius and has a representative office in Dubai. As of June 30, 2017, it has 171 branches in India, of which 132 are located in beyond top 15 (B-15) locations. A strong distribution network has helped the company garner high retail AUM (second largest MAAUM of retail investors at crore) and highest MAAUM from B-15 locations, as of June 30, 2017, according to ICRA. Expand investor base and focus on retail customers According to Icra, retail investors MAAUM grew 163% from March 2014 to June 2017 from 1.63 lakh crore to 4.28 lakh crore. To leverage this opportunity, the company intends to increase its branch network by adding 150 new branches in B-15 locations and relocating 54 existing branches across India by March 31, Concerns Reliance Nippon Life Asset Management Ltd Price band Retaining investment professionals and personnel remains key risk Underperformance of investment products to impact profitability Competition could reduce market share or margins Acquisition targets have not been identified Priced at 6.8% of AUM on higher band At the IPO price band of , the stock is available at a valuation of ~6.8% of closing AUM of 2.25 lakh crore as on September 30, 2017 and multiple of 38.3x FY17 EPS (post issue, post bonus) at the upper end of the price band. Based on robust growth in AUM and thereby revenue, steady financial performance and healthy return ratios, we have assigned SUBSCRIBE recommendation to the issue.

2 Company Background Reliance AMC (RAMC) is one of the largest asset management companies in India, managing total AUM of 3,62,550 crore as of June 30, It is involved in managing (i) mutual funds (including ETFs), (ii) managed accounts, including portfolio management services (PMS), AIFs and pension funds and (iii) offshore funds & advisory mandates. It acts exclusively as the asset manager of Reliance Mutual Fund, which is the third largest mutual fund house in India based on mutual fund quarterly average AUM (QAAUM) with a market share of 11.4%, as of June 30, 2017, according to Icra. As of June 30, 2017, it managed 229 mutual funds schemes. For FY16, it was ranked the second most profitable asset management company in India, according to Icra. The company started mutual fund operations in 1995 as the asset manager for Reliance Mutual Fund, managed QAAUM of 2,22,964 crore and 70.1 lakh investor folios, as of June 30, It managed 55 open ended mutual fund schemes including 16 ETFs and 174 closed ended schemes for Reliance Mutual Fund as of June 30, It has a pan India network of 171 branches and ~58,000 distributors including banks, financial institutions, national distributors and independent financial advisors (IFAs), as of June 30, Exhibit 1: Breakup of closing AUM ( crore) Mutual Funds As of (including ETFs) Managed Accounts The company is promoted by Reliance Capital Ltd, an RBI registered nonbanking finance company with business interests including in asset management and mutual funds, life, health and general insurance, commercial and home finance, stock broking, wealth management services, distribution of financial products, asset reconstruction and proprietary investments. Reliance Capital is a part of the Reliance Group, which has business interests in financial services, telecommunications, power, energy, infrastructure, and defence. Reliance Anil Dhirubhai Ambani Group (Reliance ADAG) is led by Anil D Ambani. The copromoter, Nippon Life Insurance Company is one of the leading private life insurers in Japan with assets of approximately US$57,700 crore, as of March 31, Nippon Life offers a wide range of financial products, including individual and group life and annuity policies. For Q1FY18 and FY17, the company had total revenues of crore and 1, crore and PAT of crore and crore, respectively. From FY13-17, total revenues and PAT increased at a CAGR of 18.2% and 15.0%, respectively. RAMC offers following services to its clients: Offshore funds and Total end of period advisory mandates AUM 30-Jun , ,393 2, , Mar , ,263 1, , Mar , ,695 4, , Mar , ,486 6, , Mar-14 94,489 85,109 4, , Mar-14 81,473 72,255 6, ,045 Mutual Fund business: RAMC offers a range of mutual fund products to investors to meet their financial goals. It categorises products under the following types: equity funds, debt funds (liquid), debt funds (others), exchange traded funds and gold funds, Other funds: As of June 30, 2017, it offered 55 open-ended schemes and 174 close-ended schemes. As of June 30, 2017, the QAAUM of the mutual fund business was 2,22,964 crore with 70.1 lakh investor folios. Page 2

3 Managed accounts business: The company provides portfolio management services to high net worth individuals and institutional investors including the Employees Provident Fund Organisation (EPFO) and Coal Mines Provident Fund Organisation (CMPFO). Its subsidiary, Reliance AIF Management Co Ltd (Reliance AIF) manages two alternative investment funds, which are privately pooled investment vehicles registered with Sebi. Further, Reliance Capital Pension Fund Ltd, one of its Group Companies, received a certificate of commencement of business as a pension fund manager from the Pension Fund Regulatory and Development Authority (PFRDA) in 2009 and manages pension assets under the National Pension System (NPS). As of June 30, 2017, the company managed total AUM of 1,50,393 crore as part of its managed accounts business. Offshore funds: RAMC manages offshore funds through its subsidiaries in Singapore, Mauritius and has a representative office in Dubai, which enables it to cater to investors across Asia, Middle East, UK, US and Europe. As of June 30, 2017, it managed total AUM of 2,207 crore as part of its offshore fund management portfolio. It also acts as the advisor for India focused equity and fixed income funds in Japan and South Korea. Further, as of June 30, 2017, it managed 5,277 crore of international advisory mandates. Exhibit 2: Category-wise QAAUM of mutual fund business ( crore) Particulars Q1FY18 Q4FY17 Q4FY16 Q4FY15 Q4FY14 Q4FY13 Equity 64,410 57,011 47,668 44,437 24,558 27,174 Debt (Liquid) 41,564 37,995 33,543 27,707 24,703 17,440 Debt (Others) 102, ,137 75,422 62,865 52,021 47,029 ETF 11,475 9, Gold 2,674 2,796 1,372 1,526 2,230 2,926 Total QAAUM 22,296 21,089 15,841 13,712 10,354 9,458 ; QAAUM Quarterly Average Assets Under Management Exhibit 3: Breakup of AUM other than MF ( crore) Particulars Q1FY18 Q4FY17 Q4FY16 Q4FY15 Q4FY14 Q4FY13 NPS EPFO 126, , ,301 99,318 83,558 70,759 CMPFO 21,215 20,762 18, AIF 1,337 1, PMS 1,176 1,277 1,455 1,562 1,507 1,473 Total end of period AUM 15,039 14,526 12,470 10,149 8,511 7,226 Page 3

4 ( crore) (%) (%) ( crore) (%) ( crore) (%) Financial Performance On a consolidated restated basis, RAMC total revenues grew from crore in FY15 to crore in FY17; clocking CAGR of 24.23%. EBITDA has increased at a lower pace at 13.91% CAGR in FY15-17 to crore. Consequently, EBITDA margins have deteriorated from 42.83% in FY15 to 36.01% in FY17. The bottomline has seen growth of 6.59% CAGR in FY15-17 from crore to crore in FY17 with margins deterioration of ~11 percentage points to 30.8%. Exhibit 4: Trend in revenue Exhibit 5: Trend in EBITDA margin FY15 FY16 FY FY15 FY16 FY Revenue YoY Growth (RHS) EBITDA EBITDA Margin (RHS) Source: RHP, ICICIdirect.com, Research Source: RHP, ICICIdirect.com, Research Exhibit 6: Trend in net profit Exhibit 7: Return ratios FY15 FY16 FY FY15 FY16 FY17 PAT PAT Margin (RHS) RoNW Source: RHP, ICICIdirect.com, Research Source: RHP, ICICIdirect.com, Research Page 4

5 Exhibit 8: Market share of top AMCs based on QAAUM Mutual Fund Industry in India Current scenario in MF industry As of June 2017, there are 41 active AMCs actively operating in the current market comprising seven entities sponsored by public sector banks, two entities sponsored by financial institutions, 25 AMCs sponsored by the private sector and other financial companies and seven entities sponsored by foreign players (including joint ventures). In addition, one AMC is yet to start operations. Despite the increase in the number of players, the Indian mutual fund industry remains concentrated with the 10 largest AMCs contributing to over 80% of the industry s total AUM from FY15 to FY17. ICICI Prudential AMC, HDFC AMC, Reliance AMC, Birla Sun Life AMC and SBI Funds Management are the five largest AMCs, together contributing to 57% of QAAUM for Q4FY17 and Q1FY18. Total AUM Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Jun-17 Category lakh crore % of total lakh crore % of total lakh crore % of total lakh crore % of total lakh crore % of total lakh crore % of total Top 5 AMCs Next 5 AMCs Rest of Market Total Source: RHP, Company, ICICIdirect.com Research Exhibit 9: Trend in Indian Household Savings Particulars Household savings in India The household savings data compiled by the Ministry of Statistics and Programme Implementation indicates that Indian households have traditionally favoured real estate and gold as means of investments. However, recently there has been an increase in financial awareness and a consequent increase in financial savings. Within financial savings, there is a marked preference for deposits due to their perceived low risks. Nevertheless, the share of mutual funds has been on the rise from 1.35% of net financial savings in FY12, to 2.94% in FY16. Demonetisation has reduced the value of real estate (with an expected decline in real estate prices) and gold (with the curbs on cash transactions) as forms of savings. Further, with the introduction of GST on gold, the attractiveness of gold as an investment option has reduced. As a consequence, savings in financial assets is expected to witness a rise. Also, the efforts by the Government to increase the banking penetration through its Jan Dhan Yojana would further help in increasing the share of savings in financial assets. Within savings in financial assets, mutual funds and insurance offer valuable post-tax returns as compared to deposits. This could help the growth of the AUM of mutual fund and insurance industry. FY12 FY13 FY14 FY15 FY16 crore % crore % crore % crore % crore % Net Financial Savings 642, , , , ,082, Net Currency and Deposits 356, , , , , Mutual Funds 8, , , , , Shares and Debentures 7, , , , , Insurance 195, , , , , Pension 95, , , , , Claims on Government (21,900) (1.06) (7,100) (0.32) 23, , , Savings in physical assets 1,389, ,462, ,412, ,578, ,483, Savings in form of gold and silver ornaments 33, , , , , Net Household Savings 2,065, ,232, ,280, ,543, ,609, Page 5

6 Exhibit 10: Evolution of Indian mutual fund industry Evolution of mutual fund industry in India In 1963, the Indian mutual funds (MF) industry commenced operations with the formation of the Unit trust of India (UTI) by an Act of Parliament. For over 25 years, UTI remained the only player in the MFs industry. In 1987, public sector financial companies entered the mutual fund industry. In 1993, the MF industry opened up to the private sector. The first MF regulations were formalised, the 1993 Sebi (Mutual Fund) Regulations, which were later substituted by more comprehensive and revised Mutual Fund Regulations in During , the number of MF houses increased with many foreign mutual fund houses also participating in the industry. By the end of January 2003, there were 33 mutual funds or AMCs with total assets of 1.22 lakh crore. In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated into two separate entities, the Specified Undertaking of the Unit Trust of India and the UTI Mutual Fund. Since then the mutual fund industry has witnessed healthy growth, supported by various regulatory measures as well as investor education initiatives, reaching an AUM of 17.5 lakh crore as of March 31, 2017, up from 3.3 lakh crore as of March 31, 2007, reporting at a CAGR of 18% over this 10-year period. Page 6

7 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 ( crore) (crore) Key strengths and strategies: Leading AMC with strong credentials RAMC is the third largest AMC in India, in terms of mutual fund QAAUM, as of June 30, 2017, according to Icra. It has strong relationships with distributors and investors. It has a diversified investor base. As of June 30, 2017, it managed assets for 70.1 lakh investor folios, which comprised 67.2 lakh retail folios. As of June 30, 2017, the monthly average AUM (MAAUM) of retail investors managed by it was the second largest (with a total market share of 13.6%) among AMCs in India, according to Icra. As of June 30, 2017, it had branches across 145 districts in India. In addition, as of June 30, 2017, 77 of the S&P BSE 100 companies, which includes top 100 companies by market capitalisation that are listed on the BSE, had invested with it. The company s QAAUM, total revenues and PAT have increased between FY13 and FY17, by a CAGR of 22.2%, 18.2% and 15.0%, respectively. According to Icra, it had the highest net worth among top five AMCs based on average AUM (AAUM) in India, as of March 31, Exhibit 11: Trend in company s SIP book growth SIP Book SIP Count (RHS) Exhibit 12: Top 10 AMCs on QAAUM basis QAAUM for various AMCs Top 5 AMCs Mar-17 lakh crore % of total Jun-17 lakh crore % of total ICICI Prudential AMC HDFC AMC Reliance Nippon Life AMC Birla Sun Life AMC SBI Funds Management Total QAAUM for Top 5 AMCs Next Five AMCs UTI AMC Kotak Mahindra AMC Franklin Templeton AMC DSP Blackrock Investment Managers IDFC AMC Total QAAUM for Next 5 AMCs QAAUM for Top 10 AMCs Page 7

8 Exhibit 13: Increasing share of retail investors diversifies customer base Multi-channel distribution network RAMC has a strong presence across India, has set up subsidiaries in Singapore, Mauritius and a representative office in Dubai. In India, it has a pan-india network of 171 branches, of which 132 branches are located in beyond top 15 (B-15) locations, and ~ 58,000 distributors as of June 30, None of its distributors account for over 4% of AUM, as of June 30, Its strong distribution network in India has helped the company garner high retail AUM. As of June 30, 2017, the MAAUM of retail investors managed by the company was crore, which was the second largest AMCs in India according to Icra. Further, it had the highest total mutual fund MAAUM among all AMCs in India from bottom 15 (B-15) locations, as of June 30, 2017, according to Icra. The profile of the company s large institutional investors and their advisors is welldiversified and includes corporate, banks, financial institutions, government bodies, societies and trusts, with no single investor contributing to more than 3% of the company s closing mutual fund AUM as of June 30, MAAUM % crore % crore % crore % crore % crore % crore Retail , , , , , ,276.2 Corporate , , , , , ,164.5 HNI , , , , , ,018.1 Other Institutions , , , , , ,511.3 Retail Folio Count Average Ticket Size ( ) Q1FY18 6,724,167 98,838 Q4FY17 6,576,793 94,689 Q4FY16 5,691,362 73,361 ; Retail includes investors other than banks, corporates, HNIs, FIIs and FPIs. Other institutions include Banks/FIs, FIIs/FPIs Q4FY15 5,363,027 62,651 Q4FY14 5,305,279 47,630 Q4FY13 6,064,209 40,044 Expand investor base and focus on retail customers According to Icra, in India, the retail investors MAAUM grew significantly by 163% from March 2014 to June 2017 from 1.63 lakh crore to 4.28 lakh crore. To leverage this market opportunity, the company intends to: Open new branches: The B-15 MAAUM in India increased from 1.4 lakh crore in March 2014 to 3.1 lakh crore in March 2017 at a CAGR of 30% over the three-year period, according to Icra. The company intends to increase its branch network by adding 150 new branches in B-15 locations and relocating 54 existing branches across India by March 31, 2021 Grow distributor network: The company intends to broaden distributor base to grow the share of AUM coming from retail investors including from B-15 locations. It also intends to cross sell products to customers. RAMC has a dedicated retail business development team, which focuses on developing relationships with PSU banks, which it sees as a significant opportunity for future growth, given their geographical reach Increase investor base: The company intends to undertake the following initiatives - offering a diverse portfolio of equity, debt, hybrid and sector focused funds, including by way of launching new mutual fund schemes; educating the benefits of investing in mutual funds through SIPs; providing a simple, multi-device, appbased and user friendly technology experience; setting up digital kiosks across India as part of investor outreach; and facilitating easy KYC and account opening systems to attract investors. Page 8

9 Focus on developing AIF business RAMC s subsidiary, Reliance AIF is the investment manager to Reliance Capital AIF Trust (Category II) and Reliance Event Opportunities Trust (Category III). Reliance AIF launched its first AIF in 2014 and is currently managing six schemes of which, four are closed for subscription. As of June 30, 2017, Reliance AIF was raising funds in three alternative investment schemes across asset classes in categories including long only equity, sector agnostic credit and high yield real estate structured debt. The total capital commitment raised across these schemes as of June 30, 2017 was 1,336.7 crore. Subject to market conditions and regulatory approvals, Reliance AIF intends to launch between six and 10 new schemes (Category II and Category III) over the next three financial years (proposed schemes) and utilise 125 crore from the net proceeds towards such continuing interest at or above the minimum level prescribed by law for the proposed schemes. The proposed schemes may be housed under the current trust or a new trust and will include both close ended and open ended schemes. Inorganic growth through strategic acquisitions In November 2016, in order to strengthen its ETF offerings, it acquired the asset management rights to 12 schemes launched by the Goldman Sachs Mutual Fund, and then managed by Goldman Sachs Asset Management (India) Pvt Ltd. Going forward, while continuing to maintain organic growth momentum, the company intends to explore inorganic expansion as well by leveraging on the experience it has gained through its previous acquisition. The company continues to selectively evaluate targets or partners for strategic acquisitions and investments in order to: consolidate its market position in existing businesses, strengthen and expand its product portfolio, enhance its depth of experience, knowledge-base and know-how and Increase its branch network, customers and geographical reach. The company currently intends to utilise 165 crore from the net proceeds towards such potential acquisitions and strategic initiatives. Page 9

10 Key risks and concerns Retaining investment professionals and personnel remains key risk The company s performance depends largely on the efforts and ability of its senior management and other key personnel, particularly its chief executive officer, its chief investment officers, its fund managers and other investment professionals. There is no guarantee that these individuals or any other members of the company s senior management team will not leave the company or join a competitor or that the company will be able to retain such personnel or find adequate replacements in a timely manner, or at all. Any such loss or vacancy could affect the company s operations thereby increasing expenses or leading to a decline in performance of the mutual funds advised and other businesses, or damage the company s reputation and therefore the attractiveness of its products to clients. In the last five years immediately preceding, 14 senior members including key management personnel, departmental heads, fund managers have resigned from the company. Five out of these resignations were on account of transfers within Reliance ADAG. Underperformance of investment products to impact profitability The investment products in respect of which the company provides asset management services may at any time not outperform either their relevant benchmarks, or similar investment products provided by competitors, for many reasons. Many investments held by the mutual funds for which the company provides asset management services can be illiquid or volatile which may result in losses. Many other investments, including in particular investments in equity, are subject to potential capital losses. In addition, the company may, from time to time, reduce or waive investment management fees, or limit total expenses, on certain products or services for particular time periods to improve portfolio performance, manage portfolio expenses, and to help retain or increase managed assets, or for other reasons. If the company s revenue declines without a commensurate reduction in its expenses, its PAT will decline. Competition may reduce market share or margins The financial services industry is rapidly evolving and intensely competitive. Low barriers to entry have also resulted in a large number of smaller participants entering the market. It is possible that there may in future be consolidation in the market. Any such consolidation may create stronger competitors in the market overall, or leave the company at a competitive disadvantage. In addition, there has not yet been significant international competition in the Indian financial services market. This may change, in particular if the sector continues to grow and remain profitable, and competition from multi-national companies may be difficult for the company to withstand. Increased competition may result either in a decrease in AUM market share, or force the company to reduce its management fees so as to preserve such market share. Acquisition targets have not been identified The company intends to utilise 165 crore from net proceeds towards inorganic growth and strategic initiatives by FY21. The actual deployment of funds will depend on a number of factors, including the timing, nature, size and number of strategic initiatives undertaken, as well as general factors affecting the company s results of operation, financial condition and access to capital. The company has not entered into any definitive agreements towards such potential inorganic growth or strategic acquisitions. Page 10

11 Financial Summary Exhibit 14: Profit and Loss Statement crore (Year-end March) FY13 FY14 FY15 FY16 FY17 Revenue From Operations , ,307.5 Growth (%) Employee benefits expenditure Marketing and publicity expenditure Administration and other expenditure Total Operating Expenditure EBITDA Growth (%) Depreciation and amortisation expense Other Income Profit before exceptional items and tax Add/Less: Forex & Exceptional Items Profit before tax Total tax expense Profit after tax before share of minority interest Share of minority shareholders Profit after tax Growth (%) EPS - Diluted ( ) Page 11

12 Exhibit 15: Balance Sheet crore (Year-end March) FY13 FY14 FY15 FY16 FY17 Equity Share capital Reserves and surplus 1, , , , ,851.1 Total Shareholders funds 1, , , , ,892.6 LIABILITIES Total Non-Current Liabilities Total Current Liabilities Total Equity and Liabilities 1, , , , ,051.3 Assets Property, plant and equipment Intangible assets Non-current investments Long term loans and advances Deferred tax assets (net) Other non-current assets Total Non-Current Assets 1, ,000.6 Current investments Trade receivables Cash and bank balance Short-term loans and advances Other current assets Total Current Assets , ,050.7 Total Assets 1, , , , ,051.3 Page 12

13 Exhibit 16: Cash Flow statement (Year-end March) FY13 FY14 FY15 FY16 FY17 CASH FLOW FROM OPERATING ACTIVITIES Profit before tax for the year Adjustments for Income tax expenses recognised in profit or loss Depreciation Amortisation of discount/premium on investments Provision for Wealth Tax Provision for doubtful debts Dividend income Interest income (Profit)/Loss on sale of investment (Net) Loss on foreign currency transactions and translations (Write back)/dimunition in value of long term investments Profit/(Loss) on sale of fixed assets/write off Operating profit before working capital changes Movements in working capital (Increase) / Decrease in long term loans and advances (Increase) / Decrease in other non-current assets (Increase) / Decrease in trade receivable (Increase) / Decrease in short term loans and advances (Increase) / Decrease in other current assets (Decrease) / Increase in long term provisions (Decrease) / Increase in short term provisions (Decrease) / Increase in other long term liabilities (Decrease) / Increase in short term borrowings (Decrease) / Increase in trade payables (Decrease) / Increase in other current liabilites Cash Generated from operations Taxes paid Net Cash generated from operating Activities Cash Flow from Investing Activities Purchase of fixed assets Sale of fixed assets Inter Corporate deposit received Inter Corporate deposit given Loan repaid by ESOP Trust (net of loan advanced) Purchase of investments -1, , , , ,886.2 Drawings received from limited liability partnership Purchase of minority stake in subsidiary/investment in subsidiary Sale of investments 1, , , , ,906.2 Interest received/(paid) Dividend received Net cash generated from investing activities Cash Flow from Financing Activities Redemption of Preference Share Capital Interim Dividend paid including dividend distribution tax Dividend paid including dividend distribution tax Net cash used in financing activities Effect of exchange fluctuation on translation reserve Net increase/(decrease) in cash and cash equivalents Opening Balance of 'Cash and cash equivalents Closing Balance of Cash and cash equivalents ; Figures are in crore Exhibit 17: Key Ratios (Year-end March) FY15 FY16 FY17 Valuation No of Equity shares (crore) EPS DPS BVPS P/E P/BV Operating Ratios (%) EBITDA / Net Sales PAT / Net Sales Return Ratios (%) RoNW Page 13

14 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Subscribe: Apply for the IPO Avoid: Do not apply for the IPO Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai research@icicidirect.com Page 14

15 ANALYST CERTIFICATION We /I, Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Page 15