GRINDWELL NORTON LTD Result Update (CONSOLIDATED BASIS): Q2 FY18

GRINDWELL NORTON LTD Result Update (CONSOLIDATED BASIS): Q2 FY18 Index Details Stock Data Sector Other Industrial Products BSE Code 506076 Face Value 5.00 52wk. High / Low (Rs.) 524.90/311.10 Volume (2wk. Avg.) 3797 Market Cap (Rs. in mn.) 57651.90 Annual Estimated Results(A*: Actual / E*: Estimated) Years(Rs. in mn) FY17A FY18E FY19E Net Sales 13638.00 14374.45 15524.41 EBITDA 2239.80 2483.18 2674.07 Net Profit 1194.00 1344.60 1448.27 EPS 10.78 12.14 13.08 P/E 48.28 42.88 39.81 Shareholding Pattern (%) As on Sep 2017 As on Jun 2017 Promoter 58.89 58.89 Public 41.11 41.11 Others 1 Year Comparative Graph -- -- CMP: 520.70 NOV 25 th, 2017 Overweight SYNOPSIS ISIN: INE536A01023 Grindwell Norton Limited (GNO) manufactures and sells abrasives, ceramics, and plastic products in India and internationally. Consolidated revenue for the quarter stood at Rs. 3443.80 mn from Rs. 3355.40 mn, when compared with the prior year period, an increase of 2.63%. During Q2 FY18, consolidated Operating Profit (EBIDTA) is Rs. 656.50 mn as against Rs. 538.80 mn in Q2 FY17, an increase of 21.84%. Consolidated PBT increased by 25.41% to Rs. 541.90 mn in Q2 FY18 from Rs. 432.10 mn during the quarter ended Sep 30 th, 2016. During Q2 FY18, consolidated net profit jumps to Rs. 357.00 mn from Rs. 291.90 mn in Q2 FY17, an increase of 22.30%. EPS of the company stood at Rs. 3.22 during the quarter, as against Rs. 2.64 per share over previous year period. During H1 FY18, revenue stood at Rs. 7048.50 mn as compared to Rs. 6705.20 mn during the same period of previous year. GRINDWELL NORTON LTD S&P BSE SENSEX During H1 FY18, net profit stood at Rs. 657.30 mn from Rs. 568.70 mn in H1 FY17, grew by 15.58%. Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 9% over 2016 to 2019E, respectively. PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn (Rs.) Ratio Ratio (%) Grindwell Norton Ltd 520.70 57651.90 11.48 45.34 6.46 80.00 Ramkrishna Forgings Ltd 780.00 25421.40 15.20 51.32 5.14 10.00 Carborundum Universal Ltd 383.10 77346.10 9.97 38.43 4.99 175.00 Steelcast Ltd 167.30 3386.20 4.48 36.53 4.56 0.00

QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS) Results updates- Q2 FY18, (Rs. in Million) Sep-17 Sep-16 % Change Revenue 3443.80 3355.40 2.63% Net Profit 357.00 291.90 22.30% EPS 3.22 2.64 22.30% EBIDTA 656.50 538.80 21.84% Revenue for the 2 nd quarter stood at Rs. 3443.80 million from Rs. 3355.40 million, when compared with the prior year period, an increase of 2.63%. EBIDTA is Rs. 656.50 million as against Rs. 538.80 million in the corresponding period of the previous year, an increase of 21.84%. The company s net profit jumps to Rs. 357.00 million from Rs. 291.90 million in the corresponding quarter ending of previous year, an increase of 22.30%. Reported earnings per share of the company stood at Rs. 3.22 during the quarter, as against Rs. 2.64 per share over previous year period. Break up of Expenditure Break up of Expenditure Cost of material consumed Q2 FY18 Value in Rs. Million Q2 FY17 % Change 1141.10 1146.60 0% Excise duty on sales 0.00 242.80 -- Purchase of Traded Goods Employee Benefit Expenses Depreciation & Amortization Expense 283.70 259.30 9% 468.20 412.00 14% 110.60 103.30 7% Power & Fuel 184.80 144.70 28% Other Expenses 725.50 720.30 1%

Segment Revenue COMPANY PROFILE Grindwell Norton Ltd (GNO) is one of the subsidiaries of Company Saint-Gobain (Saint-Gobain), a transnational group with its headquarters in Paris with Sales of Euro 39.1 billion in 2016. Saint-Gobain s businesses fall into four broad sectors of activity: Construction Products, Flat Glass, High Performance Materials and Building Distribution. GNO s businesses are a part of the High Performance Materials sector of activity. In GNO, the businesses are divided into two major segments: 1. Abrasives, 2. Ceramics & Plastics. The Abrasives segment offers bonded abrasives in the form of wheels, segments, sticks, etc. for various applications, such as lapping, honing, super-finishing, race grinding, thread grinding, fluting, OD grinding, ID grinding, surface grinding, etc., as well as for rough applications, including snagging, cutting-off, burr removal, weld preparation, etc. It also provides abrasives consisting of stationary dressers, rotary dressers, diamond and grinding wheels, and allied products for precision applications; coated abrasives products in various shapes, such as discs, belts, rolls, etc. for material removal and surface generation; nonwoven abrasives for use in domestic and industrial applications; construction products, such as various blades, diamond polishing pads and sponge wheels, and diamond core drill bits; and thin wheels. The Ceramics and Plastics segment offers silicon carbide grains primarily for use as raw material in the manufacture of abrasives and refractories, and for stone polishing; and high performance refractories for use in processing ferrous and non-ferrous metals, and as kiln furniture to fire ceramic wares, as well as used as filtering media and for wear resistance. It also produces and markets performance plastics comprising bearings, seals, tubing and hoses, films, fabrics, and foams for use in automotive, pharma and bio-pharma, construction, food and beverage, energy, and general industrial markets. Grindwell Norton Limited also exports its products to other countries.

FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as of March 31, 2016-2019E FY16A FY17A FY18E FY19E ASSETS 1) Non-Current Assets a) Property, plant and equipment 3474.78 3658.13 3694.72 3805.56 b) Capital Work in Progress 135.81 62.13 123.01 150.07 c) Goodwill 4.88 4.88 4.93 5.03 d) Other Intangible assets 25.05 18.26 14.06 15.05 e) Financial Assets i) Investments 1349.43 1454.93 1673.17 1840.49 ii) Loans 22.02 32.67 41.17 48.16 iii) Other Financial Assets 16.34 41.79 51.40 60.65 f) Other Non Current Assets 105.84 78.47 105.14 124.07 Sub - Total Non- Current assets 5134.15 5351.26 5707.60 6049.08 2) Current Assets a) Inventories 2579.53 2455.84 2710.97 2846.52 b) Financial assets i) Trade receivables 1335.39 1273.94 1936.39 2284.94 ii) Cash and cash equivalents 1164.41 2406.76 2503.03 2690.81 iii) bank balances Other than Cash 76.26 18.35 24.95 28.45 iv) Loans 9.69 10.35 10.97 11.74 v) Other Financial Assets 215.94 159.63 134.09 120.68 c) Other Current Assets 375.28 422.84 685.01 780.91 Sub - Total current assets 5756.49 6747.72 8005.42 8764.05 Total Assets (1+2) 10890.64 12098.98 13713.01 14813.12 EQUITY AND LIABILITIES 1) EQUITY a) Equity Share Capital 276.80 553.60 553.60 553.60 b) Other equity 7354.87 8376.59 9381.78 10601.41 c) Minority Interest 97.47 112.37 123.61 132.26 Total Equity 7729.14 9042.56 10058.99 11287.27 2) Non Current Liabilities a) Financial Liabilities i) Borrowings 27.82 19.23 10.00 8.40 b) Provisions 104.83 172.81 243.67 287.53 c) Deferred Tax Liabilities (net) 250.54 229.68 296.29 334.80 d) Other Non Current liabilities 22.87 19.82 16.45 14.64 Sub - Total Non Current liabilities 406.05 441.55 566.41 645.37 3) Current Liabilities a)financial liabilities i) Borrowings 123.85 58.37 158.77 182.58 ii) Trade payables 833.24 751.47 2437.02 2242.06 iii) Other financial liabilities 1384.32 1412.23 98.86 110.72 b)other Current Liabilities 328.34 290.96 122.20 103.87 c) Provisions 42.28 56.76 82.30 101.23 d) Current tax Liabilities (net) 43.41 45.09 188.48 241.25 Sub - Total current liabilities 2755.45 2614.87 3087.62 2880.48 Total Equity and Liabilities (1+2+3) 10890.64 12098.98 13713.01 14813.12

Annual Profit & Loss Statement for the period of 2016 to 2019E Value(Rs.in.mn) FY16A FY17A FY18E FY19E Description 12m 12m 12m 12m Net Sales 12406.50 13638.00 14374.45 15524.41 Other Income 225.80 308.50 327.01 353.17 Total Income 12632.30 13946.50 14701.46 15877.58 Expenditure -10571.40-11706.70-12218.28-13203.51 Operating Profit 2060.90 2239.80 2483.18 2674.07 Interest -24.20-20.10-17.69-15.57 Gross profit 2036.70 2219.70 2465.49 2658.50 Depreciation -425.80-422.50-448.70-480.10 Profit Before Tax 1610.90 1797.20 2016.79 2178.40 Tax -547.10-588.30-658.48-715.60 Profit After Tax 1063.80 1208.90 1358.31 1462.80 Minority Interest -11.50-14.90-13.71-14.53 Net Profit 1052.30 1194.00 1344.60 1448.27 Equity capital 276.80 553.60 553.60 553.60 Reserves 7354.87 8376.59 9381.78 10601.41 Face value 5.00 5.00 5.00 5.00 EPS 19.01 10.78 12.14 13.08 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2017 to 31 st Dec, 2017E Value(Rs.in.mn) 31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17E Description 3m 3m 3m 3m Net sales 3553.10 3604.70 3443.80 3512.68 Other income 78.40 60.30 77.50 87.58 Total Income 3631.50 3665.00 3521.30 3600.25 Expenditure -3023.90-3085.80-2864.80-2982.61 Operating profit 607.60 579.20 656.50 617.64 Interest -7.40-4.80-4.00-3.76 Gross profit 600.20 574.40 652.50 613.88 Depreciation -114.20-109.20-110.60-112.26 Profit Before Tax 486.00 465.20 541.90 501.62 Tax -144.30-162.00-182.00-166.69 Profit after Tax 341.70 303.20 359.90 334.93 Minority Interest -4.50-2.90-2.90-2.70 Net Profit 337.20 300.30 357.00 332.23 Equity capital 553.60 553.60 553.60 553.60 Face value 5.00 5.00 5.00 5.00 EPS 3.05 2.71 3.22 3.00

Ratio Analysis Particulars FY16A FY17A FY18E FY19E EPS (Rs.) 19.01 10.78 12.14 13.08 EBITDA Margin (%) 16.61% 16.42% 17.27% 17.22% PBT Margin (%) 12.98% 13.18% 14.03% 14.03% PAT Margin (%) 8.57% 8.86% 9.45% 9.42% P/E Ratio (x) 27.39 48.28 42.88 39.81 ROE (%) 13.94% 13.54% 13.67% 13.11% ROCE (%) 21.01% 20.17% 20.14% 19.34% Debt Equity Ratio 0.02 0.01 0.02 0.02 EV/EBITDA (x) 13.46 24.69 22.27 20.61 Book Value (Rs.) 137.86 80.66 89.73 100.75 P/BV 3.78 6.46 5.80 5.17 Charts

OUTLOOK AND CONCLUSION At the current market price of Rs. 520.70, the stock P/E ratio is at 42.88 x FY18E and 39.81 x FY19E respectively. Earning per share (EPS) of the company for the earnings for FY18E and FY19E is seen at Rs. 12.14 and Rs. 13.08 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 9% over 2016 to 2019E, respectively. On the basis of EV/EBITDA, the stock trades at 22.27 x for FY18E and 20.61 x for FY19E. Price to Book Value of the stock is expected to be at 5.80 x and 5.17 x for FY18E and FY19E respectively. Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment. INDUSTRY OVERVIEW The Abrasives industry currently has two major players offering a full range of Abrasives products, one of which is GNO. GNO has a leadership position in several product-market segments. Apart from the two major players in the market, there are a few medium sized players and a number of small local players. Besides, imports from China are present in many categories, particularly, at the low end. Some of the players from Europe and Japan have their agents and/or distributors to service mainly the precision grinding or polishing or surface preparation segments. In the case of Coated Abrasives, a few important international players have set up conversion facilities and some have also set-up local manufacturing facilities. Also most of the Power Tool players are now focusing on developing their accessories business which includes Thin Wheels and some Coated Abrasives. The market, over a period of time, has become highly price sensitive. Key success factors are quality, cost, service and capability to provide total grinding solutions.

Development & Outlook Basic and applied areas and global reach, with plants and marketing/sales organizations all over the world. GNO benefits from being a part of such an organization, in terms of access to all developments in products and process technology, sourcing of products and development of exports. Over the past few years, the growth in manufacturing and mining has been moderate to low and this has affected the Abrasives Business. During 2016-17, there was some revival of the Auto and Steel sectors. On the other hand, there was little or no improvement in private investment and in project activity. Consequently, volume growth though much higher than the previous year, was below expectations. The growth was mainly on account of new products and new markets (including export markets). While efforts were made to increase product prices, in a competitive and low-growth and low inflationary market, success was limited and the increase was below expectations. Under these circumstances, the business delivered a reasonable performance with improvements in several areas. The Next Level initiative continued to engage the employees at all levels and there was progress on several dimensions. In addition, working capital, in general, and the quality of Receivables and Inventory, in particular, were in good shape. All in all, the Abrasives business strengthened its market and its financial position during the financial year. Looking ahead, the short term outlook is uncertain. The implementation of the Goods and Services Act will accentuate uncertainty in the next few months. Having said that, the medium term outlook is positive and the business is well-placed to benefit from growth of the industrial economy as and when this takes place. Under these circumstance, in the current fiscal, the business will focus on growing volumes (new products, new markets domestic and export) and on increasing prices while continuing to focus on operational excellence, implementing various marketing programmes and The Next Level initiatives. CERAMICS & PLASTICS In the domestic market there are three main players (including GNO) in the SiC business. GNO is the market leader. This market is also catered to by imports, mainly from China and Vietnam. The key requirements for success in the industry are quality and cost competitiveness. Entry barriers are high by way of capital investment and technology. The Silicon Carbide business had another challenging year. Domestic demand for SiC continued to be stable. The business lost market share to imports (primarily from Vietnam/China). Exports continued to decline. This was partly due to weak European demand and also due to the weakness of the Euro. The depreciation of the Euro had an impact on export margins too. The availability of low priced imports from Vietnam and China put increasing downward pressure on domestic prices. On the supply side, production at the Company s Tirupati Plant was affected by the low power generation by the Andhra Pradesh Gas Power Corporation Limited (on account of reduced availability of gas). Consequently, production was low at Tirupati. Further, prices for key raw materials increased significantly during the fiscal year.

Although from an external perspective, the outlook for the business in 2017-18 continues to be uncertain, the worst seems to be over. The supply situation should improve, while demand and prices are unlikely to fall further. Input prices are expected to be stable around present levels. The focus in 2017-18 will be on price and cost management. In the medium term, the business needs to find an economically viable source of crude to grow. FUTURE PROSPECTS While the long term outlook for the Indian economy remains very positive, the short term outlook is uncertain. Investment demand remains low. The order inflow, across businesses, remains muted and there is no pull from the channel. While the implementation of the Goods and Services Tax Act will have a positive impact in the medium term, it will accentuate short term uncertainty. With capacity utilization increasing, inflation expected to remain low, the Rupee expected to depreciate gradually and the cumulative impact of the economic reforms initiated by the Government being positive, there are hopes of higher industrial growth in the new fiscal. Under the circumstances, the company s management will continue to focus on new products, new markets and exports to sustain growth.

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