Indian Oil Corporation (INDOIL) 390

Result Update Rating matrix Rating : Buy Target : 420 Target Period : 12 months Potential Upside : 10% What s changed? Target Changed from 335 to 420 EPS FY17E Changed from 36.7 to 38.4 EPS FY18E Changed from 30.6 to 33 EPS FY19E Changed from 31.3 to 35 Rating Changed from Hold to Buy Quarterly performance Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%) Revenue 115,644.9 83,461.9 38.6 100,274 15.3 EBITDA 7,948.6 5,242.0 51.6 5,772.2 37.7 EBITDA (%) 6.9 6.3 59 bps 5.8 112 bps PAT 3,994.9 3,056.9 30.7 3,121.9 28.0 Key financials Crore FY16 FY17E FY18E FY19E Revenues 350,603.1 450,170.1 533,390.9 544,960.0 EBITDA 20,081.8 33,866.9 30,387.7 32,399.6 Net Profit 10,399.1 18,662.1 16,037.1 17,000.5 EPS ( ) 21.4 38.4 33.0 35.0 Valuation summary FY16 FY17E FY18E FY19E P/E 17.8 9.9 11.6 10.9 Target P/E 19.6 10.9 12.7 12.0 EV / EBITDA 9.2 5.5 6.1 5.7 P/BV 2.5 2.2 2.0 1.8 RoNW (%) 14.1 21.8 16.9 16.2 RoCE (%) 12.0 22.3 17.2 17.1 Stock data Particular Amount Market Capitalization ( Crore) 185,495.4 Total Debt (FY16) ( Crore) 52,467.1 Cash and Investments (FY16) ( Crore) 10,513.0 EV ( Crore) 227,449.5 52 week H/L 392/172 Equity capital ( Crore) 2,428.0 Face value ( ) 10.0 Price performance Return % 1M 3M 6M 12M HPCL 22.1 15.9 27.5 100.4 BPCL 9.0 2.5 16.5 57.4 IOCL 15.5 15.5 38.5 86.0 ONGC 4.6 3.9 37.2 33.4 Research Analyst Mayur Matani mayur.matani@icicisecurities.com Akshay Gavankar akshay.gavankar@icicisecurities.com Performance to remain strong... February 3, 2017 Indian Oil Corporation (INDOIL) 390 Indian Oil Corporation s (IOC) Q3FY17 results were in line with our estimates on the topline front. Revenues increased 15.3% QoQ to 115644.9 crore, in line with our estimate of 116657.1 crore Reported EBITDA was at 7948.6 crore, marginally below our estimated EBITDA of 8075.6 crore due to higher-than-expected other expenses (provision made in the matter of entry tax for Uttar Pradesh). However, GRMs came in at US$7.7/bbl, above our estimate of US$6.7 /bbl due to inventory gains PAT increased 28% QoQ to 3994.9 crore but came in below our estimate of 4401.5 crore. There was no subsidy burden this quarter Government policies continue to provide comfort The government s decision to deregulate diesel prices was a major positive for OMCs. It led to a decline in crude oil gross under-recoveries, with only kerosene and LPG prices under the regulatory regime. Also, the hike of 25 paise per month in kerosene prices and scheme of Direct Benefit Transfer (DBT) for LPG cylinders has led to lower gross underrecoveries. Given our assumptions on Brent crude at US$55/barrel and exchange rate of 67 per US dollar, we expect gross under-recovery of 23662.5 crore and 24640.7 crore in FY18E and FY19E, respectively. The government s decision to cap its sharing of kerosene subsidy at 12/litre and LPG at 15/kg and the rest by upstream companies is a welcome move for OMCs. Hence, we assume no downstream subsidy share for FY18E and FY19E of total under-recoveries. GRMs remain robust due to inventory gains Reported GRMs of IOC were at US$7.7/bbl in Q3FY17 vs. our estimate US$6.7/bbl mainly on account of higher operational efficiency and inventory gains. The refining products inventory gains came in at 2094 crore in Q3FY17 vs. 45 crore in Q2FY17. With the revival seen in GRMs due to complete commission of the Paradip refinery, we estimate reported GRMs of US$6.8/bbl, $6/bbl and $6.3/bbl for FY17E, FY18E and FY19E, respectively. The marketing products inventory gains came in at 957 crore in Q3FY17 vs. loss of 731 crore in Q2FY17. We estimate throughput of 64.9 MMT, 68.4 MMT and 69.2 MMT for FY17E, FY18E and FY19E, respectively. Going forward, we expect the interest cost to remain at comfortable levels of 3153.3 crore, 3147.5 crore and 3335 crore in FY17E, FY18E and FY19E, respectively, due to working capital efficiencies on account of diesel price deregulation, DBT for LPG cylinders. Paradip ramp up to strengthen position The successful commissioning of 15 MMTPA Paradip refinery marks a major shift for IOC as a pivotal player in complex refineries. The refinery s capacity utilisation during the quarter was at 63% with further ramp up expected in coming quarters. The ability to process heavy crude oils with major secondary processing units like FCC, delayed coking unit (DCU), etc, will further improve GRMs. Going forward, steady petroleum sales volume and normalised marketing margins would augur well for the company over the next two years. Hence, we have a BUY recommendation on the stock with a target price of 420 (based on average of P/BV multiple: 397/share and P/E multiple: 443/share). ICICI Securities Ltd Retail Equity Research

Variance analysis Q3FY17 Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%) Comments Total Revenues 115,644.9 116,657.1 83,461.9 38.6 100,273.9 15.3 Raw materials costs 73,872.5 78,478.7 68,999.0 7.1 66,329.6 11.4 Employees Cost 1,812.6 1,602.8 1,702.6 6.5 1,871.7-3.2 Other Expenses 32,011.3 28,500.0 7,518.3 325.8 26,300.3 21.7 Total Expenditure 107,696.3 108,581.5 78,219.8 37.7 94,501.7 14.0 Provision for entry tax in Uttar Pradesh led to higher other expenses EBITDA 7,948.6 8,075.6 5,242.0 51.6 5,772.2 37.7 EBITDA margins (%) 6.9 6.9 6.3 59 bps 5.8 112 bps Depreciation 1,554.1 1,475.5 1,169.3 32.9 1,504.8 3.3 EBIT 6,394.5 6,600.1 4,072.7 57.0 4,267.4 49.8 Interest 996.7 724.0 610.4 63.3 614.7 62.1 Higher due to interest implications of Paradip Refinery and higher oil prices Other Income 792.9 693.2 650.0 22.0 854.1-7.2 Extra Ordinary Item 0.0 0.0 473.1-100.0 0.0 NA PBT 6,190.7 6,569.4 4,585.4 35.0 4,506.9 37.4 Total Tax 2,195.8 2,167.9 1,528.6 43.7 1,385.0 58.5 PAT 3,994.9 4,401.5 3,056.9 30.7 3,121.9 28.0 Key Metrics Exchange rate ( /$) 67.5 67.5 66.1 2.1 66.9 0.9 Under-recoveries ( cr)* 4614.3 4614.3 6151.4-25.0 3731.3 23.7 Downstream share (%) 0.0 0.0 10.4 NA 0.0 NA The company did not bear any subsidy for the quarter Net Under-recovery ( cr) 0.0 0.0 206.5-100.0 0.0 NA Throughput (mmt) 16.4 12.9 13.1 25.0 15.6 4.7 Sales (mmt) 20.1 19.9 19.1 5.3 18.5 9.0 GRM ($/barrel) 7.7 6.4 6.0 28.7 4.3 77.5 * Includes Direct Benefit Transfer(DBT) of LPG Change in estimates FY17E FY18E ( Crore) Old New % Change Old New % Change Comments Revenue 440,250.9 450,170.1 2.3 481,410.4 533,390.9 10.8 EBITDA 33,577.1 33,866.9 0.9 27,735.1 30,387.7 9.6 Increase in crude oil throughput and higher marketing profitabilty led to increase in FY18E estimates EBITDA Margin (%) 7.6 7.5-10 bps 5.8 5.7-6 bps PAT 18,817.2 18,662.1-0.8 14,507.9 16,037.1 10.5 EPS ( ) 39.7 38.4-3.2 30.6 33.0 7.9 Assumptions FY15 FY16 FY17E FY18E FY17E FY18E Comments Exchange rate ( /$) 61.1 65.4 67.3 67.5 67.1 67.0 Under-recoveries ( cr) 76,285.0 27,570.2 17,487.9 19,382.6 17487.9 19,382.6 Estimates increased due to higher crude oil prices Downstream share (%) 3.0 0.1 0.0 0.0 0.0 0.0 Net Under-recovery ( cr) 1,200.5 9.1 0.0 0.0 0.0 0.0 Assuming no downstream share for FY17E and FY18E Throughput (mmt) 53.6 56.7 64.9 68.4 64.5 68.0 Sales (mmt) 72.8 77.1 80.4 83.6 80.2 83.4 GRM ($/barrel) 0.3 5.1 6.8 6.0 6.4 6.0 Current Earlier ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis Government policies continue to provide comfort The government s decision to deregulate diesel prices was a major positive for OMCs. It led to a decline in crude oil gross under-recoveries, with only kerosene and LPG prices under the regulatory regime. Also, the hike of 25 paise per month in kerosene prices and scheme of Direct Benefit Transfer (DBT) for LPG cylinders, has led to lower gross underrecoveries. Given our assumptions on Brent crude at US$55/barrel and exchange rate of 67 per US dollar, we expect gross under-recovery of 23662.5 crore and 24640.7 crore in FY18E and FY19E, respectively. The government s decision to cap its sharing of kerosene subsidy at 12/litre and LPG at 15/kg and the rest by upstream companies is a welcome move for OMCs. Hence, we assume no downstream subsidy share for FY18E and FY19E of the total under-recoveries. Exhibit 1: IOC s share of net under-recoveries Year FY15 FY16 FY17E FY18E FY19E Products ( Cr) HSD 10,935.0 0.0 0.0 0.0 0.0 LPG 40,551.0 16,056.9 10,125.3 15,397.5 16,706.3 SKO 24,799.0 11,513.3 7,748.1 8,265.0 7,934.4 Total 76285.0 27570.2 17873.5 23662.5 24640.7 Sharing Macro (%) Upstream 56.1% 4.5% 0.0% 2.8% 2.5% Downstream 2.9% 0.1% 0.0% 0.0% 0.0% Government 41.0% 95.4% 100.0% 97.2% 97.5% Total 100.0% 100.0% 100.0% 100.0% 100.0% Sharing ( Cr) Upstream 42,822.2 1,251.2 0.0 651.2 625.2 Downstream 2,183.5 17.1 0.0 0.0 0.0 Government 31,279.3 26,301.9 17,873.5 23,011.3 24,015.5 Total 76285.0 27570.2 17873.5 23662.5 24640.7 IOCL share of net under-recoveries ( Cr) 1200.5 9.1 0.0 0.0 0.0 ICICI Securities Ltd Retail Equity Research Page 3

Core GRMs continue to be strong The reported GRMs of IOC were at US$7.7/bbl in Q3FY17 vs. our estimate of US$6.7/bbl mainly on account of higher operational efficiency and inventory gains. The refining products inventory gains came in at 2094 crore in Q3FY17 vs. 45 crore in Q2FY17. With the revival seen in GRMs due to complete commission of the Paradip refinery, we estimate reported GRMs of US$6.8/bbl, $6/bbl and $6.3/bbl for FY17E, FY18E and FY19E, respectively. Exhibit 2: Refining margins trend 7.5 6.0 5.1 6.8 6.0 6.3 US$ / bbl 4.5 3.0 4.2 1.5 0.0 0.3 FY14 FY15 FY16 FY17E FY18E FY19E Exhibit 3: Retail sales trend 100 80 71.1 72.8 77.1 80.4 83.6 86.9 (mmt) 60 40 20 0 FY14 FY15 FY16 FY17E FY18E FY19E The commissioning of new 15 MMT refinery complex at Paradip begun operations in Q4FY16 and is ramping up its production with capacity utilisation of ~63% in current quarter. Hence, we have assumed the throughput will increase from 56.7 MMT in FY16 to 69.2 MMT in FY19E. The marketing sales volume reported 5.3% YoY growth to 20.1 MMT in Q3FY17, which led to higher marketing segment profitability. We expect marketing margins to remain stable over the next few months. ICICI Securities Ltd Retail Equity Research Page 4

Interest costs to remain at comfortable levels Going forward, interest costs are estimated to increase marginally but are expected to remain at comfortable levels of 3153.3 crore, 3147.5 crore and 3335 crore in FY17E, FY18E and FY19E, respectively. The working capital efficiencies on account of diesel price deregulation, DBT for LPG cylinders will continue to benefit the company Exhibit 4: Interest cost trend 5600 5084.4 4200 3435.3 3000.1 3153.3 3147.5 3335.0 crore 2800 1400 0 FY14 FY15 FY16 FY17E FY18E FY19E ICICI Securities Ltd Retail Equity Research Page 5

Outlook & Valuation The successful commissioning of 15 MMTPA Paradip refinery marks a major shift for IOC as a pivotal player in complex refineries. The refinery s capacity utilisation during the quarter was at 63% with further ramp up expected in coming quarters. The ability to process heavy crude oils with major secondary processing units like FCC, delayed coking unit (DCU), etc, will further improve GRMs. Going forward, steady petroleum sales volume and normalised marketing margins would augur well for the company over the next two years. Hence, we have a BUY recommendation on the stock with a target price of 420 (based on average of P/BV multiple: 397/share and P/E multiple: 443/share). Valuation Valuation based on Price / BV Multiple Adjusted Book Value for FY19E ( Crore) 100951.3 Adjusted number of shares (Crore) 482.7 Adjusted Book Value per share ( ) 209.1 Multiple 1.6 Value of core business ( per share) 336.7 Add: Listed investments (25% discount to CMP)+ Other Investments 59.8 Fair Value per share ( ) 397 Valuation based on P / E multiple Profit after tax for FY19E ( Crore) 17000.5 Less: Other Income adjusted for tax ( Crore) 2221.2 Adjusted profit after tax for FY19E ( Crore) 14779.4 Number of shares (Crore) 482.7 Adjusted EPS for FY19E ( ) 30.6 Multiple 12.5 Fair value per share without investments ( ) 383 Add: Value of Investments ( per share) Listed investments (25% discount to CMP) 44.6 Other Investments 15.2 Fair value per share ( ) 443 Weighted Target Price ( per share) 420 Source: ICICIdirect.com Research Exhibit 5: Valuations Year Sales EPS EPS Gr. PE RoNW ( Crore) (%) ( ) (%) (x) EV/EBITDA (x) (%) RoCE (%) FY16 350,603.1-19.9 21.4 97.2 18.2 9.4 14.1 12.0 FY17E 450,170.1 28.4 38.4 79.5 10.1 5.6 21.8 22.3 FY18E 533,390.9 18.5 33.0-14.1 11.8 6.2 16.9 17.2 FY19E 544,960.0 2.2 35.0 6.0 11.1 5.8 16.2 17.1 ICICI Securities Ltd Retail Equity Research Page 6

Recommendation history vs. consensus estimate ( ) 400 300 200 100 Jan-15 Apr-15 Jun-15 Aug-15 Nov-15 Jan-16 Apr-16 Jun-16 Sep-16 Nov-16 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Feb-17 (%) Price Idirect target Consensus Target Mean % Consensus with BUY Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Jun-11 Nov-11 May-12 Jan-13 Event Indian government announced increase in petroleum product prices, eliminated custom duty on crude oil and reduced in excise duties on petrol and diesel Under recoveries on diesel remain high due to depreciation of Indian rupee. Gross under recovery on petroleum products likely to increase sharply QoQ Petrol prices increased sharply by 7.5-8 per litre The government took a brave and bold decision and asked the oil marketing companies (OMCs) to periodically hike diesel prices by 50 paise/month May-13 Finance ministry plans to implement Export Parity Pricing (EPP) for pricing of petroleum products for refiners from the current trade parity pricing model. The move if implemented would have a huge negative impact on profitability of companies Jun-13 Cabinet clears 10% disinvestment in IOC Oct-14 Government announces Diesel deregulation Oct-14 Government announces gas pricing policy Dec-14 Crude oil prices decline by nearly 50% from the 2014 high's Aug-15 Government of India divests its 10% stake in IOC Feb-16 Prime Minister inaugurates IOC's 15 MMTPA Paradip Refinery Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Government of India 25-Jan-17 57.6 2796.7-33.3 2 Oil and Natural Gas Corporation Ltd 31/Dec/16 13.8 668.6 0.0 3 Life Insurance Corporation of India 31-Dec-16 8.3 402.3-21.4 4 Oil India, Ltd. 31/Dec/16 5.0 242.8 0.0 5 IOC BRPL Merger Scheme Trust 31-Dec-16 2.4 116.6 0.0 6 The Vanguard Group, Inc. 31/Dec/16 0.7 33.2 0.4 7 Norges Bank Investment Management (NBIM) 31-Dec-15 0.4 21.6-1.1 8 Birla Sun Life Asset Management Company Ltd. 31/Dec/16 0.4 17.6-0.1 9 Reliance Nippon Life Asset Management Limited 31-Dec-16 0.3 16.3 4.0 10 Goldman Sachs Asset Management (India) Private Ltd. 31/Dec/16 0.3 12.8 0.1 Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Promoter 58.6 58.6 58.3 58.3 58.3 FII 3.9 4.2 4.5 5.4 5.3 DII 12.9 12.4 12.4 11.2 11.2 Others 24.7 24.8 24.8 25.1 25.2 Recent Activity Investor name Investor name Investor name Value(m) Shares(m) Investor name Value(m) Shares(m) DSP BlackRock Investment Managers Pvt. Ltd. 22.03 4.61 Government of India -180.66-33.28 Reliance Nippon Life Asset Management Limited 19.14 4.00 Life Insurance Corporation of India -102.32-21.39 Tata Asset Management Limited 12.24 2.56 SBI Funds Management Pvt. Ltd. -4.52-0.94 Grantham Mayo Van Otterloo & Co LLC 8.50 1.98 JM Financial Asset Management Pvt. Ltd. -3.12-0.65 UTI Asset Management Co. Ltd. 6.78 1.42 Goldman Sachs Asset Management (US) -4.40-0.54 Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 7

Financial summary Profit and loss statement Crore (Year-end March) FY16 FY17E FY18E FY19E Revenue 350,603.1 450,170.1 533,390.9 544,960.0 Growth (%) -19.9 28.4 18.5 2.2 (Inc.)/(Dec.) in stock in trade 3607.2-6405.5 0.0 0.0 Raw material Costs 142265.0 159969.2 203469.6 205872.1 Purchase of Products 143628.8 136787.5 163089.3 163089.3 Employee Costs 7637.1 7595.8 7964.4 8600.5 Other Expenditure 33383.1 118356.3 128480.0 134998.4 Op. Expenditure 330521.3 416303.2 503003.3 512560.3 EBITDA 20,081.8 33,866.9 30,387.7 32,399.6 Growth (%) 97.9 68.6-10.3 6.6 Depreciation 4852.8 5948.1 6377.3 6863.8 EBIT 15229.0 27918.8 24010.4 25535.8 Interest 3000.1 3153.3 3147.5 3335.0 Other Income 3610.6 2860.8 3073.1 3173.1 PBT 15839.5 27626.4 23935.9 25373.9 Growth (%) 98.1 74.4-13.4 6.0 Tax 5440.5 8964.3 7898.9 8373.4 Reported PAT 10,399.1 18,662.1 16,037.1 17,000.5 Growth (%) 97.2 79.5-14.1 6.0 EPS 21.4 38.4 33.0 35.0 Cash flow statement Crore (Year-end March) FY16 FY17E FY18E FY19E Profit after Tax 10,399.1 18,662.1 16,037.1 17,000.5 Less: Dividend Paid 4,063.6 6,817.7 6,817.7 6,817.7 Add: Depreciation 4,852.8 5,948.1 6,377.3 6,863.8 Add: Others 0.0 0.0 0.0 0.0 Cash Profit 13,936.3 20,792.5 15,896.7 17,346.6 Increase/(Decrease) in CL 808.9 12,620.2 10,142.8 2,811.0 (Increase)/Decrease in CA 3,061.9-3,008.3-8,058.1 3,962.7 CF from Operating Activities 17807.0 30404.4 17981.4 24120.4 Purchase of Fixed Assets 14,195.5 15,231.5 20,000.0 25,000.0 (Inc)/Dec in Investments -75.8 0.0 0.0 0.0 Others 2.0 3.0 4.0 4.0 CF from Investing Activities -14,271.4-15,231.5-20,000.0-25,000.0 Inc/(Dec) in Loan Funds -2,777.9-13,000.0 5,000.0 0.0 Inc/(Dec) in Sh. Cap. & Res. -356.7-0.1 0.0 0.0 Others 0.0 0.0 0.0 0.0 CF from financing activities -3,134.6-13,000.1 5,000.0 0.0 Change in cash Eq. 401.1 2,172.8 2,981.4-879.6 Op. Cash and cash Eq. 111.9 513.0 2,685.8 5,667.3 Cl. Cash and cash Eq. 513.0 2,685.8 5,667.3 4,787.6 Balance sheet Crore (Year-end March) FY16 FY17E FY18E FY19E Source of Funds Equity Capital 2,428.0 4,855.9 4,855.9 4,855.9 Preference capital 0.0 0.0 0.0 0.0 Reserves & Surplus 71,520.8 80,937.2 90,156.6 100,339.5 Shareholder's Fund 73,948.8 85,793.1 95,012.5 105,195.4 Loan Funds 52,467.1 39,467.1 44,467.1 44,467.1 Deferred Tax Liability 9,468.2 12,468.2 12,768.2 13,068.2 Minority Interest 0.0 0.0 0.0 0.0 Source of Funds 135,884.1 137,728.4 152,247.8 162,730.7 Application of Funds Gross Block 150,559.0 175,559.0 188,059.0 203,059.0 Less: Acc. Depreciation 59,663.5 65,380.0 71,757.3 78,621.1 Net Block 90,895.5 110,179.0 116,301.7 124,437.9 Capital WIP 21,022.2 11,022.2 18,522.2 28,522.2 Total Fixed Assets 111,917.7 121,201.2 134,823.9 152,960.1 Investments 23,975.3 23,975.3 23,975.3 23,975.3 Inventories 38,282.4 49,333.7 58,453.8 59,721.6 Debtor 8,026.4 10,483.4 12,421.4 12,690.8 Cash 513.0 2,685.8 5,667.3 4,787.6 Loan & Advance, Other CA 43,892.4 33,392.4 30,392.4 24,892.4 Total Current assets 90,714.2 95,895.3 106,934.9 102,092.5 Current Liabilities 58,959.4 67,833.9 80,374.0 82,117.3 Provisions 31,763.8 35,509.5 33,112.2 34,179.9 Total CL and Provisions 90,723.1 103,343.4 113,486.2 116,297.2 Net Working Capital -9.0-7,448.0-6,551.3-14,204.7 Miscellaneous expense 0.0 0.0 0.0 0.0 Application of Funds 135,884.1 137,728.4 152,247.8 162,730.7 Key ratios (Year-end March) FY16 FY17E FY18E FY19E Per share data ( ) Book Value 152.3 176.7 195.7 216.6 Cash per share 1.1 5.5 11.7 9.9 EPS 21.4 38.4 33.0 35.0 Cash EPS 31.4 50.7 46.2 49.1 DPS 7.0 12.0 12.0 12.0 Profitability & Operating Ratios EBITDA Margin (%) 5.7 7.5 5.7 5.9 PAT Margin (%) 3.0 4.1 3.0 3.1 Fixed Asset Turnover (x) 3.1 3.7 4.0 3.6 Inventory Turnover (Days) 39.9 40.0 40.0 40.0 Debtor (Days) 8.4 8.5 8.5 8.5 Current Liabilities (Days) 61.4 55.0 55.0 55.0 Return Ratios (%) RoE 14.1 21.8 16.9 16.2 RoCE 12.0 22.3 17.2 17.1 RoIC 13.1 24.8 19.4 18.9 Valuation Ratios (x) PE 18.2 10.1 11.8 11.1 Price to Book Value 2.6 2.2 2.0 1.8 EV/EBITDA 9.4 5.6 6.2 5.8 EV/Sales 0.7 0.5 0.4 0.4 Leverage & Solvency Ratios Debt to equity (x) 0.7 0.5 0.5 0.4 Interest Coverage (x) 5.1 8.9 7.6 7.7 Debt to EBITDA (x) 2.6 1.2 1.5 1.4 Current Ratio 1.0 0.9 0.9 0.9 Quick ratio 0.6 0.5 0.4 0.4. ICICI Securities Ltd Retail Equity Research Page 8

ICICIdirect.com coverage universe (Oil & Gas) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E Bharat Petroleum (BHAPET) 695 680 Hold 50,254 35.2 51.4 53.9 19.8 13.5 12.9 13.6 10.4 9.8 16.5 21.6 19.9 23.2 27.9 24.4 Cairn India (CAIIND) 273 245 Hold 51,779-50.3 12.8 12.4 11.4-5.4 21.3 5.9 14.5 11.8 10.1 0.5 1.7 7.6-19.3 4.8 Castrol India (CASIND) 418 504 Buy 24,926 12.4 13.5 14.3 33.6 31.0 29.2 22.3 19.9 18.9 148.7 158.7 163.9 106.9 110.0 114.1 GAIL (India) (GAIL) 476 505 Buy 60,380 24.0 18.1 30.9 19.9 26.3 15.4 14.6 15.6 10.6 9.6 7.6 11.7 10.4 7.5 11.7 Gujarat Gas (GUJGAS) 593 570 Hold 8,164 32.2 13.0 23.0 18.4 45.7 25.8 10.1 14.4 11.7 16.6 10.8 13.7 22.3 8.5 13.5 Gujarat State Petronet (GSPL) 158 170 Buy 8,901 7.3 7.9 9.3 21.7 20.0 16.9 10.8 11.5 10.0 15.2 13.5 15.3 11.3 11.2 12.1 Gulf Oil Lubricants (GULO) 683 750 Hold 3,386 20.2 23.8 24.3 33.8 33.8 33.8 21.0 18.8 18.2 34.5 37.1 35.8 40.4 36.8 31.0 Hindustan Petroleum (HINPET) 541 455 Hold 55,021 9.0 12.7 16.7 20.1 14.2 10.8 13.3 9.6 7.7 10.2 13.1 16.7 17.1 20.6 22.7 Indian Oil Corporation (INDOIL) 390 420 Buy 189,380 21.4 38.4 33.0 18.2 10.1 11.8 9.4 5.6 6.2 12.0 22.3 17.2 14.1 21.8 16.9 Indraprastha Gas (INDGAS) 972 920 Buy 13,608 31.3 29.7 42.1 31.1 32.7 23.1 17.1 17.0 12.4 28.7 25.4 28.8 20.9 17.2 20.4 Mangalore Refinery (MRPL) 104 114 Buy 18,228 6.6 14.1 12.1 15.9 7.4 8.6 7.0 5.6 6.1 7.4 23.9 18.9 17.9 29.1 20.8 ONGC (ONGC) 201 215 Hold 257,950 14.3 11.0 16.2 14.1 18.3 12.4 5.2 5.8 5.6 10.5 9.7 11.5 9.8 7.7 11.0 Petronet LNG (PETLNG) 386 410 Buy 28,950 11.8 12.2 21.5 32.8 31.7 18.0 21.7 18.3 10.6 13.5 14.5 23.2 15.5 14.3 21.0 ICICI Securities Ltd Retail Equity Research Page 9

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. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; 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 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 10

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ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Mayur Matani, MBA and Akshay Gavankar, PGDM, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities Ltd Retail Equity Research Page 11