Suprajit Engineering (SEL) Automobiles Strong performance. Suprajit Engineering reported a consolidated net profit of `210 mn in 3QFY16, which was 2% higher than our estimates. Phoenix Lamps was consolidated from 2QFY16 so yoy numbers are not comparable. The company grew revenues by 13% yoy in standalone operations and EBITDA by 21% yoy in 3QFY16, which is impressive led by strong growth in 4-wheeler and exports businesses. We maintain our BUY rating and revise our target price to 175 (from 165 earlier). BUY FEBRUARY 10, 2016 RESULT Coverage view: Attractive Price (`): 140 Target price (`): 175 BSE-30: 23,759 C ompany data and valuation summary Suprajit Engineering Stock data Forecasts/Valuations 2016 2017E 2018E 52-week range (Rs) (high,low) 152-111 EPS (Rs) 6.3 7.9 9.3 Market Cap. (Rs bn) 16.8 EPS growth (%) 49.9 25.0 18.4 Shareholding pattern (%) P/E (X) 22.2 17.8 15.0 Promoters 51.8 Sales (Rs bn) 9.3 11.7 13.3 FIIs 4.6 Net profits (Rs bn) 0.8 0.9 1.1 MFs 2.5 EBITDA (Rs bn) 1.5 2.0 2.2 Price performance (%) 1M 3M 12M EV/EBITDA (X) 13.6 9.8 8.6 Absolute (1.2) 4.1 6.9 ROE (%) 27.9 28.0 26.9 Rel. to BSE-30 3.6 12.8 27.6 Div. Yield (%) 0.8 1.1 1.3 Strong performance in standalone operations led by gross margin improvement The company reported a growth of 13% yoy in standalone revenues driven by strong growth in 4-wheeler OEM and exports. The company is gaining market share in the 4-wheeler OEM segment and has 25% market share now. The company has also gained market share in the two-wheeler segment due to gain in market share with Honda Motorcycles. The company s revenue mix was two-wheelers (52%), four-wheelers (33%), aftermarket (10%) and non-auto (5%) in 3QFY16. Exports form 18% of consolidated revenues (excluding Phoenix Lamps) while domestic business forms 82% of revenues. The export business accounted for 14% of consolidated revenues in FY2014 and is growing at a fast clip. Gross margin improved 140 bps yoy largely driven by productivity improvements in their plants, which led to 120 bps yoy improvement in EBITDA margin. The company s market share in the replacement market is ~4-5%, which is likely to increase as it increases distribution presence in North, West and East India. The company is quite strong in South India in the replacement market. Exports and replacement markets are likely to be strong growth drivers for the company, which will help it grow higher than automotive production growth in India. Restructuring of Phoenix Lamps underway Phoenix Lamps reported 15% yoy decline in revenues and 31% yoy decline in EBITDA in 9MFY16. The company had taken steps to improve quality levels, accounting practices related to working capital and productivity levels, which have started to show results. EBITDA margin improved 330 bps on a qoq basis. Management expects further improvement in EBITDA margin as productivity levels are brought in line with Suprajit s standards. Maintain BUY rating on strong growth outlook We maintain our BUY rating on the stock with a revised target price of 175 (from 165 earlier). We have increased our earnings estimates by 5-6% over FY2017/18E driven by 4% increase in standalone revenue assumptions and 40-90 bps increase in our EBITDA margin assumptions. We value the stock at 20X September 2017E EPS. We expect the company to deliver 30% earnings CAGR over FY2015-18E. Hitesh Goel hitesh.goel@kotak.com Mumbai: +91-22-4336-0878 Nishit Jalan nishit.jalan@kotak.com Mumbai: +91-22-4336-0873 Kotak Institutional Equities Research kotak.research@kotak.com Mumbai: +91-22-4336-0000 For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
Automobiles Suprajit Engineering Exhibit 1: Suprajit s standalone 3QFY16 results were marginally above our estimates Suprajit Engineering standalone results, March fiscal year-end, 3QFY16 ( mn) (% chg.) 3QFY16 3QFY16E 3QFY15 2QFY16 3QFY16E 3QFY15 2QFY16 9MFY16 9MFY15 Yoy chg. (%) 2016E Net sales 1,591 1,551 1,411 1,482 2.6 12.7 7.3 4,307 3,889 10.7 5,861 Raw materials (981) (974) (890) (931) 0.8 10.2 5.4 (2,680) (2,465) (3,634) Staff costs (192) (185) (179) (180) 4.1 7.4 7.2 (541) (502) (738) Other expenses (133) (115) (107) (108) 15.6 24.3 23.4 (337) (307) (471) Total expenses (1,307) (1,274) (1,177) (1,218) 2.6 11.1 7.3 (3,558) (3,273) (4,843) EBITDA 284 277 235 264 2.5 21.1 7.7 749 617 21.5 1,018 Depreciation (21) (20) (20) (20) 4.3 5.1 1.9 (62) (60) (86) EBIT 263 257 215 243 2.4 22.6 8.2 688 557 23.5 932 Other income 30 4 10 4 91 43 101 Interest expense (47) (43) (36) (45) (130) (103) (167) Profit before tax 246 218 189 202 12.8 29.9 21.7 648 497 30.4 866 Exceptional income/(expense) (10) (17) (46) Tax expense (83) (70) (69) (65) 17.9 19.4 27.3 (203) (159) (277) Profit after tax 153 148 120 120 3.7 27.6 27.6 399 338 17.9 589 EPS (Rs) 1.3 1.2 1.0 1.0 3.7 27.6 27.6 3.3 2.8 17.9 4.9 As % of net revenues Raw material cost as % of net sales 61.7 62.8 63.1 62.8 62.2 63.4 62.0 Staff cost as % of net sales 12.1 11.9 12.7 12.1 12.6 12.9 12.6 Other expenses as % of net sales 8.4 7.4 7.6 7.3 7.8 7.9 8.0 No. of shares 120.0 120.0 120.0 120.0 120.0 120.0 120.0 Tax rate (%) 35.0 32.1 36.5 35.0 33.8 32.0 32.0 EBITDA margin (%) 17.8 17.9 16.6 17.8 17.4 15.9 17.4 EBIT margin (%) 16.5 16.6 15.2 16.4 16.0 14.3 15.9 Exhibit 2: Suprajit s consolidated 3QFY16 EBITDA was 12% above our estimates Suprajit Engineering consolidated results, March fiscal year-end, 3QFY16 ( mn) (% chg.) 3QFY16 3QFY16E 3QFY15 2QFY16 3QFY16E 3QFY15 2QFY16 9MFY16 9MFY15 Yoy chg. (%) 2016E Net sales 2,605 2,391 1,628 2,624 9.0 60.0 (0.7) 6,782 4,570 48.4 9,273 Raw materials (1,468) (1,016) (1,598) 44.5 (8.1) (3,991) (2,817) (5,504) Staff costs (360) (224) (337) 60.2 6.6 (922) (645) (1,296) Other expenses (348) (136) (281) 156.9 23.9 (799) (404) (1,011) Total expenses (2,176) (1,376) (2,217) 58.1 (1.8) (5,712) (3,866) (7,811) EBITDA 429 384 252 407 11.7 70.3 5.3 1,070 703 52.1 1,462 Depreciation (41) (38) (25) (48) 8.5 64.8 (13.2) (118) (73) (175) EBIT 388 346 227 360 12.1 70.9 7.7 952 631 50.9 1,287 Other income 78 15 12 19 163 46 191 Interest expense (61) (60) (44) (63) (170) (125) (246) Profit before tax 405 301 196 316 34.5 107.0 28.1 944 552 71.1 1,232 Exceptional income/(expense) (10) (17) (46) Tax expense (142) (96) (76) (101) 47.4 86.3 40.3 (307) (182) (393) Minority interest (44) (44) (84) Profit after tax 210 205 120 198 2.3 75.4 5.8 547 370 48.1 754 EPS (Rs) 1.7 1.7 1.0 1.7 2.3 75.4 5.8 4.6 3.1 48.1 6.3 As % of net revenues Raw material cost as % of net sales 56.4 62.4 60.9 58.9 61.6 59.4 Staff cost as % of net sales 13.8 13.8 12.9 13.6 14.1 14.0 Other expenses as % of net sales 13.4 8.3 10.7 11.8 8.8 10.9 No. of shares 120.0 120.0 120.0 120.0 120.0 120.0 120.0 Tax rate (%) 35.8 31.9 38.8 33.7 34.2 33.0 31.9 EBITDA margin (%) 16.5 16.1 15.5 15.5 15.8 15.4 15.8 EBIT margin (%) 14.9 14.5 13.9 13.7 14.0 13.8 13.9 2 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Suprajit Engineering Automobiles Exhibit 3: Phoenix s consolidated EBITDA declined by 23% yoy in 3QFY16 partly due to EUR depreciation Phoenix Lamps consolidated results, March fiscal year-end, 3QFY16 ( mn) (% chg.) 3QFY16 3QFY15 2QFY16 3QFY15 2QFY16 9MFY16 9MFY15 Yoy chg (%) 2016E Gross sales 837 972 935 2,496 2,879 Excise duty (54) (42) (48) (144) (127) Net sales 783 930 887 (16) (12) 2,352 2,751 (14.5) 3,150 Raw materials (415) (527) (556) (21) (25) (1,357) (1,568) (1,780) Staff costs (124) (131) (120) (5) 3 (361) (384) (504) Other expenses (129) (122) (109) 6 18 (359) (399) (454) Total expenses (669) (780) (786) (14) (15) (2,076) (2,351) (2,738) EBITDA 115 150 102 (23) 13 276 400 (31.1) 412 Depreciation (16) (26) (25) (38) (34) (78) (90) (90) EBIT 98 123 76 (20) 29 198 310 (36.3) 322 Other income 13 2 1 15 8 40 Interest expense (10) (17) (13) (41) (43) (61) Profit before tax 101 108 64 (7) 57 172 274 301 Exceptional income/(expense) 18 (2) 1 40 (14) - Tax expense (43) (38) (25) 14 76 (87) (85) (90) Profit after tax 75 69 41 10 85 125 175 (28.9) 211 EPS (Rs) 2.7 2.5 1.5 9.7 85 0.7 1.0 (28.9) 1.8 As % of net revenues Raw material cost as % of net sales 53.0 56.7 62.7 57.7 57.0 56.5 Staff cost as % of net sales 15.9 14.1 13.6 15.3 14.0 16.0 Other expenses as % of net sales 16.4 13.1 12.3 15.3 14.5 14.4 No. of shares 28.0 28.0 28.0 170.8 170.8 120.0 Tax rate (%) 36.5 35.6 37.8 41.2 32.7 30.0 EBITDA margin (%) 14.7 16.1 11.4 11.7 14.6 13.1 EBIT margin (%) 12.5 13.3 8.6 8.4 11.3 10.2 Exhibit 4: We have increased our FY2017-18E consolidated EPS estimates by 5-6% Earnings revision table, March fiscal year-ends, 2016-18E ( mn) Standalone New estimates Old estimates % change 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E Net sales 5,861 7,026 8,123 5,629 6,737 7,779 4.1 4.3 4.4 EBITDA 1,018 1,275 1,491 907 1,163 1,385 12.3 9.7 7.7 Margin (%) 17.4 18.2 18.4 16.1 17.3 17.8 Net Profit 589 731 883 500 669 819 17.8 9.2 7.8 EPS (Rs/share) 4.9 6.1 7.4 4.2 5.6 6.8 17.8 9.2 7.8 Consolidated Net sales 9,273 11,667 13,252 9,283 11,821 13,400 (0.1) (1.3) (1.1) EBITDA 1,462 1,959 2,232 1,419 1,893 2,177 3.0 3.5 2.5 Margin (%) 15.8 16.8 16.8 15.3 16.0 16.2 Net Profit 754 943 1,116 630 888 1,062 19.7 6.1 5.1 EPS (Rs/share) 6.3 7.9 9.3 5.2 7.4 8.8 19.7 6.1 5.1 KOTAK INSTITUTIONAL EQUITIES RESEARCH 3
Automobiles Suprajit Engineering Exhibit 5: Two-wheeler accounts for almost of 55% of Suprajit s revenues Consolidated revenue breakdown of Suprajit (ex-phoenix Lamps), March fiscal year-ends, 2012-18E ( mn) 2012 2013 2014 2015 2016E 2017E 2018E Revenues (mn) Two-wheeler 2,789 3,037 3,275 3,765 3,892 4,451 4,914 Automotive 1,143 1,366 1,727 1,555 1,716 2,190 2,591 Non auto 411 455 596 908 975 1,260 1,596 Replacement 229 202 357 423 498 615 792 Total revenues 4,572 5,061 5,955 6,651 7,081 8,516 9,893 Domestic 4,115 4,504 5,122 5,540 5,913 7,008 7,984 Exports 457 557 834 1,111 1,168 1,508 1,909 Contribution to sales (%) Two-wheeler 61 60 55 57 55 52 50 Automotive 25 27 29 23 24 26 26 Non auto 9 9 10 14 14 15 16 Replacement 5 4 6 6 7 7 8 Total 100 100 100 100 100 100 100 Domestic 90 89 86 83 84 82 81 Exports 10 11 14 17 16 18 19 Volumes (mn units) Two-wheeler 74 77 84 81 82 89 95 Automotive 23 27 35 31 35 44 51 Non auto 7 7 9 14 15 19 24 Replacement 5 4 7 8 10 12 15 Total 110 115 135 134 143 164 185 Domestic 102 106 122 117 124 140 155 Exports 8 9 13 17 19 24 30 Realizations (Rs/unit) Two-wheeler 38 40 39 47 47 50 52 Automotive 49 51 49 50 48 49 50 Non auto 56 63 65 65 64 66 66 Replacement 45 48 50 52 50 52 54 Total Domestic 40 42 42 48 48 50 51 Exports 56 62 63 64 61 63 64 4 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Suprajit Engineering Automobiles Exhibit 6: We expect standalone net profit to grow at 25% CAGR over FY2015-18E Standalone profit model, balance sheet and cash flow statement, March fiscal year-ends, 2011-18E ( mn) 2011 2012 2013 2014 2015 2016E 2017E 2018E Profit model (Rs mn) Net sales 3,005 3,787 4,210 4,823 5,222 5,861 7,026 8,123 EBITDA 510 665 728 851 839 1,018 1,275 1,491 Other income 26 22 31 28 35 101 40 50 Interest and finance charges (61) (86) (96) (118) (135) (167) (175) (169) Depreciation (49) (51) (57) (69) (75) (86) (97) (111) Pre-tax profits 426 550 607 692 665 866 1,044 1,261 Extraordinary items 50 Income tax (122) (157) (183) (216) (219) (277) (313) (378) Net profits 305 392 475 477 446 589 731 883 Earnings per share (Rs) 2.5 3.3 3.6 4.0 3.7 4.9 6.1 7.4 Balance sheet (Rs mn) Total equity 978 1,280 1,649 1,993 2,301 2,731 3,242 3,861 Deferred tax liability 35 41 53 66 80 80 80 80 Total borrowings 368 675 876 1,158 1,418 1,618 1,718 1,668 Other liabilities 654 648 710 882 966 1,131 1,253 1,367 Total liabilities and equity 2,035 2,645 3,288 4,099 4,765 5,560 6,293 6,975 Cash 20 29 60 40 45 386 545 591 Current assets 992 1,349 1,739 2,455 2,809 3,049 3,419 3,766 Total fixed assets 788 1,021 1,205 1,340 1,641 1,855 2,059 2,348 Other long term assets 236 246 284 263 269 269 269 269 Total assets 2,035 2,645 3,288 4,099 4,765 5,560 6,293 6,975 Free cash flow (Rs mn) Operating cash flow, excl. working capital 403 518 563 658 644 741 962 1,113 Working capital 18 (282) (107) (245) (38) (75) (248) (233) Capital expenditure (256) (285) (194) (205) (380) (300) (300) (400) Investments 4 (92) (252) (280) (349) Free cash flow 166 (49) 263 207 226 366 414 480 Ratios (%) EBITDA margin (%) 17.0 17.6 17.3 17.7 16.1 17.4 18.2 18.4 Gross margin (%) 34.8 34.4 35.7 37.1 36.6 38.0 38.0 38.0 Debt/equity (X) 0.4 0.5 0.5 0.6 0.6 0.6 0.5 0.4 Net debt/equity (X) 0.4 0.5 0.5 0.6 0.6 0.5 0.4 0.3 RoAE (%) 35.6 34.7 32.4 26.2 20.8 23.4 24.5 24.9 RoACE (%) 25.3 27.9 24.3 24.3 21.1 23.5 26.1 26.4 KOTAK INSTITUTIONAL EQUITIES RESEARCH 5
Automobiles Suprajit Engineering Exhibit 7: We expect consolidated net profit to grow at 30% CAGR over FY2015-18E Consolidated profit model, balance sheet and cash flow statement, March fiscal year-ends, 2011-18E ( mn) 2011 2012 2013 2014 2015 2016E 2017E 2018E Profit model (Rs mn) Net sales 3,467 4,238 4,625 5,452 6,118 9,273 11,667 13,252 EBITDA 566 686 774 924 961 1,462 1,959 2,232 Other income 48 29 28 38 41 191 110 122 Interest and finance charges (74) (93) (102) (134) (164) (246) (275) (269) Depreciation (72) (75) (81) (84) (90) (175) (219) (234) Pre-tax profits 468 548 618 744 747 1,232 1,575 1,851 Extraordinary items 50 Income tax (135) (150) (197) (236) (245) (393) (478) (562) Minority interest (84) (154) (173) Net profits 332 398 471 508 503 754 943 1,116 Earnings per share (Rs) 2.7 3.3 3.5 4.2 4.2 6.3 7.9 9.3 Balance sheet (Rs mn) Total equity 969 1,292 1,667 2,047 2,408 3,003 3,727 4,578 Deferred tax liability 38 46 60 75 91 91 91 91 Total borrowings 463 744 1,029 1,421 1,660 3,455 2,855 2,855 Other liabilities 733 735 762 1,018 1,128 2,339 2,165 2,266 Total liabilities and equity 2,203 2,818 3,519 4,561 5,286 8,888 8,838 9,789 Cash 27 31 76 76 56 365 477 488 Current assets 1,233 1,578 1,968 2,885 3,312 5,224 5,673 6,326 Total fixed assets 910 1,134 1,365 1,531 1,850 2,317 2,619 2,906 Other long term assets 33 74 110 70 69 983 69 69 Total assets 2,203 2,818 3,519 4,561 5,286 8,888 8,838 9,789 Free cash flow (Rs mn) Operating cash flow, excl. working capital 480 562 596 719 753 677 1,634 1,497 Working capital (114) (299) (139) (344) (81) (1,307) (17) (553) Capital expenditure (263) (300) (331) (253) (412) (642) (521) (521) Free cash flow 103 (37) 126 122 260 (1,272) 1,096 423 Ratios (%) EBITDA margin 16.3 16.2 16.7 17.0 15.7 15.8 16.8 16.8 Gross margin 36.4 34.9 37.5 38.5 39.0 40.6 41.7 41.6 Debt/equity (X) 0.5 0.6 0.6 0.7 0.7 1.2 0.8 0.6 Net debt/equity (X) 0.4 0.6 0.6 0.7 0.7 1.0 0.6 0.5 RoAE 39.7 35.2 31.8 27.4 22.6 27.9 28.0 26.9 RoACE 26.5 28.2 24.4 23.8 21.1 22.3 24.3 25.7 6 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Disclosures "I, Hitesh Goel, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report." Kotak Institutional Equities Research coverage universe Distribution of ratings/investment banking relationships 70% 60% 50% Percentage of companies covered by Kotak Institutional Equities, within the specified category. Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has provided investment banking services within the previous 12 months. 40% 30% 20% 10% 0% 32.9% 34.1% 17.9% 15.0% 6.4% 2.3% 1.7% 0.0% BUY ADD REDUCE SELL * The above categories are defined as follows: Buy = We expect this stock to deliver more than 15% returns over the next 12 months; Add = We expect this stock to deliver 5-15% returns over the next 12 months; Reduce = We expect this stock to deliver -5-+5% returns over the next 12 months; Sell = We expect this stock to deliver less than -5% returns over the next 12 months. Our target prices are also on a 12-month horizon basis. These ratings are used illustratively to comply with applicable regulations. As of 31/12/2015 Kotak Institutional Equities Investment Research had investment ratings on 173 equity securities. Source: Kotak Institutional Equities As of December 31, 2015 Ratings and other definitions/identifiers Definitions of rating BUY. We expect this stock to deliver more than 15% returns over the next 12 months. ADD. We expect this stock to deliver 5-15% returns over the next 12 months. REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months. SELL. We expect this stock to deliver <-5% returns over the next 12 months. Our target prices are also on a 12-month horizon basis. Other definitions Coverage view. The coverage view represents each analyst s overall fundamental outlook on the Sector. The coverage view will consist of one of the following designations: Attractive, Neutral, Cautious. Other ratings/identifiers NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. CS = Coverage Suspended. Kotak Securities has suspended coverage of this company. NC = Not Covered. Kotak Securities does not cover this company. RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. NA = Not Available or Not Applicable. The information is not available for display or is not applicable. NM = Not Meaningful. The information is not meaningful and is therefore excluded. KOTAK INSTITUTIONAL EQUITIES RESEARCH 7
Corporate Office Overseas Affiliates Kotak Securities Ltd. 27 BKC, Plot No. C-27, G Block Bandra Kurla Complex, Bandra (E) Mumbai 400 051, India Tel: +91-22-43360000 Kotak Mahindra (UK) Ltd 8th Floor, Portsoken House 155-157 Minories London EC3N 1LS Tel: +44-20-7977-6900 Copyright 2016 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved. 1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and Kotak Mahindra Inc 369 Lexington Avenue 28th Floor, New York NY 10017, USA Tel:+1 212 600 8856 2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. 3. Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc at nilesh.jain@kotak.com. This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the Securities and Futures Act. Recipients of this analysis / report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay, #35-02/03, Hong Leong Building, Singapore 048581) in respect of any matters arising from, or in connection with, this analysis / report. Kotak Mahindra (UK) Limited (Singapore Branch) is regulated by the Monetary Authority of Singapore. Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment. Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have long or short positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions. Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India s largest brokerage and distribution house. Kotak Securities Limited is a corporate trading and clearing member of BSE Limited (BSE), National Stock Exchange of India Limited (NSE), MSEI and United Stock Exchange of India Limited (USEIL). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management. Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time. We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us Details of Associates are available on our website i.e. www.kotak.com Research Analyst has not served as an officer, director or employee of Subject Company. We or our associates have received compensation from the subject company in the past 12 months. We or our associates have managed or co-managed public offering of securities for the subject company in the past 12 months. We or our associates have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates have received any compensation or other benefits from the subject company or third party in connection with the research report. Research Analyst or his/her relative s may have financial interest in the subject company. Kotak Securities Limited or its associates have financial interest in the subject company. Research Analyst or his/her relatives does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report: Kotak Securities Limited does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Associates of Kotak Securities Limited may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Subject Company has been client during twelve months preceding the date of distribution of the research report. A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser and select the three years icon in the price chart). Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSEI INE 260808130/INB 260808135/INF 260808135, Research Analyst INH000000586, AMFI ARN 0164 and PMS INP000000258. NSDL: IN-DP- NSDL-23-97. CDSL: IN-DP-CDSL-158-2001. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022-4285 6825 or Email: ks.compliance@kotak.com