Mount Shivalik Industries Ltd BSE Scrip Code:

Mount Shivalik Industries Ltd BSE Scrip Code: 507522 Breweries & Distilleries October 11, 2012 Equity Statistics Current Market Price Rs. 38 52 Week High/Low Rs. 49.30/19.00 Market Capitalisation Rs. Crores 22.98 Free Float Rs. Crores 12.16 Dividend Yield % 0.00 One Year Regression Beta Times 0.29 BSE Volumes Trend - Average = 3.07 Thousand 229 179 129 79 Returns 1M 3M 6M 1 Yr Absolute 0% 73% 76% 54% Rel. to Sensex -5% 61% 62% 36% Shareholding Pattern 100% 80% 60% 40% 20% 0% 100 80 60 40 20 0 Relative Returns Mount Shivalik Industries Ltd Sensex Sep `11 Dec `11 Mar `12 Jun `12 Promoter DII FII Others Business Summary Promoted by Mr B. D. Bali, Mr Kamal Dutt and Mount Shivalik Breweries Ltd (MSBL), Mount Shivalik Industries Ltd (MSIL) was incorporated on 19th January, 1993 and received the certificate of commencement of business on March 2, 1993. MSIL is engaged in manufacturing and marketing of Beer. MSIL has well-established brands in the beer industry particularly in strong beer segment, where it has strong presence, which is famous in the market and its brands are well received by the customers. The company tapped the capital market in October 1994 to part-finance its 10,000 kilolitres per annum beer manufacturing facility at Behror, Alwar Dist. of Rajasthan. In the year 2000 MSIL forayed into the UK market with its strong beer brand Thunderbolt and its lager segment brand Golden Peacock in July 2000. The installed capacity was expanded to 200,000 HL per annum in 2001-02. In 2004 - Cobra Beer, one of the UK's growing beer brands, announced its technical collaboration with Mount Shivalik Group. The company had also diversified into hospitality business by setting up a Motel project including Fast Food Joint, Restaurant, Bar and other Recreational facilities etc adjacent to Brewery site at Delhi-Jaipur Highway. MSIL derives its revenue from two segments i.e. brewery and hospitality. While brewery contributes to majority of sales of more than 90%, the hospitality segment comprises only a small portion of the total revenues. Geographically, the Indian market continues to be the key market for MSIL. In FY12, MSIL reported net sales of Rs.117.4 crore and a loss of Rs.9.9 crore. MSIL is currently trading at 0.54 times the FY12 sales per share. Board of Directors Person Role Qualification B.D Bali Chairman & MD NA Sanjiv Bali MD B.Com, MBA K.C Garg Director Finance B.Com, LLB, ACA Rajiv Bali Promoter, NED NA Kamal Dutt Promoter, NED Bachelor Degree and Business Associates Degree A.L Batra Independent, NED Graduate J.M Malhotra Independent, NED B.Sc, B.E (Hons) Raghbir Singh Independent, NED NA S.K Chhibber Independent, NED NA K.S Chugh Independent, NED NA Source: AR and CARE Research Note: NA: Not Available, MD: Managing Director, ED: Executive Director, NED: Non Executive Director, 1 Initiative of the BSE Investors Protection Fund

Background Promoted by Mr. BD Bali, Mr. Kamal Dutt and Mount Shivalik Breweries Ltd (MSBL), Mount Shivalik Industries Ltd (MSIL) was incorporated on January 19, 1993 and received the certificate of commencement of business on March 2, 1993. MSIL tapped the capital market in October 1994 to part-finance its 10,000 kilolitres per annum beer manufacturing facility at Behror, Alwar Dist. of Rajasthan. The company had inked an agreement with a leading beer manufacturer for bottling and sale of the latter's brands in the state of Rajasthan during the year 1996-97. The company had tied up with M/s Stroh Brewery Co. of USA, a leading brewer in the world for technical knowhow and the company signed an agreement in this regard with Stroh Brewery in 1999. In the year 2000 MSIL forayed into the UK market with its strong beer brand Thunderbolt and its lager segment brand Golden Peacock in July 2000. The installed capacity was expanded to 200,000 HL per annum in 2001-02. In 2004 -Cobra Beer, one of the UK's growing beer brands, announced its technical collaboration with Mount Shivalik Group. Business overview MSIL derives its revenue from two segments i.e. brewery and hospitality. While brewery contributes to majority of sales of more than 90%, the hospitality segment comprises only a small portion of the total revenues. Geographically, the Indian market continues to be the key market for MSIL. Sales during FY12 (15-months period) grew by approximately 20% compared to FY11. Barley Malt, Rice, Maize/Rice Flakes and sugar are the key raw materials for MSIL in the manufacturing of beer of which barley constitutes nearly 65% of the total raw material costs. Strengths and growth drivers Indian economy is shifting from controlled one to market-driven one and in this process several developments have unfolded. Whereas in case of the beer industry, every State Governments formulate their own Excise Policies, which change almost every year. The control of production, sale price and distribution of beer rests with the State Governments. Certain states have now liberalized the sale of beer by allowing retail distribution to private parties and these conditions have resulted in higher growth of the beer industry particularly. The company's products have been enjoying consistently good brand image and are well received by the customers in the market for several years. Risk and concerns In India, Beer has been categorized as an Alcoholic Beverage, mainly because it suits the State Taxation Policy. At the same time 'Alcohol Beverage is politically sensitive because it is a socially sensitive issue. On one hand, the State-specific taxation policy keeps the price levels very high and on the other hand, State controls the distribution of the product because of the sensitivity. These factors are the biggest threat to the business of beer. The inflationary trend in the price of inputs (particularly raw material and empty bottles) is another constraint faced by the company. Future strategy and expansion plans The company is in the process of continuous modernizing and expanding production capacity further. MSIL has also been expanding its restaurant business over the years. Industry outlook The Indian Breweries & Distilleries (Alcohol) industry s production was estimated at about 1,680 million Kiloletres (kls) in FY10. The industry is expected to grow at a CAGR of 9 per cent during the period of FY10-13 and reach the level of 2,175 million kls. There are about 325 distilleries in the country with the total production capacity of 3,540 million litres. However, the licensed capacity is majorly concentrated in three states of U.P., Maharashtra and Tamil Nadu. The changing perception of the people towards alcohol, growing youth population in the country coupled with rising acceptability of alcohol consumption among the female population is driving the growth of the alcohol industry in India. The Alcohol industry in India can be broadly classified into four segments - beer, wine, Indian Made Foreign Liquor ( IMFL ) and country liquor. The IMFL segment, comprising almost half of the Indian Alcoholic Beverages industry, was estimated at around 195 million cases in FY10. It comprises five products Brown - Whisky, Rum, Brandy, and White Vodka and Gin. CARE Research expects the IMFL market-size to grow at a CAGR of 10 per cent from 195 million cases in 2 Initiative of the BSE Investors Protection Fund

FY10 to 313 million cases in FY15. The growth in this segment will be driven by increasing income levels, growing urbanization, increasing consumerism and changing lifestyles and adoption of western culture across smaller town and cities. The industry is highly fragmented in nature with a large number of small unorganised players and a handful of organised large players. The key players in the industry are United Spirits, United Breweries, Radico Khaitan, Jagatjit Industries, Empee Distilleries and Tilaknagar Industries. The alcohol industry faces stiff competition in terms of the brand popularity in the medium and premium categories. The competition is expected to intensify due to the influx of foreign brands in India. Alcoholic beverages are in the domain of the state governments, with excise policies/duties, licensing system etc governed by the states. States have a wide array of rules and regulations and often oblivious of those in the other states. The high tax burden imposed by the state governments on liquor acts as a hindrance for the growth of the industry. The industry is not allowed to expand without the prior approval of the Central government, as it is among the few industries which are still under the licensing policy. Though the revenues of the market participants in the alcohol industry have increased sharply over the last three years, the profitability margins have declined due to the sharp rise in the sugar, molasses and other raw material prices. The operating margins were also affected due to a sharp rise in the power costs. Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) MSIL KIL AABL USL Total income 118.2 165.6 140.2 9,931.0 Net sales 117.4 164.5 138.4 9,186.5 EBITDA (7.3) 47.2 9.3 1,049.4 Ordinary PAT (9.9) 20.8 2.6 187.2 Adjusted PAT (9.9) 20.8 2.6 189.1 Per share data (Rs.) Adjusted BVPS NA 30.6 50.6 357.5 Diluted EPS NM 5.5 2.3 14.5 Growth (Y-o-Y) (%) Growth in total income NM 17.4 52.6 25.3 Growth in net sales NM 19.7 52.5 24.5 Growth in EBITDA NM 368.4 54.5 (8.3) Growth in adjusted PAT NM (249.7) 99.2 (64.3) Growth in EPS* NM (249.7) (14.0) (67.6) Profitability ratio (%) EBITDA margin NM 28.7 6.7 11.4 Adjusted PAT margin NM 12.5 1.8 1.9 Valuation ratios (Times) Price/EPS (P/E) NM 9.1 8.5 85.3 Price/Book value (P/BV) NA 1.6 0.4 3.5 Enterprise value (EV)/EBITDA NM 4.9 3.0 20.2 Note: KIL: Khoday India Ltd., AABL: Associated Alcohols Breweries Ltd., USL: United Spirits Ltd. MSIL, FY12 financials are based on abridged results Quarterly financials Income statement (Rs. crore) Q5FY12 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income 36.8 13.0 15.5 21.5 31.4 Net sales 36.7 13.0 15.4 21.4 31.3 EBITDA 2.1 (1.6) (2.5) (3.3) (1.7) Ordinary PAT 0.3 (2.2) (2.6) (2.1) (3.2) Adjusted PAT 0.3 (2.2) (2.6) (2.1) (3.2) Growth (Q-o-Q) (%) Growth in net sales 182.4 (15.4) (28.1) (31.8) Profitability ratio (%) EBITDA margin 5.9 NM NM NM NM Adjusted PAT margin 0.7 NM NM NM NM 3 Initiative of the BSE Investors Protection Fund

Financial analysis In FY12 (refers to 15-months period from April 1, 2011 to June 30, 2012), MSIL reported net sales of Rs.117.4 crore. Unanticipated steep rise in cost of input materials, particularly the bottles and malt, which could not be passed on to the customers in view of competitive conditions and reluctance of the State Government Corporations, who are the major customers for MSIL to revise the prices resulted in an operating loss of Rs.7.3 crore during FY12 compared to an operating loss of Rs.5.5 crore in FY11. Barley is the key raw material for MSIL. The raw materials cost as a percentage of net sales is approximately 20%. Administrative and selling expenses comprising mainly of freight, power cost, rates and taxes constitute around 45% of the net sales. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income 94.8 103.7 117.1 98.2 118.2 Net sales 93.9 102.3 113.9 98.0 117.4 EBITDA 9.4 4.5 3.2 (5.5) (7.3) Depreciation and amortization 1.6 1.8 2.1 2.5 3.4 EBIT 7.9 2.7 1.1 (7.9) (10.8) Interest 1.0 1.4 1.9 2.6 4.8 PBT 7.8 2.4 1.1 (9.7) (14.7) Ordinary PAT 4.8 1.2 0.1 (6.5) (9.9) Adjusted PAT 4.8 1.3 0.1 (6.5) (9.9) Balance sheet (Rs. crore) Adjusted networth 18.1 18.6 18.6 12.2 NA Total debt 8.8 13.0 13.3 16.4 NA Cash and bank 1.4 2.0 1.5 1.4 NA Investments 0.2 0.1 0.1 0.1 NA Net fixed assets (incl. CWIP) 19.1 24.2 26.7 26.9 NA Net current assets (excl. cash, cash equivalents) 9.1 8.1 6.6 0.1 NA Per share data (Rs.) Adjusted BVPS 29.9 30.7 30.8 20.1 NA Diluted EPS* 7.7 1.8 0.1 NM NM DPS 1.2 1.0 - - - Growth (Y-o-Y) (%) Growth in total income 65.3 9.4 12.9 (16.1) NM Growth in net sales 69.8 9.0 11.3 (14.0) NM Growth in EBITDA 194.1 (52.4) (29.7) NM NM Growth in adjusted PAT 240.1 (73.5) (94.5) NM NM Growth in EPS* 150.7 (76.5) (95.6) NM NM Key financial ratio EBITDA margin (%) 10.0 4.4 2.8 NM NM Adjusted PAT margin (%) 5.1 1.2 0.1 NM NM RoCE (%) 18.5 4.8 NM NM NA RoE (%) 29.5 6.5 0.3 NM NA Gross debt - equity (times) 0.5 0.7 0.7 1.4 NA Net debt - equity (times) 0.4 0.6 0.6 1.2 NA Interest coverage (times) 8.3 2.0 0.6 NM NA Current ratio (times) 1.4 1.3 1.3 1.0 NA Inventory days 47.2 43.0 41.6 51.2 NA Receivable days 50.8 61.4 61.4 59.6 NA NM: Not Meaningful; NA: Not Available Note: FY12 financials are for a period of 15 months, from April 1, 2011 to June 30, 2012; FY12 financials are based on abridged results 4 Initiative of the BSE Investors Protection Fund

DISCLOSURES Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company. This report has been sponsored by the BSE Investors Protection Fund. DISCLAIMER CARE Research, a division of Credit Analysis & REsearch Limited [CARE] has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain or from sources considered reliable. However, neither the accuracy nor completeness of information contained in this report is guaranteed. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report can be construed as either investment or any other advice or any solicitation, whatsoever. The subscriber / user assumes the entire risk of any use made of this report or data herein. CARE specifically states that it or any of its divisions or employees do not have any financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied for any purpose. PUBLISHED BY CARE Research is an independent research division of CARE Ratings, a full-service rating company. CARE Research is involved in preparing detailed industry research reports with 5-year demand and 2-year profitability outlook on the industry besides providing comprehensive trend analysis and the current state of the industry. CARE Research also offers research that is customized to client requirements. Credit Analysis & REsearch Ltd. (CARE) is a full service rating company that offers a wide range of rating and grading services across sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best international practices. Head Office: 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road, Sion East, Mumbai 400 022. Tel: +91-22-67543456 Fax: +91-22-67543457 www.careratings.com Regional Offices: New Delhi Kolkata Ahmedabad Bangalore Hyderabad Chennai Pune Published on behalf of The Stock Exchange Investors' Protection Fund First Floor, P J Towers, Dalal Street, Mumbai. Tel: 22721233/34 www.bseindia.com www.careratings.com