Coal India (COAL IN) Rating: BUY CMP: Rs279 TP: Rs340 August 13, 2018 Q1FY19 Result Update Change in Estimates Target Reco Change in Estimates Current Previous FY19E FY20E FY19E FY20E Rating BUY BUY Target Price 340 340 Sales (Rs. m) 9,68,416 10,16,530 9,68,416 10,16,530 % Chng. - - EBITDA (Rs. m) 2,70,194 2,79,980 2,70,194 2,79,980 % Chng. - - EPS (Rs.) 26.4 26.7 26.4 26.7 % Chng. - - Key Financials FY17 FY18 FY19E FY20E Sales (Rs. bn) 784 859 976 1,038 EBITDA (Rs.bn) 151 129 275 298 Margin (%) 19.3 15.1 28.2 28.8 PAT (Rs. bn) 90 67 163 171 EPS (Rs.) 14.5 10.8 26.3 27.6 Gr. (%) (35.1) (25.6) 143.7 5.2 DPS (Rs.) 19.9 16.5 20.0 22.0 Yield (%) 7.1 5.9 7.2 7.9 RoE (%) 30.3 30.1 79.4 79.5 RoCE (%) 30.0 26.6 93.7 95.6 EV/Sales (x) 1.8 1.7 1.5 1.4 EV/EBITDA (x) 9.6 11.1 5.3 4.9 PE (x) 19.3 25.9 10.6 10.1 P/BV (x) 7.1 8.7 8.2 7.9 Key Data COAL.BO COAL IN 52-W High / Low Rs.317 / Rs.235 Sensex / Nifty 37,869 / 11,430 Market Cap Rs.1,732bn/ $ 24,769m Shares Outstanding 6,207m 3M Avg. Daily Value Rs.1929.15m Shareholding Pattern (%) Promoter s 78.32 Foreign 5.41 Domestic Institution 13.19 Public & Others 3.08 Promoter Pledge (Rs bn) - Stock Performance (%) 1M 6M 12M Absolute 4.2 (7.2) 18.3 Relative 1.1 (15.4) (1.9) Kamlesh Bagmar kamleshbagmar@plindia.com 91-22-66322237 Amit Khimesra amitkhimesra@plindia.com 91-22-66322244 Meets the estimate on realisations and costs; Maintain BUY Coal India (COAL) reported Q1FY19 earnings in line with our estimate. Blended realisations fall marginally short of our estimate due to higher share of FSA volumes. However, headline FSA/E-auction realisation beat our estimates by 3%/4%. Our estimates already factors in ~30% YoY fall in E-auction volumes at 75mn tonnes (t) with realisations at Rs2,300/t lower than Q1 level of Rs2,400/t. We keep our FSA realisations unchanged, as high priority to supply coal to Power sector would keep the increase in check. Thus, better than expected E-auction and stable FSA realisations would offset the impact of higher employee cost on our earnings estimates. Driven by strong volume outlook and steady realisations, we expect EBITDA to grow at CAGR of 21% in FY18-FY20e. We reiterate BUY with TP of Rs340, EV/EBITDA of 6xFY20E. Higher share of FSA limits the increase in realisations on blended level: Volumes rose 11.7% YoY to 153.5mn (PLe:153.4mn) t. FSA volumes rose 22% YoY to 130.4mn (PLe: 124.3mn) t with share at 85% (PLe:81%). Led by 9% price hike in non-coking coal in January-2018 and stabilisation of grades, FSA realisations rose 9% YoY to Rs1,313 (PLe:Rs1,270). E-auction volumes fell 29% YoY to 19mn (PLe: 25mn) t with sharp fall in its share to 12.6% (PLe:16.3%) against 19.8%/18.4% in Q1FY18/Q4FY18. E-auction realisations rose 51% YoY ( 14 QoQ) to Rs2,400 (PLe:Rs2,300). Washed coal realisations fell 33% YoY ( 17% QoQ) to Rs2,427 (PLe:Rs2,920). Impacted by higher share of FSA volumes, blended realisations came marginally below our estimate at Rs1,470 (PLe:Rs1,480); up 10% YoY. Adj. EBITDA in line with estimate, led by higher other operating income: Impacted by provisioning for pension at increased rates (effective from 1 st Oct-2017) and higher than expected OBR adj (non-cash cost), total cost/t rose 6% YoY/Rs69 to Rs1,207 (PLe:Rs1,150). Adjusted for provisioning of Rs330bn for pension related to prior year and non-cash OBR adj, cost/t fell 2% YoY at Rs1,128 (PLe:Rs1,130). Reported EBITDA rose 63% YoY to Rs57.3bn (PLe:Rs65.8bn). Adjusted for one-time and OBR adj, EBITDA rose 104% YoY to Rs69.5bn (PLe:Rs68.9bn). Impacted by higher than expected tax rate (38% v/s PLe:35%), Adj. PAT came below our estimate at Rs45.4bn (PLe:Rs47.5bn), up 98% YoY. Impending OFS would remain an overhang in the near term: As the concerns related to grade slippage and inability to rationalise costs are behind, we believe that investors would not be as worried given better earnings outlook and attractive valuations (EV/EBITDA at 5x FY20e). August 13, 2018
Exhibit 1: Q1FY19 Result Overview (Rs mn) Y/e March (Rs mn) Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 FY19E FY18 YoY gr. (%) Net operating revenue 225,978 184,043 22.8 251,087 910,342 817,000 11.4 Other operating income 16,631 7,574 119.6 18,005 66,035 41,624 58.6 Revenue (including other operating income) 242,609 191,617 26.6 269,092 976,377 858,624 13.7 (Accretion)/Decretion in Stocks 11,635 8,817 32.0 (13,785) - 16,795 (100.0) Consumption of stores and spares 15,739 14,806 6.3 21,481 77,682 68,296 13.7 Employees' Remuneration & Benefits 95,982 80,716 18.9 166,539 374,127 426,336 (12.2) Power & Fuel 5,940 6,178 (3.8) 6,310 28,623 25,164 13.7 CSR expenses 375 1,104 (66.1) 2,010 5,556 4,838 14.8 Repairs 2,811 2,916 (3.6) 5,958 16,373 14,395 13.7 Contractual Expenses 31,761 30,980 2.5 38,954 146,612 127,670 14.8 Miscellaneous expenses 11,105 10,742 3.4 12,613 47,948 42,154 13.7 Overburden Removal Adjustment 8,835 (1,069) - 24,847 36,729 33,583 9.4 Provision and write off 1,102 1,209 (8.9) 2,211 4,082 3,732 9.4 Total Cost of Sales 185,284 156,397 18.5 267,137 737,730 762,962 (3.3) EBITDA 57,325 35,220 62.8 1,955 238,647 95,663 149.5 as a % of Sales 25.4 19.1 0.8 26.2 11.7 Depreciation 7,452 6,699 11.2 9,308 31,938 30,664 4.2 EBIT 49,872 28,521 74.9 (7,353) 206,709 64,999 218.0 Interest 1,103 1,210 (8.8) 1,127 3,000 4,318 (30.5) PBT (before other income) 48,769 27,311 78.6 (8,480) 203,709 60,681 235.7 Other Income 12,100 12,066 0.3 20,002 45,450 46,583 (2.4) PBT before extraordinaries 60,869 39,377 54.6 11,521 249,159 107,264 132.3 Exceptional items - - - - - PBT after extraordinaries 60,869 39,377 54.6 11,521 249,159 107,264 132.3 Provision for Taxation 23,025 15,860 45.2 (1,420) 86,209 37,067 132.6 Reported PAT 37,843 23,517 60.9 12,942 162,950 70,198 132.1 Adjusted PAT 37,843 23,517 60.9 12,942 162,950 70,198 132.1 Source: Company, PL August 13, 2018 2
Exhibit 2: Operating Metrics Y/e March (Rs mn) Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 FY19E FY18 YoY gr. (%) Coal production (m tonnes) 136.9 118.8 15.2 183.5 620.5 567.4 9.4 Coal sales volume (m tonnes) 153.5 137.4 11.7 158.9 620.5 580.3 6.9 Rs/tonne analysis on aggregate volumes Net realisation (Excl. other operating income) 1,472 1,339 9.9 1,581 1,467 1,408 4.2 Realisation (including other operating income) 1,581 1,394 13.4 1,694 1,573 1,480 6.3 Total cost/tonne 1,207 1,138 6.1 1,682 1,189 1,315 (9.6) EBITDA/tonne 374 256 45.7 12 385 165 133.3 Sales volume mix (m tonnes) FSA 130.4 107.1 21.7 126.4 530.0 460.0 15.2 E-auction 19.4 27.3 (28.8) 29.3 75.0 106.2 (29.4) Washed coal 2.6 2.7 (5.9) 3.1 11.6 11.5 1.6 Realisation per tonne (Rs) FSA 1,313 1,201 9.3 1,403 1,320 1,257 5.0 E-auction 2,399 1,586 51.3 2,112 2,300 1,839 25.1 Washed coal 2,427 3,649 (33.5) 2,923 2,509 3,023 (17.0) Source: Company, PL August 13, 2018 3
Financials Income Statement (Rs m) Net Revenues 784,187 858,624 976,377 1,037,524 YoY gr. (%) 0.5 9.5 13.7 6.3 Cost of Goods Sold 57,253 85,090 77,682 85,389 Gross Profit 726,935 773,534 898,695 952,135 Margin (%) 92.7 90.1 92.0 91.8 Employee Cost 335,143 426,336 374,127 375,474 Other Expenses 215,109 192,789 220,570 246,891 EBITDA 151,102 129,245 275,376 298,308 YoY gr. (%) (29.8) (14.5) 113.1 8.3 Margin (%) 19.3 15.1 28.2 28.8 Depreciation and Amortization 55,790 64,246 68,666 77,499 Balance Sheet Abstract (Rs m) Non-Current Assets Gross Block 294,279 360,723 437,717 519,849 Tangibles 294,279 360,723 437,717 519,849 Intangibles - - - - Acc: Dep / Amortization 56,165 84,949 116,886 155,189 Tangibles 56,165 84,949 116,886 155,189 Intangibles - - - - Net fixed assets 238,114 275,774 320,831 364,660 Tangibles 238,114 275,774 320,831 364,660 Intangibles - - - - EBIT 95,313 64,999 206,709 220,809 Margin (%) 12.2 7.6 21.2 21.3 Net Interest 4,117 4,318 3,000 3,001 Other Income 53,242 46,583 45,450 44,366 Capital Work In Progress 85,852 102,864 111,419 120,545 Goodwill - - - - Non-Current Investments 105,270 129,132 129,132 129,132 Net Deferred tax assets 27,328 53,551 53,551 53,551 Other Non-Current Assets 22,390 25,454 26,454 27,454 Profit Before Tax 144,437 107,264 249,159 262,174 Margin (%) 18.4 12.5 25.5 25.3 Total Tax 51,735 38,081 86,209 90,712 Effective tax rate (%) 35.8 35.5 34.6 34.6 Profit after tax 92,703 69,184 162,950 171,462 Minority interest - - - - Share Profit from Associate - - - - Adjusted PAT 89,839 66,861 162,950 171,462 YoY gr. (%) (36.2) (25.6) 143.7 5.2 Margin (%) 11.5 7.8 16.7 16.5 Extra Ord. Income / (Exp) 2,864 2,323 - - Reported PAT 92,703 69,184 162,950 171,462 YoY gr. (%) (34.9) (25.4) 135.5 5.2 Margin (%) 11.8 8.1 16.7 16.5 Other Comprehensive Income - - - - Total Comprehensive Income 92,703 69,184 162,950 171,462 Equity Shares O/s (m) 6,207 6,207 6,207 6,207 EPS (Rs) 14.5 10.8 26.3 27.6 Current Assets Investments 5,135 2,056 2,056 2,056 Inventories 89,453 64,439 64,658 68,836 Trade receivables 124,763 86,892 96,819 102,712 Cash & Bank Balance 311,492 314,751 289,596 287,311 Other Current Assets 139,934 184,313 185,092 185,732 Total Assets 1,178,152 1,274,917 1,315,300 1,377,681 Equity Equity Share Capital 62,074 62,074 62,074 62,074 Other Equity 183,107 136,392 149,991 157,168 Total Networth 245,181 198,466 212,065 219,242 Non-Current Liabilities Long Term borrowings 3,015 10,612 15,377 15,377 Provisions 437,781 499,031 529,542 569,925 Other non current liabilities 38,197 43,666 46,666 49,666 Current Liabilities ST Debt / Current of LT Debt 27,130 4,765 - - Trade payables 38,843 45,169 51,377 56,474 Other current liabilities 374,119 457,948 444,384 450,735 Total Equity & Liabilities 1,178,152 1,274,917 1,315,300 1,377,681 August 13, 2018 4
Cash Flow (Rs m) Key Financial Metrics Year PBT 144,448 110,043 249,159 262,174 Per Share(Rs) Add. Depreciation 29,068 30,468 31,938 38,303 EPS 14.5 10.8 26.3 27.6 Add. Interest - - - - CEPS 23.5 21.1 37.3 40.1 Less Financial Other Income 53,242 46,583 45,450 44,366 BVPS 39.5 32.0 34.2 35.3 Add. Other 16,820 7,991 10,267 14,009 FCF 40.5 48.0 42.8 51.0 Op. profit before WC changes 190,336 148,502 291,364 314,486 DPS 19.9 16.5 20.0 22.0 Net Changes-WC 63,688 138,450 (24,872) 1,297 Return Ratio(%) Direct tax (89,415) (74,329) (86,209) (90,712) RoCE 30.0 26.6 93.7 95.6 Net cash from Op. activities 164,608 212,623 180,283 225,071 ROIC 12.8 10.1 20.9 21.7 Capital expenditures (86,761) (85,293) (85,549) (91,258) RoE 30.3 30.1 79.4 79.5 Interest / Dividend Income 34,642 24,044 26,462 25,187 Balance Sheet Others 56,666 (15,514) - - Net Debt : Equity (x) (1.2) (1.5) (1.3) (1.2) Net Cash from Invt. activities 4,546 (76,763) (59,087) (66,070) Net Working Capital (Days) 82 45 41 40 Issue of share cap. / premium (45,531) - - - Valuation(x) Debt changes 18,169 (14,778) - - PER 19.3 25.9 10.6 10.1 Dividend paid (151,031) (123,238) (149,350) (164,285) P/B 7.1 8.7 8.2 7.9 Interest paid (306) (370) - - P/CEPS 23.7 21.4 37.8 40.6 Others 2,720 2,513 3,000 3,000 EV/EBITDA 9.6 11.1 5.3 4.9 Net cash from Fin. activities (175,980) (135,873) (146,350) (161,285) EV/Sales 1.8 1.7 1.5 1.4 Net change in cash (6,825) (12) (25,155) (2,285) Dividend Yield (%) 7.1 5.9 7.2 7.9 Free Cash Flow 251,370 297,916 265,832 316,328 Quarterly Financials (Rs m) Y/e Mar Q2FY18 Q3FY18 Q4FY18 Q1FY19 Net Revenue 181,483 216,433 269,092 242,609 YoY gr. (%) 11.7 5.7 15.8 26.6 Raw Material Expenses - - - - Gross Profit 181,483 216,433 269,092 242,609 Margin (%) 100.0 100.0 100.0 100.0 EBITDA 12,310 46,179 1,955 57,325 YoY gr. (%) (65.0) 275.1 (95.8) 2,832.2 Margin (%) 6.8 21.3 0.7 23.6 Depreciation / Depletion 7,146 7,511 9,308 7,452 EBIT 5,164 38,668 (7,353) 49,872 Margin (%) 2.8 17.9 (2.7) 20.6 Net Interest 1,007 974 1,127 1,103 Other Income 6,107 8,409 20,002 12,100 Profit before Tax 10,264 46,102 11,521 60,869 Margin (%) 5.7 21.3 4.3 25.1 Total Tax 6,576 16,052 (1,420) 23,025 Effective tax rate (%) 64.1 34.8 (12.3) 37.8 Profit after Tax 3,689 30,050 12,942 37,843 Minority interest 4 (1) (1) (1) Share Profit from Associates - - - - Adjusted PAT 3,689 30,050 12,942 37,843 YoY gr. (%) (39.8) 4.2 (52.4) 60.9 Margin (%) 2.0 13.9 4.8 15.6 Extra Ord. Income / (Exp) (4) 1 1 1 Reported PAT 3,684 30,051 12,943 37,845 YoY gr. (%) (39.8) 4.2 (52.4) 60.9 Margin (%) 2.0 13.9 4.8 15.6 Other Comprehensive Income - - - - Total Comprehensive Income 3,684 30,051 12,943 37,845 Avg. Shares O/s (m) - - - - EPS (Rs) - - - - Key Operating Metrics Raw coal prod (mn tn) 554 567 621 662 Coal despatches (mn tn) 543 580 621 662 Vol sold under FSA/MoU (mn tn) 430 460 530 571 Vol sold under E-auction (mn tn) 94 106 75 75 Beneficiated coal vol (mn tn) 14 11 12 12 Vol sold to power utilities (mn tn) 426 453 Real. / tonne (Rs) 1,393 1,409 1,467 1,458 Total cost per tonne (Rs) 1,110 1,215 1,315 1,189 Cash cost per tonne (Rs) 1,057 1,166 1,257 1,130 Employee cost / tonne (Rs) 559 605 751 603 EBITDA / tonne (Rs) 229 165 385 391 OBR adj / tonne (Rs) 52 48 59 59 August 13, 2018 5
Price Chart Recommendation History (Rs) 400 359 318 277 236 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 No. Date Rating TP (Rs.) Share Price (Rs.) 1 16-Aug-17 Reduce 225 239 2 9-Oct-17 Reduce 272 276 3 13-Nov-17 Reduce 275 285 4 9-Jan-18 BUY 365 288 5 10-Jan-18 BUY 365 304 6 12-Feb-18 BUY 365 300 7 13-Apr-18 BUY 365 285 8 29-May-18 BUY 340 282 9 1-Jun-18 BUY 340 295 10 10-Jul-18 BUY 340 261 Analyst Coverage Universe Sr. No. CompanyName Rating TP (Rs) Share Price (Rs) 1 ACC BUY 1,750 1,311 2 Ambuja Cement Accumulate 250 208 3 Coal India BUY 340 261 4 Heidelberg Cement India BUY 200 159 5 Hindalco Industries Accumulate 285 223 6 Hindustan Zinc Accumulate 340 277 7 Jindal Steel & Power BUY 305 204 8 JK Lakshmi Cement Hold 360 330 9 JSW Steel BUY 450 317 10 NMDC Accumulate 145 105 11 Shree Cement Hold 17,235 15,978 12 Steel Authority of India Hold 86 80 13 Tata Steel BUY 727 566 14 The Ramco Cements Hold 735 693 15 Ultratech Cement Hold 4,000 3,849 PL s Recommendation Nomenclature (Absolute Performance) Buy : > 15% Accumulate : 5% to 15% Hold : +5% to -5% Reduce : -5% to -15% Sell : < -15% Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly August 13, 2018 6
ANALYST CERTIFICATION (Indian Clients) We/I, Mr. Kamlesh Bagmar- CA, Mr. Amit Khimesra- 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. (US Clients) The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific recommendation or views expressed in this research report. DISCLAIMER Indian Clients Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as PL ) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for third party financial products. PL is a subsidiary of Prabhudas Lilladher Advisory Services Pvt Ltd. which has its various subsidiaries engaged in business of commodity broking, investment banking, financial services (margin funding) and distribution of third party financial/other products, details in respect of which are available at www.plindia.com. This document has been prepared by the Research Division of PL and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. PL may from time to time solicit or perform investment banking or other services for any company mentioned in this document. PL is in the process of applying for certificate of registration as Research Analyst under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 PL submits that no material disciplinary action has been taken on us by any Regulatory Authority impacting Equity Research Analysis activities. PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company. PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report. PL or its associates might have received compensation from the subject company in the past twelve months. PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company for any other assignment in the past twelve months. PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. PL or its associates might 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 twelve months PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report. PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. PL or its analysts did not receive any compensation or other benefits from the subject Company or third party in connection with the preparation of the research report. PL or its Research Analysts do not have any material conflict of interest at the time of publication of this report. It is confirmed that Mr. Kamlesh Bagmar- CA, Mr. Amit Khimesra- MBA 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. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. The research analysts for this report has not served as an officer, director or employee of the subject company PL or its research analysts have not engaged in market making activity for the subject company Our sales people, traders, and other professionals or affiliates 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 o the foregoing, among other things, may give rise to real or potential conflicts of interest. PL and its associates, their directors and employees may (a) from time to time, have a long or short position in, and buy or sell the securities of the subject company or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company or act as an advisor or lender/borrower to the subject company or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. US Clients This research report is a product of Prabhudas Lilladher Pvt. Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by Prabhudas Lilladher Pvt. Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Prabhudas Lilladher Pvt. Ltd. has entered into an agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo"). Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer. Prabhudas Lilladher Pvt. Ltd. 3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209 www.plindia.com Bloomberg Research Page: PRLD <GO> August 13, 2018 7