ABFRL IN Equity 30Jul21 RU - edelweissresearch.com

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KEY DATA

Rating BUY Sector relative Outperformer Price (INR) 224 12 month price target (INR) 260 Market cap (INR bn/USD bn) 209/2.8 Free float/Foreign ownership (%) 40.9 / 9.7

What’s Changed Target Price

Rating/Risk Rating ⚊

QUICK TAKE

Online powers; ethnic launch on course

ABFRL reported an above estimate recovery (37% of Q1FY20) driven by e-commerce traction in Madura. However, adjusted margins were a miss due to higher marketing spends. Other key highlights: 1) Debt increased due to operating losses and higher inventory. 2) Launch of two ethnic wear brands on course during festive season (October). 3) FY22 target: 400+/60 Lifestyle/Pantaloons stores addition.

Ignoring the cost and debt spike in this covid quarter, factoring the encouraging recovery trends, ABFRL’s industry leading e-commerce traction and the normalizing situation, we raise our target EBITDA to 21x Q3FY23E (18x earlier, in sync with pre-covid average) leading to revised TP of INR260. Maintain ‘BUY’. Slip on debt is the biggest risk.

FINANCIALS (INR mn)

Year to March FY21A FY22E FY23E FY24E

Revenue 51,811 69,151 97,810 1,07,437

EBITDA 4,870 8,298 14,476 16,438

Adjusted profit (8,034) (3,447) 1,906 3,223

Diluted EPS (INR) (8.6) (3.7) 2.0 3.5

EPS growth (%) 215.1 (57.1) nm 69.1

RoAE (%) (43.3) (13.3) 7.2 11.1

P/E (x) nm nm 109.6 64.8

EV/EBITDA (x) 43.4 25.7 14.5 12.6

Dividend yield (%) 0 0 0 0

PRICE PERFORMANCE

E-commerce drives Madura; ethnic launch on schedule

ABFRL reported 37% overall recovery (of Q1FY20). The higher recovery versus

Q1FY21 (up 2.5x) was driven by: a) higher operational days; and

b) e-commerce channel growth. Segment-wise, recovery in Madura was up 1.4x YoY

(recovery of 46% of Q1FY20) driven by traction in e-commerce (up 3x YoY).

Pantaloons’ limited online contribution and higher share of mall-based stores saw it

clock 25% recovery. Innerwear grew 2x YoY and was ahead of pre-covid level. Gross

margin fell versus Q4FY21 due to lower absorption of manufacturing overheads.

Despite the second wave impact, cost control was limited (other expenses fell only

18% QoQ, up 45% YoY) as ABFRL stepped-up e-commerce channel-related marketing

spends. Overall, management expects recovery by festival season and around that

time it is planning to launch two premium ethnic wear brands–one in men’s wear

and another in women’s wear. ABFRL is planning to add 400+ stores in Lifestyle

brands and 60+ in Pantaloons in FY22.

Debt increases due to cash losses and working capital stretch

Debt increased to INR12bn in Q1FY22 (Q4FY21: INR6.4bn) due to operating losses

(~INR3.5bn) and higher net working capital mainly inventory (INR2bn). ABFRL targets

to limit debt to 1-2x net debt: EBITDA (Current:~2x).

Explore:

Outlook and valuations: Online powers through; retain ‘BUY’

Factoring the encouraging recovery trends, ABFRL’s industry leading e-commerce

traction and the normalizing situation, we raise our target EBITDA to 21x Q3FY23E

(18x earlier, in sync with pre-covid average) with a revised TP of INR260 (INR218

earlier). Any slip on debt remains the biggest risk to our recommendation.

Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change

Net Revenue 7,740 3,200 141.9 17,836 (56.6)

EBITDA ( 1,618) ( 3,234) NM 2,570 NM

Adjusted Profit ( 3,352) ( 3,999) NM ( 1,348) NM

Diluted EPS (INR) ( 3.7) ( 5.2) NM ( 1.5) NM

Above In line Below

Profit

Margins

Revenue Growth

Overall

36,000

39,600

43,200

46,800

50,400

54,000

100

130

160

190

220

250

Jul-20 Oct-20 Jan-21 Apr-21

ABFRL IN Equity Sensex

India Equity Research Retail July 30, 2021

ABFRL RESULT UPDATE

Nihal Mahesh Jham Abneesh Roy +91 (22) 6623 3352 +91 (22) 6620 3141 [email protected] [email protected]

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ABFRL

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Financial Statements

Income Statement (INR mn) Year to March FY21A FY22E FY23E FY24E

Total operating income 51,811 69,151 97,810 1,07,437

Gross profit 26,182 35,267 50,861 55,867

Employee costs 8,654 9,681 11,737 12,355

Other expenses 10,977 11,756 14,672 16,116

EBITDA 4,870 8,298 14,476 16,438

Depreciation 9,628 9,388 9,764 10,140

Less: Interest expense 5,026 3,157 3,071 2,901

Add: Other income 734 800 900 900

Profit before tax (9,050) (3,447) 2,542 4,298

Prov for tax (1,015) 0 635 1,074

Less: Other adj 0 0 0 0

Reported profit (8,034) (3,447) 1,906 3,223

Less: Excp.item (net) 0 0 0 0

Adjusted profit (8,034) (3,447) 1,906 3,223

Diluted shares o/s 933 933 933 933

Adjusted diluted EPS (8.6) (3.7) 2.0 3.5

DPS (INR) 0 0 0 0

Tax rate (%) 11.2 0 25.0 25.0

Important Ratios (%) Year to March FY21A FY22E FY23E FY24E

Pantaloon (39.9) 26.1 49.8 9.2

Madura (37.3) 29.2 35.0 10.0

Pantaloon SSSG (%) (40.0) 20.0 45.0 6.0

EBITDA margin (%) 9.4 12.0 14.8 15.3

Net profit margin (%) (15.5) (5.0) 1.9 3.0

Revenue growth (% YoY) (40.7) 33.5 41.4 9.8

EBITDA growth (% YoY) (58.3) 70.4 74.4 13.6

Adj. profit growth (%) 282.4 (57.1) nm 69.1

Assumptions (%) Year to March FY21A FY22E FY23E FY24E

GDP (YoY %) (6.0) 7.0 6.0 6.0

Repo rate (%) 3.5 3.5 4.0 4.0

USD/INR (average) 75.0 73.0 72.0 72.0

Madura SSSG (%) (35.0) 25.0 20.0 7.0

Pantaloon store 5.0 33.0 33.0 33.0

Madura store 579.0 350.0 400.0 400.0

Pantaloons - COGS (%) 0 0 0 0

Madura - COGS (%) 0 0 0 0

Pantaloons - EBITDA (%) (1.1) (3.9) (8.5) (8.5)

Valuation Metrics Year to March FY21A FY22E FY23E FY24E

Diluted P/E (x) nm nm 109.6 64.8

Price/BV (x) 7.9 8.2 7.6 6.8

EV/EBITDA (x) 43.4 25.7 14.5 12.6

Dividend yield (%) 0 0 0 0

Source: Company and Edelweiss estimates

Balance Sheet (INR mn) Year to March FY21A FY22E FY23E FY24E

Share capital 9,151 9,151 9,151 9,151

Reserves 17,287 16,341 18,247 21,470

Shareholders funds 26,438 25,491 27,397 30,621

Minority interest 0 0 0 0

Borrowings 8,184 8,144 6,144 4,144

Trade payables 23,734 24,683 25,725 28,257

Other liabs & prov 8,041 8,041 8,041 8,041

Total liabilities 73,417 73,379 74,327 78,082

Net block 34,177 34,323 34,670 34,642

Intangible assets 19,973 19,973 19,973 19,973

Capital WIP 376 441 441 441

Total fixed assets 54,526 54,737 55,084 55,056

Non current inv 67 67 67 67

Cash/cash equivalent 6,061 3,973 4,860 5,578

Sundry debtors 7,305 8,016 8,441 9,713

Loans & advances 4,822 5,357 5,357 5,357

Other assets 25,596 28,944 30,314 33,995

Total assets 73,417 73,379 74,327 78,082

Free Cash Flow (INR mn) Year to March FY21A FY22E FY23E FY24E

Reported profit (8,372) (3,447) 2,542 4,298

Add: Depreciation 9,628 9,388 9,764 10,140

Interest (net of tax) 4,292 2,357 2,171 2,001

Others 0 0 0 0

Less: Changes in WC 5,947 (3,646) (753) (2,421)

Operating cash flow 12,510 4,652 13,088 12,942

Less: Capex (1,300) (2,100) (3,100) (3,100)

Free cash flow 11,210 2,552 9,988 9,842

Key Ratios Year to March FY21A FY22E FY23E FY24E

RoE (%) (43.3) (13.3) 7.2 11.1

RoCE (%) (11.7) (0.8) 16.7 21.1

Inventory days 300 217 174 173

Receivable days 55 40 31 31

Payable days 332 261 196 191

Working cap (% sales) 5.0 9.0 7.2 8.8

Gross debt/equity (x) 0.3 0.3 0.2 0.1

Net debt/equity (x) 0.1 0.2 0 0

Interest coverage (x) (0.9) (0.3) 1.5 2.2

Valuation Drivers Year to March FY21A FY22E FY23E FY24E

EPS growth (%) 215.1 (57.1) nm 69.1

RoE (%) (43.3) (13.3) 7.2 11.1

EBITDA growth (%) (58.3) 70.4 74.4 13.6

Payout ratio (%) nm nm 0 0


ABFRL

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Q1FY22 Concall highlights

Industry Trends:

There is a large growth in western wear at the bottom end of the market. In

case of ethnic wear, the market is shifting to the higher end of the market.

Q1FY22:

Increase in other expenses due to one-time ECL of INR120mn and higher

advertising expenses

This quarter doesn’t have too much mark down. Lower absorption of

manufacturing costs saw lower QoQ gross margins

Discounting is much lower across businesses

Madura/Lifestyle

Casual wear portfolio has grown to 59%

More than 85% of the network is open and revenue trajectory at 85% of pre

covid.

Losses in Q1FY22: Lifestyle brands run a large manufacturing base. There was a

one time impact of 40-45 days of under absorption of factory overheads. Also,

there is higher advertising ~INR200mn, majority of which is attributed to

Madura.

Of the 400 stores addition planned in Lifestyle brands, 150 will be PE Red and

50 of the new Allen Solly format

Lag between wholesale and retail recovery is around one month

Pantaloons:

Pantaloons clocked a lower recovery given the higher share of mall based stores

As per ABFRL, this is a landmark year for Pantaloons as it is embarking on a new

journey.

20 stores are ready to launched in the next 30 days.

Company is launching own app and website

Pantaloons business is at 70% recovery currently

Pantaloons business has a good ROCE so franchising does not make sense

ABFRL is replacing lower throughput, lower profitability external brands to

make space for the new collections it is launching

Innerwear/Other segments:

ABFRL is looking to double the store count

Trade outlets in innerwear: There is no reduction in the innerwear reach.

Company has rounded up common touch points due to which the store count

has fallen from 28,000 to 23,000. Of the 23,000, women’s innerwear reaches

5,000 outlets.

ABFRL



If things were normal company would have touched INR5bn in revenues.

Targeting INR10bn in revenues in the next two years.

Ecommerce:

ABFRL is planning to launch a multi brand app by Q4FY22

There is a lot of data gathered. The company expects to start making use of this

in the next6-12 months.

Ethnic:

ABFRL is planning two new launches: a) a premium men’s ethnic wear brand

targeted at occasions b) a premium women’s ethnic brand targeted at regular

wear.

Premium men’s ethnic wear

o This brand will be in partnership with Tarun Tahiliani and will be launched

in October.

o ABFRL is planning to launch 6 to 10 stores this year.

o 150 stores over next 3-4 years (affordable premium)

o ABFRL is targeting double digit margin in 3 years from now. This business is

less susceptible to fashion and obsolesce is lower

Premium women’s ethnic wear line.

o It will start in Pantaloons (40-50 stores) and will test out 10-15 stores

independent.

o This is more daily wear and will be priced in the mid premium to premium

(INR1500-3000).

o For this brand, ABFRL will initially target to build the brand inside

pantaloons which will drive GM for Pantaloons. As it goes out, retail

expansion will be managed based on the profitability of the brand.

Total capital committed in ethnic wear is INR0.7bn

Both these formats are very franchisable

Jaypore continues to do well online. Will open 10 stores during the year.

Japore and the men’s wear brand will take a year to break-even.

Outlook:

Net debt increased to INR12bn due to losses in Q1 and rise in working capital

requirement.

NWC was up by INR2bn

Net Debt: EBITDA target range will be 1-2x

Real boost to demand will happen during the festive period (closer to October

than December). If there is no 3rd wave Q2 will have a reasonable recovery.

Effective interest on actual debt is 7.75%


ABFRL


Others:

Rental is INR11bn in rent per annum. Majority of it is fixed.

Key trends

Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22

Madura

Revenues (INRmn) 14,630 15,320 12,290 2,370 7,060 12,460 12,170 5,550

- Lifestyle brands 12,540 12,950 10,720 1,900 5,310 10,260 10,030 4,350

- Fast Fashion - - 410 NA NA NA NA NA

- Other businesses 2,090 2,370 1,160 470 1,750 2,200 2,140 1,200

Revenues growth (%) 15.8 13.9 (6.8) (80.4) (51.7) (18.7) (1.0) 134.2

- Lifestyle brands 15.0 13.9 (5.3) (81.1) (57.7) (20.8) (6.4) 128.9

- Other businesses 148.8 123.6 8.4 (62.4) (16.3) (7.2) 84.5 155.3

EBITDA (INR mn) 2,410 2,230 - (1,040) 650 2,170 1,880 (790)

- Lifestyle brands 2,180 2,240 660 (670) 390 1,920 1,760 (570)

- Other businesses 230 (10) (320) (370) 260 250 120 (220)

EBITDA growth (%)

- Lifestyle brands 55.7 69.7 (60.9) (171.3) (82.1) (14.3) 166.7 (14.9)

EBITDA margin (%) 16.5 14.6 - (43.9) 9.2 17.4 15.4 (14.2)

- Lifestyle brands 17.4 17.3 6.2 (35.3) 7.3 18.7 17.5 (13.1)

- Fast Fashion NA NA (82.9) NA NA NA NA NA

- Other businesses 11.0 (0.4) (27.6) (78.7) 14.9 11.4 5.6 (18.3)

EBIT (INRmn) 1,044 947 (227) (2,473) (706) 832 205 (2,197)

EBIT growth (%) 24.9 41.9 NM NM NM (12.2) (190.3) (11.1)

Innerwear(%) 67.0 NA NA NA NA NA NA NA

Innerwear distr 18,000 20,000 20,000 NA NA NA NA NA

Key metrics

EBO's (Nos.) 2,096 2,187 2,253 2,222 2,247 2,341 2,253 2,380

SSG (%) 7.0 15.0 NA NA NA (17.0) 1.7 187.0

Pantaloons

Revenues (INRmn) 9,150 10,830 6,260 820 3,690 8,110 5,970 2,200

Revenues growth (%) 16.3 12.7 (1.1) (90.8) (59.7) (25.1) (4.6) 168.3

EBITDA (INR mn) 1,450 1,090 (380) (720) 710 1,900 860 (550)

EBITDA growth (%) 178.8 23.9 (392.3) (182.8) (51.0) 74.3 (326.3) (23.6)

EBIT (INRmn) 500 998 (394) (1,730) (380) 891 (226) (1,584)

EBITDA margin (%) 15.8 10.1 (6.1) (87.8) 19.2 23.4 14.4 (25.0)

EBIT margin (%) 5.5 9.2 (6.3) (210.9) (10.3) 11.0 (3.8) (72.0)

SSG (%) 10.4 4.9 (11.7) NM NM (27.0) (10.6) 156.0

Store count (Nos.) 331 343 342 342 339 344 346 342

Source: Company, Edelweiss Research

ABFRL



One year forward EV/EBITDA

Source: Edelweiss Research, Bloomberg

12.0

15.0

18.0

21.0

24.0

27.0

Mar

-16

Jun

-16

Sep

-16

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

Mar

-20

Jun

-20

Sep

-20

Dec

-20

Mar

-21

Jun

-21

(x)


ABFRL


Quarterly summary

Year to March Q1FY22 Q1FY21 % YoY Q4FY21 % QoQ FY21 FY22E FY23E

Total income 7,740 3,200 141.9 17,836 (56.6) 52,489 69,151 97,810

Cost of goods sold 3,903 1,874 108.3 8,326 (53.1) 25,630 33,884 46,949

Employee cost 2,287 2,381 (4.0) 2,204 3.8 8,654 9,681 11,737

Rent - - 869 (100.0) 107 3,458 5,282

Other Expenditure 3,168 2,178 45.5 3,867 (18.1) 12,552 13,830 19,366

Total expenditure 9,358 6,433 45.5 15,266 (38.7) 46,942 60,853 83,334

EBITDA (1,618) (3,234) (50.0) 2,570 NM 5,548 8,298 14,476

Depreciation 2,275 2,334 (2.5) 2,470 (7.9) 9,628 9,388 9,764

EBIT (3,893) (5,568) (30.1) 100 NM (4,080) (1,089) 4,712

Interest Expense 838 1,253 (33.1) 1,196 (29.9) 5,026 3,157 3,071

Other income 242 1,486 (83.7) 202 19.5 734 800 900

Profit Before Tax (4,489) (5,335) (15.8) (893) NM (8,372) (3,447) 2,542

Prior period items - - NM - NM - - -

Provision for Tax (1,137) (1,336) NM 455 NM (1,015) - 635

Reported Profit (3,352) (3,999) NM (1,348) NM (7,357) (3,447) 1,906

Adjusted Profit (3,352) (3,999) NM (1,348) NM (7,357) (3,447) 1,906

No. of Shares outstanding (mn) 915 769 915 933 933 933

Adjusted Diluted EPS (3.7) (4.4) NM (1.5) NM (7.9) (3.7) 2.0

as % of net revenues

COGS 50.4 58.6 (814.3) 46.7 374.4 48.8 49.0 48.0

Staff expenses 30 74 NM 12 1,719.0 16.5 14.0 12.0

Rent - - - 4.9 (487.1) 0.2 5.0 5.4

Other Expenditure 41 68 NM 22 1,924.9 23.9 20.0 19.8

EBITDA (20.9) (101.1) NM 14.4 NM 10.6 12.0 14.8

EBIT (50) (174) NM 1 NM (7.8) (1.6) 4.8

PBT (58.0) (166.7) NM (5.0) NM (15.9) (5.0) 2.6

Adjusted Profit (43) (125) NM (8) NM (14.0) (5.0) 1.9

Source: Company, Edelweiss Research

ABFRL



Company Description

In May 2015, ABFRL came into being following consolidation of ABNL's branded

apparel business of Madura and Pantaloons. Post consolidation, Pantaloons was

renamed Aditya Birla Fashion and Retail (ABFRL). ABFRL brings with it learnings and

businesses of 2 renowned Indian fashion icons/brands, Madura and Pantaloons. This

amalgamation has helped ABFRL emerge as India’s No. 1 fashion lifestyle entity.

Madura has a vast retail network comprising exclusive outlets, premium multi-brand

and department stores – total presence of >2,250 stores. Four of its brands are

among India's top fashion names, with MRP sales in excess of INR10bn each.

Pantaloons brand is now present in 78 plus Indian cities/towns through >340 stores.

Forever21 is a fashion retailer of women’s, men’s and kids clothing and accessories

and is known for offering the hottest, most current fashion trends at great value to

consumers. The innerwear and athleisure business continues to perform

exceedingly well.

Investment Theme

Aditya Birla Fashion and Retail (ABFRL) is one of the largest branded clothing players

with 5 brands clocking >INR10bn sales each. ABFRL has ventured into fast fashion

via Forever 21 and innerwear under the Van Heusen brand thereby now housing full

bouquet of segments in the apparel category.

Key Risks

Slow GDP revival leading to lower traction in discretionary spending

While foreign brands such as Zara, Tommy Hilfiger, etc., have already established

themselves, other brands such as H&M, GAP, among others, are venturing inthe

Indian market thereby heightening competition.


ABFRL


Additional Data Management

CEO - Madura Vishak Kumar

CFO Jagdish Bajaj

MD Ashish Dikshit

CEO - Pantaloons Sangeeta Pendurkar

Auditor M/s. S R B C & CO LLP

Holdings – Top 10* % Holding % Holding

Nippon AMC 6.14 Sundaram AMC 1.53

UTI AMC 3.28 ICICI Pru Life 1.32

Franklin Resour 2.51 India Opportuni 1.13

Invesco AMC 1.76 Canara Robeco 1.02

Mirae AMC 1.56 Vanguard 0.83

*Latest public data

Recent Company Research Date Title Price Reco

28-May-21 Bumps ahead but on right path; Result Update

192 Buy

01-Mar-21 Clear target to the vision; Company Update

165 Buy

08-Feb-21 Margins, debt: Great going; Result Update

165 Buy

Recent Sector Research Date Name of Co./Sector Title

30-Jul-21 Shoppers Stop Stable performance; recovery promising; Result Update

24-Jul-21 V-Mart Retail Marching down south; Company Update

22-Jul-21 Avenue Supermarts Measured approach; Company Update

Rating Interpretation

Source: Bloomberg, Edelweiss research

Daily Volume

Source: Bloomberg

Rating Distribution: Edelweiss Research Coverage

Buy Hold Reduce Total

Rating Distribution* 172 54 19 246

>50bn >10bn and <50bn <10bn Total

Market Cap (INR) 215 39 5 259

*1 stocks under review

Rating Rationale

Rating Expected absolute returns over 12 months

Buy: >15%

Hold: >15% and <-5%

Reduce: <-5%

TP231

TP260

TP214

75

115

155

195

235

275

Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21

(IN

R)

ABFRL IN Equity Buy Hold Reduce0

14

28

42

56

70

Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21

(Mn

)

ABFRL



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instruments of the subject company/company(ies) discussed herein or act as advisor or lender/borrower to such company(ies) or have other potential/material conf lict of interest with

respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. ESL may have proprietary long/short

position in the above mentioned scrip(s) and therefore should be considered as interested. The views provided herein are general in nature and do not consider risk appetite or investment

objective of any particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business

with ESL.

ESL or its associates may have received compensation from the subject company in the past 12 months. ESL or its associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. ESL or its associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates may 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. ESL or its associates have not 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 or ESL’s associates may have financial interest in the subject company. ESL and/or its Group Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise in the Securities/Currencies and other investment products mentioned in this report. ESL, its associates, research analyst and his/her relative may have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance.

Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk.

Research analyst has served as an officer, director or employee of subject Company: No

ESL has financial interest in the subject companies: No

ESL’s Associates 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.

Research analyst or his/her relative has 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: No

ESL has 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: No

Subject company may have been client during twelve months preceding the date of distribution of the research report.

There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to their charges of non registration as a broker dealer.

A graph of daily closing prices of the securities is also available at www.nseindia.com

Analyst Certification:

The analyst 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.

http://www.nseindia.com/


ABFRL


Additional Disclaimers

Disclaimer for U.S. Persons

This research report is a product of Edelweiss Securities Limited, 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 Edelweiss Securities Limited 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, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc.

Disclaimer for U.K. Persons

The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Disclaimer for Canadian Persons

This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.

This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person.

ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.

Disclaimer for Singapore Persons

In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.

Disclaimer for Hong Kong persons

This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so. Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.

Aditya Narain

Head of Research

[email protected]

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