Bajaj Electricals-Initiating Coverage

Jan 19, 2010Umesh Gupta (Analyst)[email protected](022) 2282 2992 Ext. : 147Milind Karmarkar (Head Research)(022) 6630 8667Raj Mehta (Equity Sales)(022) 3290 3017

Bajaj Electricals Ltd.

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Bajaj Electricals Ltd. is a high growth company (last 5 yr sales CAGR is 30%, PAT

CAGR is 51%) trading at ~10x its FY11E earnings, its recent earnings have grown at

62% and 152% in Q1FY10 and Q2FY10 respectively. The company has grown at

these high rates without saturating any of its markets, with market share ranging

between 15-30% implying significant future growth opportunities.

The company generates significant cash to sustain its operations thereby

curtailing the need to raise capital which helps in generating high returns on

capital (Average ROE of 40% over the last 4 years). However, the company has

recently done a QIP at Rs.785 per share to raise Rs.1600 mn, which would be used

as growth capital (hinting acquisitions).

Bajaj Electricals operates in three divisions, Consumer Durables (Brown goods),

Engineering & Projects (High Mast, Poles, Towers, Rural Electrification) and Lighting

(Lamps, CFLs, LED, Street Lighting).

All three businesses are a play on India growth story: All the three divisions have been

growing at very healthy growth rates of 20-35% CAGR over the last 5 years and are

highly scalable with future growth rates expected to be ~20-25% as they are proxy

on various growth themes of India such as Consumer Discretionary, Power

Generation, Transmission, Distribution, Industrial Capex, Retail, Infrastructure

etc.

Valuations: There aren't any direct comparable companies to Bajaj Electricals,

however If we look at the various businesses of the company and compare them

with the sectoral valuations, Bajaj Electricals is trading at the lowest end of the

valuations.

The consumer focused companies with similar returns profile are trading at P/E

of ~20-25x while the power and industrial capex related companies are trading at

P/E of ~12-18x and P/BV of 3-5x.

Bajaj Electricals is trading at P/E of ~10x FY11E and P/BV of ~2.5x. Considering the

returns profile of the company and expected growth rates, we believe the stock is

undervalued. Recommend Buy.

Key Share Data

BUY

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Dalal & BroachaStock Broking Pvt. Ltd.

Visit Note @ Dalal & Broacha

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Share holding (%)

Current Price Rs 876Target Price Rs 1282% upside 46%52 Week Range Rs.1485 / Rs .331

Market Cap Rs.16.9 BN/$352.9 MNEV / Sales 0.8EV / EBIDTA 7.41mth avg. daily vol. Rs.14.5 mn/$0.3 mnNo.of Shrs o/s in MN 19.3Book Value 265.1BSE / NSE 500031 / BAJAJELECReuters BJEL.BOBloomberg BJE IN Equity

Period Dec''09 Sep'09Promote rs 65.7 73.5MF/Ba nks /Fi s 18.1 10.1FI Is 2.2 1.3Publ i c & Others 14.1 15.2Total 100.0 100.0

Year Net Sales %growth EBIDTA OPM% PAT %growth EPS PE(x) RoE% RoCE%FY08 13,815.9 27.2 1,432.1 10.4 731.2 86.8 42.3 20.7 50.1 35.0 FY09 17,779.7 28.7 1,797.4 10.1 893.5 22.2 51.7 17.0 42.6 39.0 FY10E 21,271.8 19.6 2,240.9 10.5 1,295.6 45.0 67.0 13.1 34.2 36.1 FY11E 25,907.7 21.8 2,749.3 10.6 1,638.6 26.5 84.7 10.3 28.1 33.2

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Bajaj Electricals SENSEX

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Investment Case:

Increase in availability of Power: We believe, consumer goods companies will be the major

beneficiaries of the huge power generation expansion programme of govt. of India coupled with

Rural Electrification. As most families do not buy consumer goods due to lack of electricity and

high cost of electricity. With huge power generation addition, both these problems could be

solved and due to other factors such as increase in income levels of Indian middle class and

energy efficient consumer products, we believe the consumer goods market is set to explode.

Increase in income level: Per capita GDP (at constant prices) in India has grown from approximately

Rs. 12,900 for the fiscal year ended March 1991 at the time of liberalization to approximately Rs.

27,400 for the fiscal year ended March 2008. This increase in per capita income has created

increasing wealth and has had a significant investment multiplier effect on the economy, leading

to increasing consumerism and positively impacting savings.

Growing middle class: India has a large and rapidly growing young middle class with increasing

levels of discretionary income available for consumption and investment purposes. The last five

years have seen not only a great expansion of the Indian economy but also of consumer credit.

Energy Efficiency Ratio: Energy Efficiency Ratio (EER) of products has become a key determent in the

saleability and marketability of consumer durables, due consumer concerns about inflation and

soaring energy bills, leading them to prefer appliances which offer energy-efficiency. Although

currently it is not mandatory by law to state the EER of a product, this is likely to become compulsory

over the forecast period, especially for air conditioners, refrigerators, fans and later on other

domestic appliances.

Availability of Consumer Finance: The increasing popularity of easily available consumer loans and

the expansion of hire purchase schemes will give a moral boost to the price-sensitive consumers.

The attractive schemes of financial institutions and commercial banks are increasingly becoming

suitable for the consumer. Consumer goods companies are themselves coming out with attractive

financing schemes to consumers through their extensive dealer network. This has a direct bearing

on future demand.

Rural Markets: The majority of the Indian population that lives in its villages could become a

source of very high demand for consumer goods companies, As and when banks and financial

institutions start penetrating deeper into rural India. With growth in disposable income, improving

lifestyles, power availability, low running cost, and rise in temperatures, we believe Rural India

could become a major growth driver for Consumer goods companies.

Established track record and brand name: Bajaj Electricals has been present in the electrical products

industry for several years, which, has helped it in understanding the changing needs and demands

of customers in India. With constant improvement in performance of its products, augmented

with quality and recognition of its brand, the company enjoys considerable brand equity and

reliability in the market.

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Business Overview:

Bajaj Electricals operates in three divisions, Consumer Durables (Brown goods), Engineering &

Projects (High Mast, Poles, Towers, Rural Electrification) and Lighting (Lamps, CFLs, LED, Street

Lighting).

All the three divisions have been growing at very healthy growth rates of 20-35% CAGR over the last

5 years and are highly scalable with future growth rates expected to be ~20-25% as they are proxy

of various growth themes of India such as Consumer Discretionary, Power Generation, Transmission,

Distribution, Industrial Capex, Retail, Infrastructure etc.

Rs mn FY05 FY06 FY07 FY08 FY09 CAGRAppl i ances 1410.0 1940.0 2600.0 3630.0 4640.0 35%Fans 1090.0 1410.0 1850.0 2410.0 2950.0 28%Li ghting 1000.0 1090.0 1340.0 1760.0 2090.0 20%Lumi na ires 1210.0 1550.0 1930.0 2300.0 2820.0 24%Engineering & Projects 1780.0 2450.0 3050.0 3630.0 5230.0 31%Total Revenues 6490.0 8440.0 10770.0 13730.0 17730.0 29%EBIDTA 418.6 677.5 869.4 1432.1 1797.4 44%PAT 138.5 284.8 385.6 731.2 893.5 59%

22% 23% 24% 26% 26%

17% 17% 17% 18% 17%

15% 13% 12% 13% 12%

19% 18% 18% 17% 16%

27% 29% 28% 26% 29%

0%

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FY05 FY06 FY07 FY08 FY09

Appliances Fans Lighting Luminaires Enginee ring & Projects

Well diversified revenue mix across high growth verticals:

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Consumer Durables:

The company markets various household ranges of products in its appliances division. BajajElectricals is one of the leading player for products such as irons, OTGs, water heaters, toastersand sandwich makers and air coolers under its own brand name and under the brand name of"Morphy Richards" (which is one of the largest players in the home appliances market in theUnited Kingdom). The company markets irons, toasters, OTGs, electric kettles, coolers, roomheaters, storage water heaters, instant water heaters, immersion heaters, microwave ovens,mixers, food processor, emergency light, coffee makers, DVD players, gas stoves, gas hobs, cookerhoods, rice cookers, water filters and vacuum cleaners under the "Bajaj" brand. And it marketsmixer grinders, juicer mixer grinders, juicers, toasters, steam irons, dry irons, electric cookers,coffee makers, electric kettles, hand blenders, OTGs, hair dryers and portable heaters under the"Morphy Richards" brand.

In the fans business, the company's products include ceiling, table, pedestal and wall mountedfans, industrial and domestic exhaust fans, air circulators, personal fans, children's fans, coolerkits and pumps. The company manufactures fans and related components at its Chakan unit, andalso procure fans and related components from its vendors located at Hyderabad, HimachalPradesh and Uttarakhand and imports from China. The company has also executed an agreementwith Midea , to sell and market table, pedestal and wall mounted fans under the joint brandname of "Bajaj-Midea", and has also entered into an agreement with Walt Disney for the saleand marketing of children's fans using Disney characters and designs.

Domestic Fan Industry:

India being a tropical country, electric fans are an essential utility for more than six months of theyear in most parts of the country. The Indian market is estimated at 2.5 million fans per month andit is growing at about 10% per annum (Source: Indian Fan Manufacturers Association).Bajaj Electricalssold nearly 3.2 mn fans in FY09 against 2.7mn fans in FY08.

The market is divided among ceiling, pedestal, wall and table fans. Industrial and exhaust fansare another important segment. The boom in construction industry has been a boon to the electricalfan industry, coupled with rural electrification bringing in new set of customers thereby expandingthe market.

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Engineering and Projects (E&P):

E&P business can be broadly categorised into three divisions, namely, (a) special projects, whereit undertakes turnkey lighting assignments, fibre optic lighting, factory lighting, air-port lighting,sports lighting and rural electrification projects, among others, (b) high masts and street lighting,where it undertakes design, supply, erection and commissioning of high masts, signages andpoles, and (c) towers, where it undertakes design, supply, erection and commissioning oftransmission lines, telecommunication towers and monopoles, and other related products andservices.

The company carries out galvanizing, fabrication and manufacture of high masts, lattice towers atits Ranjangaon unit, which has a state of the art galvanizing plant.

Lighting & Luminaires:

Under this division the company markets various products ranging from GLS lamps, FTLs, CFLs, andLED torches, among other products. A major portion of the electrical lamps and tubes marketed bythe company are manufactured by Hind Lamps Limited, a Bajaj Group company. Majority ofcompany's CFL lamps are manufactured by Starlite Lighting Limited. With respect to lamps, tubelights, and torches, the company is viewed as one of the leading brands in terms of price andimage in India.

Company's luminaires division is engaged in industrial, commercial, decorative and street lighting,commissioning and marketing of flood lights, light emitting diodes, lighting electronics, lightingcontrols, mercury and sodium vapour lamps, metal halide lamps and compact florescent lamps.Bajaj Electricals is one of the leading players in the market for street lights, flood lights andindustrial lighting applications.

Under this SBU the company markets various luminaire products, which include decorativeluminaires in various sizes and design for information technology parks, offices, banks andshopping mall applications, CFL down lighter luminaires with dimming solutions, luminaires forauditorium, conference room and art gallery lighting, industrial lighting applications, sportslighting applications, roadway lighting applications, hazardous area lighting, street lightingproducts, energy conservation concepts and allied accessories. Luminaires products are sourcedfrom dedicated vendors and through imports from China.

The company has recently forayed into a distribution relationship with Delta Controls of Canadafor Building management systems and HVAC products and with Securiton of Switzerland for Firealarms and Security systems.

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Consumer Durables Industry Overview:

Most of the segments in the consumer goods sector are characterized by intense competition,emergence of new companies and introduction of state-of-the-art models, price discounts andexchange schemes. Multi-national companies continue to dominate the Indian consumer durablesegment. In consonance with the global trend, over the years, demand for consumer durables hasincreased with rising income levels, double-income families, changing lifestyles, availability ofcredit, increasing consumer awareness and introduction of new models.

The consumer durables market in India was estimated to be around USD 4.5bn in 2006-07. Morethan 7mn units of consumer durable appliances have been sold in the year 2006-07 with colourtelevisions (CTV) forming the bulk of the sales with 30 per cent share of volumes. CTV, Refrigeratorsand ACs together constitute more than 60 per cent of the sales in terms of the number of unitssold.

Branded goods account for 10 per cent of the total consumer goods market in India, while organizedretailing is around 2 per cent of the total industry. Though branded products are perceived to becostlier than non-branded products, the penetration of branded products is increasing. The relativeshares of branded products and organised retail indicate that a significant share of brandedproducts is being sold through unorganised channels. This highlights the need for a strongdistribution network to penetrate deeper into the potential market.

Brown goods or domestic kitchen appliances are indicators of the changing consumer scenario inpost-liberalisation economic environment. The major products constituting the brown goodsmarket are mixers, grinders, irons, microwave-ovens, rice cookers, water heaters or geysers, electricfans and exhausts.

The branded brown goods market has expanded at a significant pace and is expected to retainthe momentum into the future as well. The market has been transformed by the entry of over adozen new brands, moreover competition has intensified. While focus on price competency remainsa key priority, players have also started focusing on other product features such as safety andtotal cost of ownership of the device.

Goods, like the rice cooker have been continuously growing in a slow and steady manner over asignificant period of time, while microwave ovens have grown exponentially after the initialperiod of customisation to local requirements. The electrical iron market can be divided into twosegments: heavy and light-weight.

The market is also segmented into two sub-segments: steam and non-steam irons. India being atropical country, electric fans are an essential utility for more than six months of the year in mostparts of the country. The present market size is estimated at around 11.6mn pieces. The market isdivided among ceiling, pedestal, wall and table fans. Industrial and exhaust fans are anotherimportant segment.

The electrical appliances industry, which had been focused on the urban market, is now reachingout to semi-urban and rural markets as well, because of the shift in living style of the population,increasing electrification of villages and relatively higher purchasing power of consumers. As themarket penetrates into the core middle class segment in both urban and rural areas, it is expectedto expand phenomenally, offering large volumes to the industry.

Domestic Electrical Appliances Industry Overview:

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Key factors affecting various businesses of the company:

Raw Material Costs and Availability: The key raw materials include Zinc and steel used in themanufacturing of products of the Engineering & Projects SBU and aluminium and copper which areused in products of Consumer durables and lighting segment. In the Engineering and Projects SBUtypical business cycle range anywhere between 4-6 months for the highmast & poles business,12-18 months for special projects business and upto 24-30 months for the transmission linetowers business. Highmast and poles contracts and special projects contracts are generally fixedprice contracts, which expose the company to the risk in fluctuations in the raw material prices.

In case of consumer durables and lighting segment, the company enters into outsourcing contractswith various third party vendors to manufacture the goods designed and developed by the company.In case of these contracts any fluctuation in the raw material prices has to be made good by thecompany to the vendors which indirectly exposes the company to the risk in upward fluctuation inraw material prices.

Product Mix: The company's product mix also affects its financial results. The breadth of theproduct range gives the company the flexibility to adapt the product mix to market demands andto maximize margins. The company intends to increase the proportion of high margin and highvalue products in the product mix so as to better withstand market dynamics and to offer a broadrange of products to meet the growing requirements of customers.

Government policies, budgetary allocations and capital expenditure plans of public sector companiesparticularly in the infrastructure sector: Demand for Engineering & project business is primarilydependent on sustained economic development and government policies relating to infrastructuredevelopment. It is also significantly dependent on budgetary allocations made by governmentsto these sectors, as well as funding provided by Indian, international and multilateral developmentfinance institutions for development of such sectors. Investments by the private sector companiesin infrastructure projects are dependent on the potential returns from such projects and aretherefore linked to government policies relating to private sector participation and the sharing ofrisks and returns from such projects.

Outsourcing arrangements with Vendors: In the consumer durables and Lighting Business unit, thecompany also operates on the outsourcing model, wherein it outsource the manufacturing ofsome of the products to third party vendors, In the event, its suppliers/vendors are unable tosupply the products / components that are sourced from them in sufficient quantities or there isa loss of one or more significant suppliers/vendors, its ability to obtain products/ componentsand/or at competitive rates could adversely affect its perfomance.

Competition: Bajaj Electricals compete with players both in the organised and unorganised segment.It faces competition from both domestic and foreign manufacturers for its consumer durables andLighting business. In order to compete effectively, the company continues to focus on enhancingrevenue growth through introduction of new products, expansion of the dealer and retailer network,along with good brand building efforts in addition to the taking measures for effective costcontrol, value engineering, competitive sourcing and improving credit discipline.

However, certain of its competitors may be larger than it in terms of production capacity and/or amore extensive global operation, and may benefit from greater economies of scale and operatingefficiencies. Company’s failure to compete effectively with such manufacturers may have an adverseeffect on its business, financial condition and results of operations.

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Valuation:

In the absence of direct comparable peers we have compared the valuations of diffrent companies

which are either present in consumer goods or capital goods businesses.

We initiate the coverage with a BUY recommendation and a 12 month target price of Rs. 1276 basedon our Weighted Average Target Price model.

EV/EB ID TA m ethodF igures (Rs m n)Com pany Price Sales EB ID TA OPM PAT PAT % FY10E F Y11EH a ve l l s * 520.0 21,983.0 2,033.0 9.2 1,452.0 6.6 12.0 9.6Cro m p to n G re a ve s 400.0 87,372.0 9,955.0 11.4 5,625.0 6.4 12.4 11.3V o l ta s 160.0 43,617.0 3,189.0 7.3 2,545.0 5.8 15.7 13.1B a ja j El e ctri ca l s 876.0 17,779.7 1,797.4 10.1 893.5 5.0 8.3 6.8

Average EV/EBID TA 12.1 10.2

V a l u a ti o n m e tri csTarget EV/EB ITD A m ultiple 9.02011E EB I TD A 2,749.32010E EV 24,743.32010E D e b t 2,138.52010E Ca s h 2,399.32010E M a rk e t Ca p . 25,004.0N o . o f s h a re s 19.3Target Price 1,293.0

CMP 876.0U p s i d e /(D o w n s i d e ) 47.6*H av ells num bers are taken as standalone for com pariosn purposeP/E m ethodF igures (Rs m n)Com pany Price FY09 FY10E FY11E FY10E F Y11EH a ve l l s * 520.0 24.1 33.2 39.9 15.6 13.0Cro m p to n G re a ve s 400.0 15.3 19.1 22.9 20.9 17.5V o l ta s 160.0 7.7 9.7 11.6 16.5 13.8B a ja j El e ctri ca l s 876.0 46.2 67.0 84.7 13.1 10.3

Average P/E 16.5 13.7

V a l u a ti o n m e tri csTarget P/E m ultiple 15.02011E EPS 84.7Target Price 1,271.0CMP 876.0U p s i d e /(D o w n s i d e ) 45.1*H av ells num bers are taken as standalone for com pariosn purpose

EV/EB ID TAFY09

EPS P/E

Weighted average target price

MethodologiesTarget pri ce

Weight ass igned

1,281.1 40.0% 512.5 Based on DCF1,293.0 30.0% 387.9 Bsaed on 9x EV/EBIDTA FY11E1,271.0 30.0% 381.3 Bsaed on 15x P/E FY11E

1,281.7876.0

46.31%

Comments

Weighted average target priceCurrent priceUps ide/(downs ide) from current

Weighted average

priceTarget pri ce us ing DCF approachTarget pri ce us ing EV/EBITDA Target pri ce us ing P/E approach

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DCF Valuation:

Year FY08 FY09 FY10E FY11E FY12E FY13E FY14E FY15E FY16EEBIT 1357.6 1711.9 2148.0 2645.7 3264.2 3753.8 4316.8 4964.4 5709.0Effective tax rate (33.6) (33.6) (33.6) (33.6) (33.6) (33.6) (33.6) (33.6) (33.6)EBIT*(1‐tax rate) 901.4 1136.7 1426.2 1756.7 2167.4 2492.5 2866.4 3296.3 3790.8Depreciation/Amortisation 74.5 85.5 92.9 103.5 127.8 146.9 169.0 194.3 223.4Change in working capital (512.5) (101.5) (676.7) (821.3) (937.0) (983.9) (1033.1) (1084.7) (1138.9)Capex (76.4) (104.7) (200.0) (200.0) (200.0) (200.0) (200.0) (200.0) (200.0)

‐FCFF 387.0 1016.0 642.5 839.0 1158.1 1455.6 1802.3 2205.9 2675.3-FCF Growth Rate 163% -37% 31% 38% 26% 24% 22% 21%-Cost of Capital (%) 11.4% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4%-Weight Assigned 0.3 1.3 2.3 3.3 4.3 5.3-Present Value 812.2 1006.4 1135.3 1261.7 1386.2 1508.9

Sum of PV of FCFF 7110.7Terminal value calculationTerminal Growth rate (g) 4.0%Terminal Year Free Cash Flow 2782.3Terminal value 32137.2 Terminal (g 10.7% 11.7% 12.7% 13.7% 14.7%PV of Terminal Value 17087.5 2.0% 1362.4 1222.7 1115.3 1023.7 948.1

3.0% 1487.8 1317.5 1189.6 1082.5 995.3Enterprise Value 24198.2 4.0% 1650.5 1437.0 1281.1 1153.4 1051.4Less: Debt (2138.5) 5.0% 1870.3 1592.2 1396.5 1240.7 1119.1Add: Cash & Investments 2714.9 6.0% 2183.6 1801.7 1546.6 1350.8 1202.4Market Capitalisation 24774.6No. of shares 19.3Value per share 1281.1

Calculation of WACC

WACC for explicit forecast WACC for terminal growthExpected Market Return (Rm) 15.0% Expected Market Return (Rm) 15.0%Risk Free Rate (Rf) 7.0% Risk Free Rate (Rf) 7.0%Country Premium (Rm-Rf ) 8.0% Country Premium (Rm-Rf ) 8.0%Beta 0.80 Beta 0.80Cost of Equity 13.4% Cost of Equity 13.4%Cost of Debt 10.0% Cost of Debt 9.0%Tax rate 33.6% Tax rate 33.6%Post Tax Cost of Debt 6.6% Post Tax Cost of Debt 6.0%WACC 11.4% Long term debt to capital ratio 10.0%

WACC 12.7%Debt 2138.5Equity 5126.6 Terminal Growth Rate 4.0%Total 7265.1 Terminal Year Free Cash Flow 2782.3

Terminal Enterprise Value 32137.2Weight Assigned 5.3Terminal Value 17087.5

WACC

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Historical PE Chart:

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Quaterly Results:

Particulars Q2F Y10 Q2F Y09 % chg Q1FY10 Q1FY09 % chg H 1FY10 H 1FY09 % chgN e t Sa l e s 5121.4 3785.7 35.3 3653.8 3175.8 15.1 8775.2 6961.5 26.1O th e r O p e ra ti n g I n co m e 0.0 0.0 0.0 0.0 0.0Total Incom e 5121.4 3785.7 35.3 3653.8 3175.8 15.1 8775.2 6961.5 26.1

R a w Ma te ri a l s (3651.5) (2859.5) 27.7 (2606.4) (2289.3) 13.9 (6257.9) (5148.8) 21.5S ta ff Co s t (305.8) (234.1) 30.6 (199.3) (166.6) 19.6 (505.1) (400.7) 26.1O th e r Exp e n d i tu re (617.6) (398.9) 54.8 (491.2) (468.9) 4.8 (1108.8) (867.8) 27.8Total Ex penditure (4574.9) (3492.5) 31.0 (3296.9) (2924.8) 12.7 (7871.8) (6417.3) 22.7

PBID T 546.5 293.2 86.4 356.9 251.0 42.2 903.4 544.2 66.0D e p re ci a ti o n (23.7) (19.9) 19.1 (21.8) (18.9) 15.3 (45.5) (38.8) 17.3PBIT 522.8 273.3 91.3 335.1 232.1 44.4 857.9 505.4 69.7O th e r I n co m e 6.7 8.2 (18.3) 1.9 5.2 (63.5) 8.6 13.4 (35.8)I n te re s t (85.1) (98.1) (13.3) (85.6) (80.1) 6.9 (170.7) (178.2) 0.0PBT 444.4 183.4 142.3 251.4 157.2 59.9 695.8 340.6 104.3Ta xe s (152.6) (68.0) 124.4 (87.3) (56.2) 55.3 (239.9) (124.2) 93.2Profit After Tax 291.8 115.4 152.9 164.1 101.0 62.5 455.9 216.4 110.7Exce p ti o n a l I te m s 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Profit After Tax 291.8 115.4 152.9 164.1 101.0 62.5 455.9 216.4 110.7

EPS 15.1 6.7 126.1 8.5 5.8 45.3 23.6 12.5 88.4Eq u i ty 193.4 172.9 11.8 193.4 172.9 11.8 193.4 172.9 11.8F a ce Va l u e 10.0 10.0 0.0 10.0 10.0 0.0 10.0 10.0 0.0

O PM 10.7 7.7 292.6 9.8 7.9 186.4 10.3 7.8 247.8N PM 5.7 3.0 264.9 4.5 3.2 131.1 5.2 3.1 208.7Ta x R a te (34.3) (37.1) 273.9 (34.7) (35.8) 102.5 (34.5) (36.5) 198.7

Exp e n s e s An a l ys i s (% o f S a l e s )R a w Ma te ri a l s (71.3) (75.5) (423.5) (71.3) (72.1) (75.2) (71.3) (74.0) (264.8)S ta ff Co s t (6.0) (6.2) (21.3) (5.5) (5.2) 20.9 (5.8) (5.8) 0.0O th e r Exp e n d i tu re (12.1) (10.5) 152.2 (13.4) (14.8) (132.1) (12.6) (12.5) 17.0To ta l Exp e n d i tu re (89.3) (92.3) (292.6) (90.2) (92.1) (186.4) (89.7) (92.2) (247.8)

S egm ental ResultsParticulars (Rs. In Mn) Q2F Y10 Q2F Y09 % chg Q1FY10 Q1FY09 % chg H 1FY10 H 1FY09 % chgS egm ent RevenueLi gh ti n g 1396.3 1214.8 14.9 736.5 870.5 (15.4) 2132.8 2085.3 2.3Co n s u m e r D u ra b l e s 2161.2 1685.4 28.2 1886.0 1738.6 8.5 4047.2 3424.0 18.2En gi n e e ri n g & Pro je cts 1556.5 885.5 75.8 1029.2 564.3 82.4 2585.7 1449.8 78.3Le s s : Se gm e n t R e s u l ts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0N et S ales 5121.4 3793.2 35.0 3653.8 3175.8 15.1 8775.2 6969.0 25.9

S egm ent ResultsLi gh ti n g 100.9 97.3 3.7 4.5 27.8 (83.8) 105.4 125.1 (15.7)Co n s u m e r D u ra b l e s 249.8 129.4 93.0 232.0 171.3 35.4 481.8 300.7 60.2En gi n e e ri n g & Pro je cts 174.3 76.0 129.3 100.2 59.0 69.8 274.5 135.0 103.3Total 531.6 306.9 73.2 335.5 257.1 30.5 867.1 564.0 53.7Le s s : I n te re s t Exp e n s e (N e t) (85.1) (97.3) 0.0 (85.6) (80.1) 0.0 (170.7) (177.4) (3.8)Le s s : U n a l l o ca b l e I n co m e / (Exp (2.1) (17.9) (88.3) 0.0 (19.7) (100.0) (2.1) (37.6) (94.4)Ad d : Oth e r I n co m e 0.0 0.0 0.0 1.5 0.0 0.0 1.5 0.0 0.0PBT 444.4 191.7 131.8 251.4 157.3 59.8 695.8 349.0 99.4

PBIT MarginLi gh ti n g 7.2 8.0 0.6 3.2 4.9 6.0Co n s u m e r D u ra b l e s 11.6 7.7 12.3 9.9 11.9 8.8En gi n e e ri n g & Pro je cts 11.2 8.6 9.7 10.5 10.6 9.3

FINANCIALS

This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are accurate and opinions given arefair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be responsible for the contents. The Company, its Directors, Officersor Employees may have a position or may otherwise be interested in the investment referred in this document. This is not an offer or solicitation to buy, sell or dispose offany securities mentioned in this document.

For Further details contact : Mr. Milind Karmarkar / Mr. Umesh Gupta / Ms. Hiral Sanghvi / Mr. Kunal Bhatia / Ms. Purvi Shah / Mr. Lalitabh / Mr. Ashutosh508, Maker Chambers V, 221 Nariman Point, Mumbai 400 021 Tel: 91-22- 2282 2992, Ext.147 Fax: 91-22-2287 0092 E-mail: [email protected]

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P&L (Rs mn) FY08 FY09 FY10E FY11E Cash Flow St. (Rs. mn) FY08 FY09 FY10E FY11ENet Sales 13,815.9 17,779.7 21,271.8 25,907.7 Net Profit 731.2 893.5 1,295.6 1,638.6

Add: Dep. & Amort. 74.5 85.5 92.9 103.5 Raw materials (9,657.5) (12,517.2) (15,166.6) (18,471.9) Cash profits 805.7 979.0 1,388.5 1,742.2 Employee costs (609.0) (708.5) (1,116.7) (1,340.0) Other Expenses (2,117.3) (2,756.6) (2,747.7) (3,346.5) (Inc)/Dec in Cost of sales (12,383.8) (15,982.3) (19,030.9) (23,158.4) -Sundry debtors (674.2) (1,338.1) (1,110.5) (1,389.6)

-Inventories (422.9) (155.2) (437.6) (482.6) Operating Profit 1,432.1 1,797.4 2,240.9 2,749.3 -Loans/advances (305.2) (240.7) (113.0) (124.3) Depreciation (74.5) (85.5) (92.9) (103.5) -Sundry creditors 1,458.9 631.9 442.5 552.1 PBIT 1,357.6 1,711.9 2,148.0 2,645.7 -Others (569.1) 1,000.6 541.9 623.2 Other income 94.3 100.9 121.1 167.9 Change in working capital (512.5) (101.5) (676.7) (821.3) Interest (337.6) (412.6) (340.9) (375.0) CF from Oper. activities 293.2 877.5 711.8 920.9

Profit before tax 1,114.3 1,400.2 1,928.1 2,438.7 CF from Inv. activities (79.7) (229.4) (175.2) (200.0) Provision for tax (383.1) (506.7) (632.6) (800.0) Reported PAT 731.2 893.5 1,295.6 1,638.6 CF from Fin. activities (187.2) (429.6) 1,350.3 (262.3) Extraordinary Items - - - - Adjusted PAT 731.2 893.5 1,295.6 1,638.6 Cash generated/(utilised) 26.3 218.5 1,887.0 458.6

Cash at start of the year 267.5 293.8 512.3 2,399.3 Cash at end of the year 293.8 512.3 2,399.3 2,857.8

Balance Sheet FY08 FY09 FY10E FY11E Ratios FY08 FY09 FY10E FY11EEquity capital 172.9 172.9 193.4 193.4 OPM 10.4 10.1 10.5 10.6 Reserves 1,575.0 2,277.2 4,933.2 6,345.1 NPM 5.3 5.0 6.1 6.3 Net worth 1,747.9 2,450.1 5,126.6 6,538.5 Tax rate (34.4) (36.2) (32.8) (32.8)

Def. Tax Liab.+Minority In 41.3 31.5 16.2 - Growth Ratios (%)Secured loans 1,559.3 1,480.3 1,480.3 1,480.3 Net Sales 27.2 28.7 19.6 21.8 Unsecured loans 807.7 658.2 658.2 658.2 Operating Profit 64.7 25.5 24.7 22.7 Total debt 2,367.0 2,138.5 2,138.5 2,138.5 PAT 86.8 22.2 45.0 26.5 CAPITAL EMPLOYED 4,156.2 4,620.1 7,281.3 8,677.0

Per Share (Rs.)Gross block 1,440.0 1,544.7 1,744.7 1,944.7 Net Earnings (EPS) 42.3 51.7 67.0 84.7 Accumulated depreciatio (497.9) (572.8) (665.7) (769.2) Cash Earnings (CPS) 46.6 56.6 71.8 90.1 Net block 942.1 971.9 1,079.0 1,175.5 Dividend 8.0 10.0 10.0 10.0 Capital WIP 3.0 24.8 - - Book Value 101.1 141.7 265.1 338.1 Total fixed assets 945.1 996.7 1,079.0 1,175.5 Free Cash Flow 12.3 37.5 27.7 37.3 Goodwill - - - - Investments 223.3 315.6 315.6 315.6 Valuation RatiosInventories 1,621.8 1,777.0 2,214.6 2,697.2 P/E(x) 20.7 17.0 13.1 10.3 Sundry debtors 4,253.5 5,591.6 6,702.1 8,091.7 P/B(x) 8.7 6.2 3.3 2.6 Cash & bank 293.8 512.3 2,399.3 2,857.8 EV/EBIDTA(x) 12.0 9.3 7.5 6.1 Loans & advances 889.7 1,130.4 1,243.4 1,367.8 Div. Yield(%) 0.9 1.1 1.1 1.1 Other current assets - - - - FCF Yield(%) 1.4 4.3 3.2 4.3 Sundry creditors (1,458.9) (2,090.8) (2,533.3) (3,085.4) Acceptances (2,186.4) (3,100.1) (3,565.1) (4,099.9) Return Ratios (%)Provisions (425.7) (512.6) (589.5) (677.9) ROAE 50.1 42.6 34.2 28.1 Working capital 2,987.8 3,307.8 5,871.4 7,151.3 ROACE 35.0 39.0 36.1 33.2 Deferred Tax Assets - - 15.3 34.7 Miscellaneous exp. - - - - CAPITAL DEPLOYED 4,156.2 4,620.1 7,281.3 8,677.0

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