HZL Initiating Coverage

Hindustan Zinc Ltd.

BUY

- 1 of 22 - Friday 22nd

May, 2015

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.

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Target Price 217 CMP 177 FY17E EV/EBITDA 3.8x

Index Details Hindustan Zinc Limited (HZL) is a leading zinc producer in India and 2nd largest zinc lead miner globally with 10 Mn MT of ore production capacity currently. It owns the world’s largest zinc mine i.e Rampura Agucha which boasts of high quality reserves and resources grade. HZL’s key strengths include:

Mine life of 25 years with 375 Mn MT of Reserves and Resources.

Debt –free coupled with high operating margins of ~50%.

High cash and cash equivalents reserves worth ~Rs 27,250 crores as of FY15.

We are positive on the company given that:

Global supply deficit of Zinc and closure of major mines will ensure firm and stable prices for the foreseeable future. With Zinc revenues contributing ~80% HZL’s revenues and zinc mined metal production capacity expected to increase to 1.2 Mn Mt (from 0.9 Mn MT), HZL enjoys a near monopoly in India and is one of the world’s lowest cost producers of zinc.

A narrowing but persistent deficit in lead is expected to keep the lead prices firm. With the sectoral consumption for lead in India expected to remain high and India being a net importer of lead, demand for lead is expected to remain stable. Thus, combined with increased mined metal production, revenues from lead are expected to grow, benefitting HZL.

Silver accounts for ~7% of HZL’s revenues and its volumes are expected to increase in tandem with the volumes of lead and zinc. With silver demand for industrial applications in solar and electronics on the rise, it is expected to remain in deficit in the coming years resulting in steady prices.

With a high quantum of surplus liquid investments, HZL generated other income worth Rs. 2821 crores in FY15; other income is expected to grow steadily in the coming years.

Sensex 27,809

Nifty 8,421

BSE 100 8,550

Industry Zinc

Scrip Details

Mkt Cap (Rs cr) 74,788

BVPS (Rs) 101

O/s Shares (Cr) 422.5

Av Vol (Lacs) 0.5

52 Week H/L 190/128

Div Yield (%) 2.1

FVPS (Rs) 2

Shareholding Pattern

Shareholders %

Promoters 70.9

DIIs 8.9

FIIs 1.9

Public 18.3

Total 100.00

HZL vs. Sensex

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Key Financials (Rs in Cr)

Y/E Mar Net

Sales EBITDA PAT

EPS (Rs)

EPS Growth (%)

RONW (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

2014 13636 6962 6905 16.3 0.1 19.8 20.0 10.8 3.8

2015E 14788 7420 8178 19.4 18.4 20.2 18.4 9.1 3.2

2016E 18630 8157 8595 20.3 5.1 18.5 17.5 8.7 2.3

2017E 21531 9127 9602 22.7 11.7 18.1 17.2 7.8 1.8

- 2 of 22- Friday 22nd

May, 2015


We initiate coverage on Hindustan Zinc as a BUY with a Price Objective of Rs. 217, representing a potential upside of ~23% over a period of 24 months. At the CMP of Rs. 177, the stock is trading at 3.8x its EV/EBITDA for FY17E. We have arrived at the target price using the DCF method over the next 25 years i.e., its existing mine life.


May, 2015


Company Background

HZL (erstwhile Metal Corporation of India) was incorporated in 1966 as a Public Sector undertaking. In April 2002, Vedanta acquired 46% stake in the company through a divestment program undertaken by the GOI (26% from the GOI and the remaining portion from an open offer). Post this, the group acquired an additional 18.9% in the company in 2003 taking the holding to 64.9%. Currently GOI holds 29.5% stake in the company as of March 2015.

HZL is India’s leading producer of zinc, lead and silver. It currently has a production capacity of 0.9 million MT of mined metal and plans to expand this to 1.2 million MT. The mining and smelting operations of the company are entirely centred in the State of Rajasthan.

Revenue Break-down

Products Revenue Share Description

Zinc 78

Special High Grade (LME Registered) -

HZL SHG - 99.995,

Vedanta SHG - 99.995,

Continuous Galvanizing Grade,

Prime Western,

High Grade

Lead 13 Vedanta 99.99

Silver 7 Silver 99.99

Wind power 1 274 MW Capacity

Others 1 Sulphuric Acid and Cadmium

Source: Ventura Research

Location of Mines and Smeltors


Location of Wind Power Plants



May, 2015


Key Investment Highlights Global dynamics, adequate resources and operating efficiencies augur

well for the long run

Demand for zinc and lead expected to be robust globally

With demand expected to increase at 3% over the next 5 years, and supply

deficit to persist, zinc prices are expected to firm upto $2600/MT by FY17 from

current $2300/MT levels.

Global deficit expected in Zinc

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Source: Bloomberg, USGS, Ventura Research Supply deficit clearly portends firm future prices for zinc

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Source: Bloomberg, HZL, Ventura Research a Research


May, 2015


India – China bulk consumption to fuel demand

This demand is driven by two of the world’s largest economies, notably China

(which has historically been in deficit) and India (where demand growth is

expected to accelerate).

Bulk of the usage is from the auto sector and the steel industries, and both are expected to do well in India and China.

Auto and Steel Account for >80% of Demand


India China Account for >50% of Demand

Source: Bloomberg, Ventura Research

China Auto Sales on an uptrend

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Production Sales

Production Growth% Sales Growth%

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Source: CAAM, Ventura Research

China Zinc been in deficit since the past five years

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China Zinc Exports (RHS) China Zinc Imports (RHS)

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Source: CAAM, Ventura Research

Bulk consumption sectors are Steel (Anti Corrosive and Bonding) and Auto (Die casting Alloys)

India and China account for majority of zinc demand


May, 2015


Mine closure to accentuate pressure on supply

The supply deficit is further accentuated by the fact that mines aggregating to

1.8 Mn MT of Zinc MIC are set for closure permanently and new mines are not

expected to add to the production until FY18.

India Steel Demand to grow at 5.2% CAGR to 102.5 Mn MT by FY17

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Source: Ministry of Steel, CMIE, Ventura Research

India Auto sales to grow at 13% CAGR to 6.2 Mn vehicles by FY17

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Production Sales % Production Growth % Sales Growth

Auto Nos '000 %

Source: SIAM, CMIE, Ventura Research

Upcoming Mines

Mine Country Production Resources Zn Grade

Dugald River Australia 450000 63 Mn MT 13%

Mc Arthur Expansion Australia 383000 110 Mn MT 7%

Gamsberg South Africa 200000 214 Mn MT 6%

Izok Corridor Canada NA 29 Mn MT 13% Source: Ventura Research, Online Sources

Major Mines set for Closure

Mine Area Company 2014 Zinc

Century Mine Australia MMG 466000

Lisheen Mine Ireland Vedanta 165000

Skorpian Namibia Vedanta 150000

1800000Total (Incl. Others) Source: Ventura Research, Online Sources


May, 2015


Lead supply deficit to contract; prices to remain stable

LME prices for lead are expected to remain flattish over the forecast period

given the narrowing deficit on the back of increasing recycled and mined

metal production.

World Lead Trends

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Refined Lead Demand Refined Lead Production Mined Lead Supply

Recycled Lead (Deficit)/Surplus

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Source: Bloomberg, Ventura Research LME lead prices to remain flat

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May, 2015


Demand prospects of industrial batteries hinges on the overall macro

economic situation. A revival in the capex cycle, coupled with the on-going

power supply issues in large parts of India, is bound to drive the requirement

for back-up power. Historically, the market for industrial batteries has grown

at a CAGR of 20 % and is expected to clock a similar growth rate in the

coming years.

A large part of the demand for automotive batteries demand stems from

replacement demand, since the typical life of a battery is 2-3 years,

depending on the extent of usage. Given that 3-3.5 mn vehicles are sold

annually in India, the replacement demand is expected to remain robust.

Zinc and Lead form ~87% of sales for HZL and the above indicates that the demand and prices for zinc are expected to remain robust while for lead it suggests steady price. This augurs well for HZL.

Auto and Industrial batteries form >75% of the demand


India and China form >55% of the demand


Auto (SLI) and Industrial Batteries form majority of zinc demand

India and China are major lead consumers


May, 2015


Adequate resources lead to long term visibility

HZL has a current Reserves & Resources (R&R) base of 375.1 Mn MT which

translates to a mine life of 25 years leading to long term sustainability of

revenues.

Sharply lower cost of production implies good profitability

HZL is set to benefit from operating efficiencies in the long run as it is one of

the lowest cost producers globally. This will help maintain higher margins

compared to peers, both in up and down economic cycles.

HZL’s has adequate reserves and resources

Site

Mining Site (MN. MT) Reserve Resource Zinc% Lead% Silver g/ton

Rampura Agucha 57.5 51.9 13.7 1.8 58

Sindesar Khud 20.4 78.7 4.6 2.6 100

Rajpura Dariba 10 44.3 6.4 1.6 90

Zawar 9.9 68.5 3.8 1.9 55

Kayad 6.2 1.5 10.4 1.5 13

Bamnia Kalan 10.9 3.8 1.7 55

Current Metal In Concentrate

Source: HZL, Ventura Research

HZL is amongst the lowest cost producers of zinc

Source: Wood Mackenzie, HZL, Ventura Research

Cash COP Zinc – ex Royalty & DMF Contribution

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834 835 837870 876 865

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COP - INR COP - $

INR $



May, 2015


Further, HZL’s Rampura Agucha mine, the world’s largest zinc mine, also

boasts of high quality zinc content with Grades of 13.7% Metal in Content

(MIC) which ensures lower cost of production.

Revenue growth to bolster on mining expansion and capex

The company plans to double its ore production capacity from the current

10.6 mn MT currently to 21.35 mn MT by FY18. The total capex to be

incurred for the mining expansion is ~ Rs 9500 crores.

Doubling of Ore Production Capacities on the cards

Mine (Mn MT)Old Production

CapacityAddl Capacity

New Production

Capacity

Rampura Agucha 6.15 0 6.15

Sindesar Khud 2 1.75 3.75

Rajpura Dariba 0.9 0.3 1.2

Zawar 1.2 3.8 5

Kayad 0.35 0.65 1

Bamnia Kalan 0.5 0.5

RAM UG 3.75 3.75

Total 10.6 10.75 21.35


Mined Metal Production to grow at 17% CAGR by FY 17

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Mined Metal Production Zinc Mined Production

Lead Mined Production

Tonnes


HZL’s Rampura Agucha mine boasts of a high grade of zinc content

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May, 2015


New licenses to add to future reserves … HZL has applied for new mining licenses under the recently amended MMDR

Act (The act introduces the concept of a Prospecting License (PL) and the

subsequent Mining License). HZL has applied for 34 PLs and 4 MLs. We

believe HZL is in a favorable position to receive at least 20 PLs given its

successful operations in the existing areas of the PLs.

The licenses for which it has applied are spread across the states of

Rajasthan, Madhya Pradesh and Gujarat.

… consequently resulting in increasing revenues Given the increased mined metal production and favourable global demand

supply dynamics, we expect HZL’s revenues to grow at a two year CAGR of

20% to Rs 22,264 (Gross) crore by FY17, higher than the historical CAGR of

11%. The revenue growth will be driven by:

19.9% 2 year CAGR in zinc revenues to Rs 17,723 crore by FY17

7.3% 2 year CAGR in lead revenues to Rs 2,351 crore by FY17

15.4% 2 year CAGR in silver revenues to Rs 1,581 crore by FY17

Zinc expansion to bolster Revenues and Profitability

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The proportion of zinc revenues is expected to increase from 79% in FY15 to 84% in FY17.



May, 2015


Zinc revenues to accelerate on higher volumes and LME prices

We expect zinc revenues to grow at a 2 year CAGR of 26% to Rs 19,626

crore by FY17. The revenue growth will primarily be volume driven led by

increase in mined metal production, and hence refined metal production, as

explained earlier. Firming up of LME prices with a widening deficit situation is

also expected to boost revenues.

HZL will remain the largest producer of zinc in India. HZL’s market share has

consistently increased from 72% in FY 2010 to 84% in FY 2014, implying that

it has serviced incremental demand arising in India. Also, given the fact that

HZL is planning to expand its capacities, it is well poised to meet additional

demand arising from higher infra spend.

Indian Zinc Trends

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Source: Ministry of Commerce, Bloomberg, Ventura Research

HZL Trends

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Hindustan Zinc Production HZL Domestic Zinc Sales

HZL Export Zinc Sales % Domestic Sales/Demand

Tonnes %

Source: Ministry of Commerce, Bloomberg, Ventura Research

Zinc Revenues

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May, 2015


Lead revenues to grow at a tepid pace

We expect lead revenues to grow at a CAGR of 7.3% to Rs 2,351 crore by FY17.

The revenue growth is expected to be subdued as LME lead prices are expected

to remain flat owing to narrowing deficit in 2016. However, the deficit is expected

to widen marginally in 2017 which will firm up prices. The proportion of lead

revenues is expected to reduce from 13% in FY15 to 10% in FY17.

Silver revenues to grow at a robust pace

We expect silver revenues to grow at a 2 year CAGR of 15% to Rs 1,580 crore

driven by 10% CAGR in volumes to 395 MT by FY17. Silver, being a by-product

of zinc and lead, will grow in tandem with the zinc and lead production volumes.

The proportion of silver revenues is expected to be stable at ~7%. The current

LBMA price of silver is $17.5/oz, and we have assumed them to remain the same

Lead Revenues

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Silver is not only an investment metal but also its industrial usage is growing rapidly as it finds increased usage in sunrise sectors like solar energy, electronic equipments and other modern applications. This will ensure that silver pricing remains steady.

Key Risks

Development of New Mines We have incorporated a gradual rise in zinc prices owing to the deficit situation. However, if the new mines commence operations earlier than anticipated, it will enhance the supply thereby putting downward pressure on prices and impacting our revenue forecasts.

Inability to achieve estimated production HZL is increasing its ore capacities and aims to achieve a mined metal production of 1.2 Mn MT by FY17-FY18. Inability to meet the estimated production and ramp up its smelter capacity for the same, could impact its profitability and cash generating abilities.

Slowdown in domestic economy Domestic sales form ~80% of HZL’s revenues. The realizations are also relatively higher than that of in export markets. Hence, a slower than anticipated recovery in domestic economy will hit the demand for zinc, lead and silver, HZL’s primary products.

Inability to generate higher yield on investments HZL currently generates substantial investment income i.e. Rs. 2821 Crores in FY15 (16% of revenues) from its investments worth Rs. 27254 Crores parked in mutual funds, bonds and other high quality debt instruments. A lower than anticipated yield on investments will impact our profit estimates.

World Silver trends

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Source: Silver Institute, Ventura Research


May, 2015


Currency movements The LME prices of zinc and lead, the determinant of HZL’s realizations, are quoted in dollars. A sharp appreciation of the dollar will directly impact HZL’s realizations.

Financial Performance

In Q4FY15, HZL reported a 13% Y-o-Y increase in revenues to Rs 4125.7

crores. EBITDA grew 12.7% Y-o-Y to 1978.4 crores in Q4FY15; EBITDA margin

remained flat Y-o-Y at 48.0%. PAT grew 6.2% Y-o-Y to 1997.4 crores; PAT

margin contracted 320 bps to 48.4% due to marginal decline in its commodity

prices, higher finance and tax expenses and lower other income.

Quarterly Performance (Rs. Crores)

Particulars Q4FY15 Q4FY14 FY15 FY14

Net Sales 4125.7 3642.7 14787.8 13636.0

Growth 13.3 8.4

Total Expenditure 2147.3 1887.5 7368.8 6674.5

EBITDA 1978.4 1755.2 7419.0 6961.5

Margin % 48.0 48.2 50.2 51.1

Depreciation 26.8 204.1 644.2 784.6

EBIT (Excl. OI) 1951.6 1551.1 6774.8 6176.9

Other Income 594.9 588.7 2821.1 1899.4

EBIT 2546.5 2139.8 9595.9 8076.3

Margin % 61.7 58.7 64.9 59.2

Finance Costs 13.8 20.2 23.5 44.9

Exceptional Income 0.0 0.0 -2.8 -61.7

PBT 2532.7 2119.6 9569.5 7969.7

Margin % 61.4 58.2 64.7 58.4

Tax Expense 535.3 238.3 1392.1 1065.1

PAT 1997.4 1881.3 8177.4 6904.6

Margin % 48.4 51.6 55.3 50.6 Source: HZL, Ventura Research


May, 2015


Financial Outlook The company reported a 8% YoY revenue growth to Rs. 14,788 crores in FY15.

Going forward, we expect the company to clock a 14% CAGR in revenues over

FY15-FY17 led by higher mined and refined production coupled with a steady

rise in zinc realizations.

The company enjoys a healthy EBITDA margin of ~50% currently. However,

operating margins are expected to contract on account of huge upcoming

District Mineral Fund (DMF) contribution. The DMF payment will be a maximum

of 100% of royalty on existing mines. Hence, on a conservative basis, based on

100% of royalty payout, the DMF payment could be in the tune of Rs. 1738

crores in FY17. Consequently, EBITDA margin could shrink by 7 pps to 43% in

FY17.

The company has huge cash reserves and invests ~45% of the operating cash

flow that it generates in various current investments such as mutual funds,

bonds and other high rated debt instruments. As on FY15, it had current

investments worth Rs. 27,254 Crores. We expect other income to continue to

form 14% of revenues over FY15-FY17. Accordingly, given the quantum of

other income, the net profit of the company is likely to be higher than the

operating profit, a phenomena witnessed in FY15 as well. The ROE for the

company is expected to gradually drop to 17% in FY17 from 20% currently. The

company will continue to remain debt free.

EBITDA and EBITDA margins

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May, 2015


Current Investment and Other Income

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20

16

E

20

17

E

PAT PAT margins (RHS)

Rs. Crs. %


ROE

0

5

10

15

20

25

30

20

11

20

12

20

13

20

14

20

15

20

16

E

20

17

EROE

%


Current Investment and Other Income

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2011

2012

2013

2014

2015

2016E

2017E

Cash Flows from Operations Investment

Rs.Crs.



May, 2015


Valuation

We have valued Hindustan Zinc based on the DCF methodology with projections

from FY16-FY40. The projection period of 25 years is based on HZL’s expected

mine life. We have modeled HZL’s financials based on management and industry

interactions.

We initiate coverage on HZL as BUY with a Target Price of 217 showing a

potential upside of 25% on the CMP of Rs. 175. Our target price implies an FY17

EV/EBITDA multiple of 5.6x.

Key Assumptions:

Ore Producing Capacity: Given that the company is ramping up its ore production capacity, we have assumed that HZL will have a total ore producing capacity of 21.35 Mn MT post the commissioning of the new mines.

Mined Metal Production: The company’s mined metal production is estimated to surge to 1.2 Mn MT in FY17, from 0.9 Mn MT in FY15 backed by higher ore produced. The mined metal production is expected to increase with the gradual expansion of HZL’s R&R.

LME Zinc and lead prices: LME Zinc prices are expected to increase gradually due the foreseen deficit. Accordingly, we expect LME zinc prices to increase to $3000 by FY 2020. LME lead prices are expected to increase gradually in the wake of marginal deficit which could persist.

Contribution to District Mineral Fund: As per the new MMDR Act, HZL could have to pay a maximum of 100% on royalty. On the same lines, we have conservatively factored the DMF payout at the rate of 100% on royalty.

Gross margins (excluding DMF payout and royalty): Gross margins are expected to peak at 59% in FY17 from 57.5% in FY15 driven by higher LME zinc prices. Post which, we expect margins to gradually moderate over the forecasted period.

Capex: We have assumed the company to incur a capex of around Rs. 9500 crores from FY16-FY20 to fund its expansion plans.

Wind Energy: We have assumed the Plant Load Factor of Wind energy to remain at 18% over the projected period.


May, 2015


Other Income: The yield on current investments is assumed at 9%.

Addition to Current Investments: Considering the company’s historical trend, we have assumed that ~45% of each year’s cash flows generated from operating activities would be further re-invested into current investments.

HZL has attractive valuations compared to global peers

MMG LTD P/E P/E EV/EBITDA EV/EBITDA EV/Sales EV/Sales

Period Current 1 yr Forward Current 1 yr Forward Current 1 yr Forward

BHP Billiton Ltd 9.97 17.23 5.12 6.82 2.41 2.99

Glencore International 15.68 19.86 8.43 9.06 0.51 0.59

Southern Copper Corp 20.65 21.58 10.78 11.54 5.19 5.25

Anglo American PLC 10.56 16.88 5.53 7.27 1.52 1.67

Teck Resources Ltd 22.02 19.55 6.98 6.94 2.12 2.12

Lundin Mining Corp 19.87 13.13 13.54 5.37 4.93 2.37

Vedanta Resources PLC 20.89 NA 5.31 6.66 1.90 1.93

Hudbay Minerals, Inc NA 19.37 35.35 8.58 6.22 3.08

Kazakhmys PLC 29.84 1297.37 10.06 22.90 3.36 3.47

MMG LTD 22.61 NA 11.90 18.32 4.66 5.40

Independence Group NL 20.92 14.11 6.66 5.20 3.17 2.47

Korea Zinc Co Ltd 18.59 NA 9.88 NA 1.95 2.00

Nyrstar loss 20.11 6.51 4.52 0.55 0.46

BolIden 28.65 11.85 10.14 6.09 1.55 1.33

HINDUSTAN ZINC 8.70 10.40 5.43 4.78 2.77 2.58


Key DCF Assumptions

Projection Period FY16-FY40

Cost of Equity 15.98

Risk Free rate 8

Beta 1.03

RM 15.75

Risk Premium 7.75 Source: Ventura Research



May, 2015


P/E

0

50

100

150

200

250

300

Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14

CMP 6X 7.575X 9.15X 10.725X 12.3X


EV/EBITDA

0

10000

20000

30000

40000

50000

60000

70000


EV 2X 3.55X 5.1X 6.255X 7.805X


P/BV

0

50

100

150

200

250

300

350

400

450


CMP 0.8X 1.625X 2.45X 3.275X 4.1X


EV/Sales

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000


EV 1X 1.75X 2.50 3.25X 4X



May, 2015


Financials and Projections

Y/E March, Fig in Rs. Cr FY 2014 FY 2015 FY 2016e FY 2017e Y/E March, Fig in Rs. Cr FY 2014 FY 2015 FY 2016e FY 2017e

Profit & Loss Statement Per Share Data (Rs)

Net Sales 13636.0 14788.4 18629.9 21530.9 EPS 16.3 19.4 20.3 22.7

% Chg. 8.5 8.5 26.0 15.6 Cash EPS 13.1 17.0 14.9 18.5

Total Expenditure 6674.5 7368.8 10472.9 12403.7 DPS 3.50 4.40 4.90 5.40

% Chg. 10.4 10.4 42.1 18.4 Book Value 87 101 115 132

EBITDA 6961.5 7419.6 8157.0 9127.2 Capital, Liquidity, Returns Ratio

EBITDA Margin % 51.1 50.2 43.8 42.4 Debt / Equity (x) 0.0 0.0 0.0 0.0

Other Income 1899.4 2821.1 2817.6 3195.0 Current Ratio (x) 11.0 10.9 11.1 11.5

Exceptional items 61.7 2.8 0.0 0.0 ROE (%) 19.8 20.2 18.5 18.1

PBDIT 8799.2 10237.8 10974.6 12322.2 ROCE (%) 20.0 18.4 17.5 17.2

Depreciation 784.6 644.2 805.5 958.5 Dividend Yield (%) 2.0 2.5 2.8 3.1

Finance Costs 44.9 23.5 57.8 66.8 Valuation Ratio (x)

PBT 7969.7 9570.1 10111.4 11296.9 P/E 10.8 9.1 8.7 7.8

Tax Provisions 1065.1 1392.1 1516.7 1694.5 P/BV 2.0 1.8 1.5 1.3

Reported PAT 6904.6 8178.0 8594.7 9602.4 EV/Sales 3.8 3.2 2.3 1.8

Minority Interest 0.0 0.0 0.0 0.0 EV/EBIDTA 7.1 6.0 4.9 3.8

Share of profit from associate 0.0 0.0 0.0 0.0 Efficiency Ratios

PAT 6904.6 8178.0 8594.7 9602.4 Inventory Days 73.0 68.0 59.8 57.4

PAT Margin (%) 50.6 55.3 46.1 44.6 Debtors Days 10.7 16.3 11.0 11.0

Prodn. Based Costs/Sales (%) 32.7 28.2 32.4 31.6 Creditors Days 31.1 35.4 25.2 24.2

Balance Sheet Cash Flow statement

Share Capital 845.1 845.1 845.1 845.1 Profit Before Tax 7969.71 9570.12 10111.39 11296.91

Reserves & Surplus 36572.6 42508.0 48767.7 55700.7 Depreciation & Amortisation 784.6 644.2 805.5 958.5

Other Long Term Liabilities 56.4 132.1 140.0 150.0 Working Capital Changes 190.5 282.0 -849.9 -190.1

Total Loans 0.0 0.0 0.0 0.0 Direct Taxes Paid & Others -3408.1 -3329.6 -3771.0 -4257.9

Deferred Tax Liability 1658.1 2515.3 3020.9 3585.8 Operating Cash Flow 5536.5 7166.7 6296 7807

Total Liabilities 39131.8 46000.5 52773.7 60281.5 Capital Expenditure -1774.2 -1623.3 -1488.5 -1532.5

Gross Block 13583.6 14989.5 16203.5 17502.0 Other Income Received 729.2 2821.1 2817.6 3195.0

Less: Acc. Depreciation 4436.6 4921.2 5554.0 6325.9 Others -6825 -6417 -5064 -5182

Net Block 9147.0 10068.2 10649.5 11176.1 Cash Flow from Investing -7869.8 -5219 -3734 -3519

Capital Work in Progress 1540.9 1382.7 1484.4 1531.9 Inc/(Dec) in Loan Fund 0.0 0.0 0.0 0.0

Investments 22506.4 27253.6 31309.9 35503.0 Interest Paid and Others -1577.4 -1945.1 -2294.1 -2609.5

Net Current Assets 2998.2 2464.7 3395.6 5137.3 Cash Flow from Financing -1577.4 -1945.1 -2294.1 -2609.5

Deferred Tax Assets 0.0 0.0 0.0 0.0 Net Change in Cash -3910.7 2.8 267.5 1678.6

Other Non-Current Assets 2939.4 4595.1 5698.0 6697.0 Opening Cash Balance 6942.1 3031.4 3034.2 3301.7

Total Assets 39131.8 45764.3 52537.5 60045.3 Closing Cash Balance 3031.4 3034.2 3301.7 4980.3


May, 2015


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Research Analyst (RA) involved in the preparation of this research report and VSL disclose that neither RA nor VSL nor its associates (i) have any financial interest in the company which is the subject matter of this research report (ii) holds ownership of one percent or more in the securities of subject company (iii) have any material conflict of interest at the time of publication of this research report (iv) have received any compensation from the subject company in the past twelve months (v) have managed or co-managed public offering of securities for the subject company in past twelve months (vi) have received any compensation for investment banking merchant banking or brokerage services from the subject company in the past twelve months (vii) have received any compensation for product or services from the subject company in the past twelve months (viii) have received any compensation or other benefits from the subject company or third party in connection with the research report. 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Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. And such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document. The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation or warranty by VSL, its associates, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. 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Documents

HZL Initiating Coverage