INSTITUTIONAL EQUITY RESEARCH GV Investor Conferencebackoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_GV_Key... · INSTITUTIONAL EQUITY RESEARCH ... PHILLIPCAPITAL INDIA

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

GV Investor Conference

Monsoon turnaround INDIA | Key Takeaways

15 June 2016

We had organised the ‘PhillipCapital India Ground View Investor Conference’ on 9 and 10 June 2016 at Sofitel, BKC, Mumbai. In this two day‐ event, we hosted mid‐sized companies from the listed and unlisted space. The conference was very well attended and achieved its purpose of presenting investors with ideas and themes across sectors. The following companies attended the event:

PhillipCapital India Research Team

Auto: Fleet operator/CEAT C&F agent, importer/trader for TBR trucks, Mahindra CIE, dealer (Hero, M&M PV, Chevrolet, VW & M&M LCV), dealer (M&M Tractor, Bajaj 3W, Bridgestone & Exide distributor), tractor company area sales manager – Escorts, M&M

BFSI: DCB Bank, Bank Employee Union, CitrusPay, State Bank of India, AZB

Capital Goods: Engineers India, Voltas

Cement: Italcementi, a senior executive of leading cement company, UltraTech Cement, CRH, HeidelbergCement, JK Cement, Lafarge, NCL Industries

Consumer: Dairy consultant, Hindustan Unilever distributor, ITC distributor, Katraj Milk cooperative, MART, P&G distributor, Parag Milk Foods, Parle Products Ltd, Pittie Group (Biggest Patanjali distributor), Technopak Advisors, Bajaj Corp, Marico Industries, Rural Distributor, Speciality Restaurants

Credit Rating Agency: CARE Ratings

Infrastructure: KNR Construction, PNC Infratech, DMICDC, The World Bank (Smart Cities)

IT Services: ex‐Accenture, Intellect design Arena, Intrasoft Technologies, Ernst & Young

Logisitcs: Blue Dart, Allcargo, GE Shipping, Navkar, Sintex, Goodluck steel, KDDL, Ashapura , Pennar Industires, Apl Apollo, KEI

Media: DB Corp, Dish TV, HT Media, Ortel

Metals: Flat Steel Trader, Hindustan Zinc, Nalco, Steelmint

NBFC: Shriram City Union Finance, Mahindra & Mahindra Finance, Shriram Transport Finance, Gruh Finance

Payments solutions: Suvidhaa Infoserve P. Ltd.

Pharma: Biocon Ltd, Syngene International

Spec Chemicals: Specialty chemical expert, Fineotex Chemicals, Meghmani Organics, Vinati Organics, IG Petrochemicals, NOCIL

Telecom: Reliance Communications, Capital Partners


GV INVESTOR CONFERENCE KEY TAKEAWAYS

Panel Discussion Rural India: Ushering in a new growth engine for India Inc. We hosted the panel discussion on rural India’s contribution to economic growth and the opportunities for India Inc in the years ahead. The panelists for the discussion were: • Mr. Pradeep Kashyap: Leading rural marketing consultant • Dr. Sudhir Goel: Leading agri business consultant (ex additional chief secretary of

agriculture Maharashtra) • Mr. Pitam Shah (MD, Parag Milk Foods) • Mr. Vivek Matthai (Leading dairy consultant) • Mr. Krishnarao Buddha (Deputy Marketing Manager, Parle Products) • Mr. Ankur Bisen (Sr. VP, Technopak Advisors) The key takeaways of the panel discussion were: • Agriculture’s contribution to rural GDP has decreased over the years; it currently

contributes to around 40% of rural GDP. • While agriculture has been impacted by droughts, horticulture and dairy have

continued to grow during the last two drought years. • Agriculture is one of the riskiest businesses in India marked by low margin and

high volumes. This sector has attracted limited investments from the private sector.

• Value chains drive the rural economy; these chains (sugar, dairy) have contributed immensely to the prosperity of farmers where these chains are strong.

• Minimum Support Prices in commodities provide secure incomes and continue to see significant cultivation by farmers, notwithstanding deteriorating economics.

• Growth in the rural economy will help the dairy sector immensely as it has a well‐established value chain.

• Companies like HUL and others are not able to grow in rural areas, even as companies such as Patanjali or Khadi Udyog have shown tremendous growth. These companies either do not have the right products or operate at higher price points.

• Companies focused on volumes and are willing to sacrifice margins (such as Parle) will see strong growth in the rural economy.

• Indian companies are seemingly better geared for the rural economy than their MNC counter parts.

Conclusion: Rural economy is poised for strong growth, but only a few companies are geared to exploit this growth. Also, the impact of good monsoons on the rural economy is exaggerated and could lead to disappointments.



Digitisation in BFSI – collaboration or competition Mr. Rajesh Prashad (Head, Rupay) • NPCI is a not‐for‐profit company established to build, own, and operate retail

payments. Earlier, RBI acted as operator as well as regulator for payments but then it transferred NFS (National Financial Switch) to NPCI. NFS allows ATM interoperability between 647 members with monthly volume now touching 360mn transactions. Eventually, it launched other products like IMPS (immediate payment service), Rupay, and now UPI (unified payment interface) – which provides different payment solutions.

• Even as people are increasingly moving to mobile technology, India will continue to have card transaction for some more time due to low penetration. Multiple payment technologies will coexist as India is a diverse market with different customer segments. Cash transaction cannot be completely replaced by cards, even in the most advanced countries. So there would be enough space and opportunity for different players, whether its mobile wallets, payment banks, small finance banks, or universal banks.

• Collaboration between banks and fintech companies would enrich customer experience, whereas healthy competition is also necessary to evolve technology.

Mr. Paresh Rajde (Chairman, Suvidha) • In India, only 8% of population transacts electronically and the rest transacts in

cash. Even in the US, 50% transactions are still through cash. This shows that the agent‐assisted model for payment services such as utility bill payments, money transfer, mobile/DTH top‐ups, etc., will continue to exist and will not be replaced by self‐service smart phones completely.

• Around 90% of our population earns its livelihood in cash; hence, PPIs (prepaid payment instruments) like Suvidha will act as a burial of cash.

• Strong advocate of collaboration; believes that such a tie‐up can create revolutionary products that can disrupt some of the existing products.

• PPIs provide the last‐mile connect through agent‐assisted models. They act as business correspondents for banks. Strong customer database and state‐of‐the‐art technology helps underwriting loan product for banks. For example, Suvidha can disburse an unsecured loan in an hour.

Mr Rajpal Duggal (Group President – Corporate strategy and planning, Oxigen) • PPIs like Oxigen or Suvidha have contributed to the electrification of cash

transaction. • Digitisation has been rapid in metro and urban centres, but the challenge

remains in rural centres where most of the population resides. • Key hindrances are: (1) lack of payment infrastructure, and (2) High rate of

interchange. • India has 216mn Jandhan bank accounts and 186mn Rupay card holders. This is

not sufficient as the transaction in these accounts or cards are minuscule due to lack of payment infrastructure.

• People in village still have to travel a long distance for any financial transaction in these instruments. Increasing point of sale (POS) terminals with shared cost amongst service provider can resolve the transaction issue.

• India needs 20mn POS terminals compared to the 1.2mn it currently has. Moreover, the locations of such touch points is spread out to just 0.4mn locations (which means there is duplication of POS at locations).

• Believes collaboration will increase the pace of digitisation. Mr Yadvendra Tyagi (Director – Business Development, Citrus) • Digitisation is not disruptive; rather, its constructive. Wallets, fintech, and banks

will complement each other rather than create competition.



• Unified payment interface will be helpful to wallets, as customer across banking channels would be able to use them. However, survival would depend on the product quality and customer experience.

Mr Mahesh Makhija (Partner, Ernst and Young) • Every part of the financial value chain is under threat from fintech companies.

Most of the companies in payment businesses such as PPIs, payment banks are fintech companies.

• Entire payment ecosystem has now exploded and banks are trying hard to match the pace of innovation which fintech companies have achieved.

• In lending, banks are trying to partner with fintech as a front‐end in customer engagement programmes, for need analysis, and generating leads.

• In terms of CASA, fintech companies can be a threat. • The regulatory environment in India is conducive. RBI has payment bank or small

bank models in place and is well aware of the innovation that fintech companies can provide.

• The recent RBI policy does not seem to be a threat to banks in the near term, but long‐term challenge from fintech will force banks to collaborate/acquire/build these fintech companies.

Mr K A Babu (Head Digital Banking, Federal Bank) Digital means making things simple for customer. Banks have become proactive rather than reactive in their endeavor to enhance customer experience. Federal banks digital strategy revolves around 3As. 1. Anywhere 2. Anytime and 3. Any device. The digitization would not only provide cost savings but add to new revenue streams. The cost savings can be enormous for the bank. Just to elude, the average cost per transaction in a branch is around Rs60, the same cost declines to less than Rs10 if its done digitally whether it is bank statement, cash withdrawal at branch, New ATM PIN etc. Banks are even investing in fintech companies to evolve product and process. Collaboration will be the strategy for banks as fintech companies can provide innovation / speed of new product development whereas for fintech companies they require investment; customer experience and understand regulatory requirements.



AUTO Fleet operator • Operates in 13 states, fleet size of 1300 vehicles (400 owned, 900 attached).

Operates with 600 agencies and has warehouses across 120 locations. • The number of attached vehicles have risen (from 600‐700 a year ago) due to

increasing demand. • No fleet addition in the last four years; only replacements. • Only buying Bharat Benz trucks for the last three years, as mileage is 10% better,

repairs needed are minimal, very low off time. • Leyland and Tata needs servicing every month, Benz needs once in six months. • Bharat Benz sends their own drivers for 2‐3 trips a month, which is a great

initiative; helps keep a check on diesel pilferage. • Average fleet age is five years; replaces trucks after 8‐9 years. • Spares is a big issue in VECV; hence, don’t buy VECV trucks. • Net truck prices have been hiked by Rs 100,000 in the last few months. • Second‐hand truck prices move up in October‐December; typically a busy season. • Freight rates haven’t moved up in line with diesel prices, therefore margins are

impacted; however, they had not fallen in line with diesel prices too. • Dedicated freight corridor will have a negative impact on demand for tractor‐

trailers. Escorts • FY17 looking very positive; expects all segments to perform well. • The south India tractor market has started booming, but north India not out of

woods yet. • Expects northern market to post growth from 2HFY17. • Expects tractor industry growth at 10% in FY17; has gained market share in 9 out

of13 key states. • Looking at double‐digit EBIT margins in tractors from 2QFY17. • Construction equipment segment has started outperforming, with last two

months growth at 60%+. Estimate minimum 15% growth in the segment. • Expect construction equipment business to be profitable in two years. • Railways order book now stands at Rs 950mn with Rs 400mn worth of orders

added in the last two months. • Will see further large VRS in FY18 and FY19; expects 700‐1000 employees to take

VRS. • Aims to reduce employee cost to 8.5% of sales in three years vs. 11% currently. • Capex at Rs 800‐850mn. M&M • No major new launch in FY17. • KUV100 stable at 5000 units/month; happy with its performance. • Spent Rs 20bn on various new launches in the recent past. • Product launch costs vary from Rs 1‐6bn depending on R&D requirement. • Aims to refresh products every three years. • GST will initially create a mess, closely watching developments on GST. • Despite slowdown, margins have been sturdy; once rural markets revive, sees

margins improving. • Capex in the last three years was Rs 75bn, of which it invested Rs 20bn in

TUV300. • Going forward, will invest a large portion of its capex into engines.



Mahindra CIE • M&M UV volumes reviving well, will lead to margin improvement in the Indian

business. • With Jeco plant closure behind, EU margins should improve in the coming 2‐3

quarters. • Exiting few low‐margin products in Europe – this will lead to pressure on revenue

growth. • Actively looking at acquisition targets in India and Asia. • Aiming to achieve 14%+ consolidated EBITDA margins in the next 2‐3 years, in‐

line with CIE’s global standards. • While growth will be a bit slower in FY17, margin improvement will continue, led

by various initiatives across segments. Chinese tyre importer and tyre dealers • One of the largest importers of Chinese tyres in India. • Imports three brands – two Chinese + one its own, but made in China. • Own brands of TBR tyres sells at Rs 28,000‐36,000 a pair; best‐selling Indian

brands sell at over Rs 40,000 a pair. • Cheapest Chinese tyres sold in India are available at Rs 24,000 a pair, but quality

is weak. • Chinese tyre imports have seen a rise in volumes over the last three months,

which will impact Indian players’ volume growth in 1QFY17. • Indian players have increased discounts recently, which will impact their margins. • After the US anti‐dumping measures, Chinese players are now more focused on

and aggressive about Indian markets. • Indian players sell at a huge discounts to OEMs, Apollo sells its 16‐ply‐rating tyres

to Tata motors at Rs 25,000 a pair vs. aftermarket price of over Rs 36,000. • Chinese tyre quality is at par with what Indian players offer; this importer

provides warranty on its tyres. • Anti‐dumping investigations have not even started yet and will take a long time if

applicable in India. • Chinese players are setting up plants in Thailand to avoid anti‐dumping duties. • MRF bias tyres are the benchmark of quality and no other player comes even

close. • There is about 20% price difference between Chinese and Indian tyres. If anti‐

dumping reduces this gap to 5‐6%, then Chinese imports would be impacted. • Earlier, there were five Chinese brands selling in India; now, there are over 30. • All the leading tyre makers had to cut prices (or schemes) by 20‐25% in last six

months, of which 5% were only recently – in April 2016. • Tractor tyres, which used to cost Rs 38,000 a pair, now cost Rs 34,000 plus

schemes. • Cheapest Indian truck tyre is by JK at Rs 31,000; the cheapest Chinese tyre is

available for Rs 24,000. • Few Tata MHCVs now come fitted with Chinese branded tyres. • Ceat is gaining marketshare in the 2W segment, as MRF still has supply issues. • Chinese PV tyres sell at 15% discount; acceptance in PV segment is also picking

up, mainly by tourist‐vehicle operators. Tractor dealers and experts • Tractor is an aspiration product for farmers; even if they don’t need it, they tend

to buy one, even a small one, if they can afford it. • If the monsoon is normal, there will be a sharp pick up in demand; high double‐

digit growth is likely. • Many farmers who have money had postponed their tractor purchases; even the

predictions of a normal monsoon have led such and other farmers to buy tractors.



• June is likely to be a strong month, after which major demand is likely from Navratri/Diwali.

• Even financiers and tractor companies have become aggressive after normal monsoon was predicted.

• Tafe has the best resale value in the Gujarat market, followed by PTL, M&M, and Escorts.

• Rich farmers replace tractors every 2‐3 years, poor farmers use it for eight years. • 25% of tractor sales are for non‐farming. • M&M has launched its new Yuvo series after seeing a revival and to excite the

market; the company has an upper hand over competition, as it covers farmers in a larger way by selling implements, seeds, powerol, etc.

• More than 50% buyers are exchange buyers. • Initial cost, fuel efficiency, and resale value are the most important factors

influencing buying decisions. • Sonalika dealers are seeing huge churn due to aggressive schemes by the

company; the company sells its products at ~10% discount to M&M. • Around 80% of Vidharbha tractor sales are financed. • No tractor company gives credit to dealers. • Some top‐ and middle‐management cadres of M&M have recently joined

Sonalika. • Dealer policy of M&M tractors was very flexible earlier, but now it has become

very stringent. Every dealer needs to have a workshop of 1500‐2000 sq. ft. • The used tractor market is over two times that of the new tractor industry,

largely unorganised. • Average age of a tractors is 3‐5 years in agri, two years in mining and

construction, and 10‐12 years in case of poor farmers. Two‐wheeler dealers • Hero’s new scooter offerings are doing well, which is leading to market‐share

gains. • No product complains received for Hero’s scooters. On the contrary, they are

getting higher product referrals. • Glamour is doing well in south and north India, not too well in the West. • TVS has good‐quality products, but marketing an issue. TVS dealers change every

5‐10 years, unlike Hero, which has old dealers. • Honda’s strategy is to duplicate Hero’s infrastructure; refreshed Shine has not

had any impact on Hero’s volumes. • No timely refreshes and upgrades impacted Hero’s brand in the premium

segment. • Hero currently gives two weeks of credit period (since the last two years),

compared to no credit period by Honda. • Currently no waiting period in Honda Activa. • Hero’s inventory days are 30‐45. • 25% of Splendor sales is Ismart – the launch added to incremental volumes.

Good mileage is the USP for the product. • 10% growth likely in Hero’s two‐wheeler portfolio if monsoon is normal. M&M automotive dealers • Sub‐4 meter Bolero is coming soon • New 100HP TUV 300 launched a few days back. This will help revive this

product’s volumes. • 40% of KUV100 sales are petrol.



Three‐wheeler dealers • Bajaj’s cargo 3W (recently launched) is priced Rs 15,000 cheaper than Piaggio’s. • Initial demand for Bajaj’s cargo 3W looks promising, as strong brand and lower

maintenance is pulling customers. • Atul 3Ws were launched in Maharashtra, but due to poor sales its dealers shut

shop. Battery dealers • Exide has dramatically improved service quality in the last two years. • Previously, warranty claims would take 1‐4 weeks to be settled; now they are

settled in a couple of hours. • Local batteries are a huge challenge to branded players as they are 20‐30%

cheaper with similar life warranty.

BFSI DCB BANK • Loan growth conditions are tough in the market. DCB Bank aims to double its

loan book in three years. However, yoy growth need not be linear. • Focus on retail and SME segment, expect muted corporate loan growth.

Mortgage is the key growth driver with 75% of its portfolio under loan against property with average ticket size of Rs 4.0‐4.5mn. Commercial vehicle portfolio majorly (85%) qualifies for priority‐sector lending, catering to new trucks in the small operator segment.

• Mortgage loans to be 45% of the portfolio whereas AIB is expected in the range of ~17%.

• NIMs may be under pressure by 20‐25bps due to ‘marginal cost’‐based lending rate.

• Reiterated branch expansion plans – to install 150+ additional branches within 24months. Cost‐to‐income to increase due to high opex, but will remain within 63% by FY17 and come down to 55% by FY19.

• Asset quality remains stable; sees credit cost at around 60bps for FY17. State Bank of India • Credit growth to remain 12‐14% led by retail and high‐rated corporates. • Non‐accrual of interest on NPA accounts to put NIMs under pressure. However,

endeavour is to maintain NIMs at current levels. • Slippage guidance is at 2.7% and credit cost guidance at 1.7‐1.8% in FY17. The

watch‐list accounts stand at Rs 314bn. Watch list for associates is around Rs 200bn.

• Merger of associate banks will be complete by FY17. One‐time cost for creation of PF of Rs 30bn, the benefits of merger would accrue within a year amounting to Rs 35bn.

• The benefit of merger will flow through in the form of higher yield on treasury book; reduction in cost of fund and containment of operating cost due to removal of duplication.

• No immediate need for capital. Adequately capitalised to take care of growth for next 12‐18 months.



AZB • AZB was part of the drafting team of the Insolvency and Bankruptcy Code (IBC);

the aim was to model the code around existing bankruptcy codes of UK, Singapore, Hong Kong, etc., and not USA’s chapter 11. The Idea was that bankruptcy should be handled through an independent body, less reliant on judiciary, so as to decrease the time‐frame of resolution. Code provided was a unified and comprehensive one, to address bankruptcy issues of corporates and individuals, and focus on bringing parity to the interest of both secured and unsecured lenders. There is no retrospective element in the code

• First part of the new infrastructure will be the insolvency professional (IP); while IP will be in charge of corporate bankruptcy, DRT will look after individual bankruptcy.

• The IP, in conjunction with the lenders, will drive the resolution process within 179 days of bankruptcy being triggered; 75% of the creditors by value will decide the fate of the resolution, or if the 30‐day extension is required. The IP will be in charge of control of assets and maintaining the going concern during the resolution process.

• Next is setting up of Information Utilities (IUs), with the dedicated task of containing information regarding the project/firm from the point of signing of a loan agreement. Filing of information to IUs will be based on a bi‐party agreement between creditors and the firm.

• Holding all requisite information regarding the loan and its utilisation will decrease the time required to gather evidence during the resolution process and is helpful from the perspective of the lender. It was communicated that RBI may ask financial institutions to make this compulsory during the loan‐approval process.

• Next will be an adjudication authority, which will take up hearing if the promoter has enough grounds to prove that the resolution was highly unfair and infringed upon his constitutional rights. AZB was of the view that such instances will be few, as there are limited grounds for appeal. In case the promoter still has legitimate concerns, s/he has Supreme Court as the final appellate authority.

• If the majority (75%) of the lenders are in agreement that the revival of the firm does not make sense, the firm will go for liquidation, which will be steered by a liquidation professional.

• IBC has modified the existing distribution waterfall and according to the new one, the order will be: a) lenders who provide interim financing and the IP, b) secured lenders and workmen upto 2 years, c) employee dues, d) unsecured lenders and e) central and state tax dues (was previously 2nd in priority order)

• India currently ranks 136/189 by country, with recovery rates in case of liquidation being around 25‐30% and average time to resolution of around 4.3 years. AZB believes that the IBC will significantly bring down the average resolution time to at par with developed nations like the UK.



Consumer Panel Discussion ‐ Rural India: Ushering in a new growth engine for India Inc. We hosted the panel discussion on rural India’s contribution to economic growth and the opportunities for India Inc in the years ahead. The panelists for the discussion were: • Mr. Pradeep Kashyap: Leading rural marketing consultant • Dr. Sudhir Goel: Leading agri business consultant (ex additional chief secretary of

agriculture Maharashtra) • Mr. Pitam Shah (MD, Parag Milk Foods) • Mr. Vivek Matthai (Leading dairy consultant) • Mr. Krishnarao Buddha (Deputy Marketing Manager, Parle Products) • Mr. Ankur Bisen (Sr. VP, Technopak Advisors) The key takeaways of the panel discussion were: • Agriculture’s contribution to rural GDP has decreased over the years; it currently

contributes to around 40% of rural GDP. • While agriculture has been impacted by droughts, horticulture and dairy have

continued to grow during the last two drought years. • Agriculture is one of the riskiest businesses in India marked by low margin and

high volumes. This sector has attracted limited investments from the private sector.

• Value chains drive the rural economy; these chains (sugar, dairy) have contributed immensely to the prosperity of farmers where these chains are strong.

• Minimum Support Prices in commodities provide secure incomes and continue to see significant cultivation by farmers, notwithstanding deteriorating economics.

• Growth in the rural economy will help the dairy sector immensely as it has a well‐established value chain.

• Companies like HUL and others are not able to grow in rural areas, even as companies such as Patanjali or Khadi Udyog have shown tremendous growth. These companies either do not have the right products or operate at higher price points.

• Companies focused on volumes and are willing to sacrifice margins (such as Parle) will see strong growth in the rural economy.

• Indian companies are seemingly better geared for the rural economy than their MNC counter parts.

Conclusion: Rural economy is poised for strong growth, but only a few companies are geared to exploit this growth. Also, the impact of good monsoons on the rural economy is exaggerated and could lead to disappointments. Largest distributor for Patanjali products • Patanjali is growing at rapid pace and aims to achieve Rs 100bn revenues by end

of FY17. In FY16, the revenues for the company were in the range of Rs 50bn. • Growth is strong in both – general and modern trade. • The company will achieve Rs 150bn over the next two years. The base effect will

only start having an impact after this scale is achieved. • It is a myth that Patanjali products are more suited more for rural consumers;

they are well accepted by both rural and urban consumers. • Patanjali has seen a huge surge of applications from distributors across India. • Products across categories, including personal wash, have seen good acceptance;

toothpaste is its largest selling category.



• It strategy now is to create sub brands such as Dant Kanti (toothpaste) and not to just rely on the umbrella brand of Patanjali.

• Quality is the motto of the company and no matter how fast the growth rates are, Patanjali will not compromise on quality.

• Challenges for the company include: o Managing input costs and sourcing requirements such as getting the

requisite number of tubes for toothpaste. o Scale of business and maintaining supply. o Quality distributors rather than quantity. o Creating successful sub brands.

HUL distributor – North India • Growth continues to be sluggish in Q1FY17 with some signs of deterioration in

FMCG demand, especially in personal products. • Various factors have caused growth to moderate in the FMCG category –

liquidity crunch, government’s strong measures to remove black money from the system, and policies of individual FMCG companies.

• The distributor’s geography has not been impacted by drought conditions, but he expects some revival in demand post monsoon.

• Distributor margins have been reduced by HUL as staff expenses are now being borne by HUL instead of distributors; however, this has hurt the distributors as the cut in margins has been more than the staff expenses they bore earlier.

• Some salesmen have complained about loss of incentives due to alleged non‐performance after HUL took over paying salespeople’s salaries; this has led to decrease in morale of some salespeople and is hurting performance.

• Due to reduction in margins, the RoI of distributors has reduced and to bring it back to an acceptable range, distributors have reduced credit period given to wholesalers from 30‐45 days earlier to 15‐20 days. This reduction has led to destocking by wholesalers and some loss of sales.

• Apart from margin reduction, HUL had also realigned channel spends (trader promotion offers) during Q3/Q4FY16 to reduce wastages in trade spends, which has added to growth challenges for distributors.

• High price points of HUL in personal products is benefitting Patanjali; many retailers are willing to give shelf space to Patanjali for free, because of sentiments such as faith and patriotism.

ITC distributor – West India • Growth trends: King Size Filter segment (KSFT) saw most value growth due to

price hikes, Regular Size Filter segment (RSFT) saw a dip in both volumes and value; volumes for FY16 were down 13%. Deluxe size filter segment (DSFT) saw some increase in revenue led by volumes.

• At the start of Q1FY17 on 4th April, FDA conducted a drive in Maharashtra to clamp down on illegal cigarettes distribution and raided godowns of company and distributors; the stock was released only in mid‐May after intense negotiations by ITC.

• In Maharashtra, for 50 days when the goods were seized, sales suffered; however, the distributor was able to procure some stock from Rajasthan and other states during this period.

• After releasing stock on 25th may, only five days were given to exhaust the entire old stock by 30th May, which led to a huge push of inventory and dumping all round from company to distributors and then to shop keepers – this dumping has led to huge inventory in system, almost 3x normal inventory. Expects inventory to normalise by early July.

• Expect FY17 volume growth to be flattish. Price hikes: 12.5% in kings, expects to take 12% hike in July to Rs 9 in Goldflake premium from Rs 8 currently.

• Bristol/Flake saw cut in length size to save price hikes in western India.



• Flour business doing very well now; Aashirwaad has 64% share, 0‐7 days credit given on aata to stores.

• Sunfeast picking up. • Juices – supply disruptions in Dabur’s Real Juices due to Nepal blockade led to

good market share gains for ITC’s B‐natural range. • Noodles – Due to Maggi controversy, ITC’s Yippe gained market share ( 16%

currently from 6% earlier) – it had peaked at 28% when Maggi was absent. • Difficult to clamp unbranded players as they operate from 15‐20 small factories;

even a 200 sq. ft. room is enough for them to put machinery and produce 15,000 units a month.

• A company occasionally buys all unbranded stock from the channel. Unbranded players need a month to replenish stocks until which time customers tend to buy ITC cigarettes and then most stick to the brand.

• Goldflake Superstar is doing well only due to the Goldflake name; ,otherwise in DSFT, brand building is very difficult, near impossible.

• Over 70% of cigarette sales are in the loose format. • When loose stick ban was proposed over 100,000 signs were collected (opposing

this) and sent to all ministries, hence don’t feel this will be implemented.

Rural distributor – West India • Rural growth in the Konkan belt of Maharashtra (which receives abundant

rainfall) is strong while it is weak in Marathwada and Vidarbha regions due to severe drought.

• Lately, FMCG companies have increased focus on rural areas for growth and this is noticeable from targets and sales push, and introduction of newer products in rural areas, which are currently sold only in urban areas.

• The overall liquidity scenario has deteriorated over the last one year, and this has impacted inventory levels at retail outlets and the credit period given by wholesalers to retailers.

• Marico’s coconut oil brand, Parachute, is seeing positive volume growth and it continues to dominate the market despite significant fall in coconut prices.

• Marico’s other categories like value‐added hair oils and Saffola are also doing well; Shanti Badam Amla has gained market share from Dabur Amla Hair Oil.

• GSK Consumer Healthcare brands Horlicks and Boost are experiencing subdued growth due to strong competition from Bournvita; other brands like Eno and Iodex are doing well.

• While Patanjali has been able to gain share in urban markets and is a topic of discussion on media, its impact is very limited in the distributor’s markets

• Patanjali’s cow ghee has helped increase demand for cow ghee in the market and that has benefitted Amul’s cow ghee brand greatly.

P&G Distributor – East India • This is the first time in twelve years that there has been a fall in revenues and

volumes. However, focus on costs and strong product categories has enabled profits to rise.

• The company has segregated all its products into two categories – strategic and non‐strategic. Focus is on monetising strong or strategic brands while not investing capital and management bandwidth in the latter. As a result, P&G has stopped sales of Tide bars and Ambi‐Pur air fresheners. At a global level, Duracell (battery brand) was sold off.

• P&G is concentrating on sales of larger packs. Lower SKUs are being discouraged. • While female hygiene category is showing superlative growth, oral care is

stagnant. Oral B is not doing as well as expected and the Crest brand is not going to be launched in India.

• Gillette is doing exceedingly well – the new entry level brand ‘Guard’, positioned below ‘Presto’, has received very encouraging response. This product is targeted



at converting users to cartridge system razors from shaving blades and is part of a long‐term initiative of the company.

• Currently, distributor‐level inventories for all products, across brands, are higher than usual, due to a sluggish market.

• P&G has launched a new initiative, ‘Distributor of the Future’; where they are looking to rationalise the number of distributors nationwide from 35 presently to 10‐12 in the distant future.

• The competitive intensity in the laundry segment has risen significantly, with HUL becoming very aggressive.

• The company’s remuneration policy is fair; distributor‐level RoIs range 15‐26%. Parag Milk Foods • The company is among the leaders in the value‐added space. Currently, value‐

added products like cheese, ghee, curd, flavoured milk, curd, and whey products contribute 64‐66% of its revenue. Fresh milk contributes 18‐20% while skimmed milk (institutional) contributes 16‐18%.

• It has the largest cheese plant (capacity 40MT/day) and is the 2nd largest player in the category in India (32% market share) after Amul (42%).

• It considers itself an innovation leader and has more SKUs than Amul. It collaborates with its European partner to understand the technology involved for new categories and implements these in India.

• Whey, a by‐product of cheese, is a phenomenally high margin business. Whey and beverages will be a focus area in coming years.

• Current margin for its value‐added product portfolio is between 25‐40%. Whey margins are expected to be at the upper end.

• Whey market is dominated by importers (~80% market share) whose average price is Rs 3000/kg, but duty is high. Parag plans to enter at a lower price point and compete on product quality. Only cost involved will be distribution, processing, and promotion. To be operational fully next year.

• Plans to grow the beverage business further with focus on products like flavoured milk, yoghurt, and cream.

• In three years, Parag is confident of improving its return ratios as a result of this focus – to 18‐20% from current 12%.

Bajaj Corp • Growth has slowed down in the category with urban markets growing at 8‐9%

and rural markets growing at ~3% • The company takes price hikes every April, but it has not taken any this year and

there is a possibility that it will not do so for the rest of the financial year. • Cost inflation continues to be low and will lead to above‐average gross margins;

hence, there is no need to take price hikes, but to revive demand. • Dependence on almond oil will continue until the company’s other brands start

commanding sizeable revenue share; will continue to experiment with new products and innovations.

• Amla hair oil has been doing well and the company targets revenues of Rs 320mn in FY17 vs. Rs 167mn in FY16.

• No Marks repositioning and repackaging exercise is nearing completion and the company targets sales of Rs 600mn from this brand in FY17 vs. ~Rs 390mn in FY16.

• Have signed badminton champion Saina Nehwal as brand ambassador for No Marks Face Wash and plan to grow the brand in next few years.

• Excise benefits will continue to accrue in plants in Himachal Pradesh and Uttarakhand till FY20; will commission new plant in Guwahati, which will get tax benefits.



• Looking actively for new acquisitions – new acquisition can be in any category and may even be a regional player; key attributes for likely target are regional dominance, high gross margins (>30%), and strong complementary distribution.

Katraj Dairy, Pune • Parag Milk Foods is the largest private diary company in Maharashtra. • On average there are 2‐3 cows for each farmers in India. • Due to lack of proper infrastructure and lower feed, productivity is the biggest

concern in the Indian dairy industry; in India, cows give milk for 150 days a year while globally they do so for 300 days on an average.

• Compared to the US and other western countries, while per capita milk availability is 1.2 litters, availability of milk in India is just 250 ml.

• Highest margins are in the ice‐cream category. • Chances for price hikes in the near term are less, as there is sufficient availability

of milk to fulfil demand.

Speciality Restaurants • With a total 123 restaurants across all formats, this company is present across

cuisines including confectionaries, fine dining, casual dining, and QSR. • It is introducing dishes from food‐streets of Korea, Japan, Malaysia, Thailand,

Singapore, and Hong Kong as well as a live kitchen format. • Its core focus will remain on Mainland China and Hoppipola. • Hoppipola brand has delivered better‐than‐expected result; the break‐even time

period is very short – the outlet in Khar, Mumbai, brokeeven in five months. In coming years, it is planning 35‐40 restaurants for Hoppipola, where the average bill value is Rs 550‐600 per customer.

• This year, Speciality Restaurants is focusing on cost cutting and investing in core brands.

• To mitigate the risk of high rentals, it has started the revenue‐sharing model. • It serves 10,000‐12,000 customers each day. If it can add 500 more each day,

revenue can grow by 5%. • Mainland China contributes 50% revenue, Sigree 15%, Hoppipola 15%, and the

rest account for 20%. • Hoppipola’s gross and EBITDA margins are higher than other brands. • The company earns 6% in royalty fees in restaurants in Dhaka (Bangladesh) and

Dar es Salaam (Tanzania). Technopak Advisors • The food services category is very exciting since the category addresses a huge

underserviced market where the pricing offered by current players is inappropriate.

• Current areas of concern are standardisation of output and quality assurance. • Vendors like Cremica, Mrs Bectors, Monginis, Tasty Bites are interesting plays. • The convenience‐cooking segment is a very promising category. Currently at Rs

5bn by turnover, this segment is registering a CAGR of 35% over the last few years. Condiments, ready‐to‐cook pastes, and packaged foods are sub‐categories that are fastest growing; operating margins in this business are ~50%.

• While foreign companies are selectively acquiring Indian brands in food services and convenience cooking, they are not able to adapt to Indian conditions. E.g.: MTR Foods was acquired by a Scandinavian player, but the brand has stagnated.

• Consumer staples is a very promising category, but product selection and adulteration are very big concerns. Pulses and flour are two categories that are seeing some action. Companies like Mahindra, Adani Wilmar, and Tata have entered this category and are trying to achieve scale.

• Ecommerce is a US$ 14bn market in India and is likely to touch US$ 50bn by 2020. However, consolidation is currently underway in 80% of the market space,



which is generic in nature. Going forward, this market space should see only two large players surviving, not unlike mature international markets. Technopak expects international players like Amazon and Alibaba’s Indian proxy to be the likely survivors.

• 20% of the Indian market consists of vertical specialists (Jabong, Lenskart, Myntra, Pepperfry, Urban Ladder), which would selectively survive based on fund infusion.

• The online space is seeing the emergence of a new trend where Pop Up stores (temporary stores) are being erected in airports, malls, etc. for a few days. This enhances the appeal of online shopping through the offline experience.

• Select offline brands (Fab India, D Mart, Metro Shoes, V Mart) have developed a niche and are thriving in that. Any foray into the online space by these players will be limited in nature.

Dairy consultant (ex Amul) • Overall market size of the Indian milk sector is Rs 5tn, which is divided into

organised and unorganised. • Government diary, private dairy, co‐operative and multinational, all come under

the organised sector, which accounts for 20% of the overall market. This is likely to increase to 30% in coming years.

• The unbranded market or the unorganised sector accounts for 80% of market size, which is likely to decrease to 70% in coming years.

• As per latest figures, about ~145 MT of milk is produced in India, which is growing at 4.0‐4.5% per annum, whereas demand is growing at 5.0‐5.5% and is expected to grow at 7% in coming years.

• Dairies in north India procure milk from contractors, while in south and west India, milk is majorly procured from farmers.

• Companies like Prabhat Dairy procure 40% milk from farmers and 60% milk from contractors.

• Liquid milk dominates the dairy industry with 58% share and other products account for the rest.

• New generation products (flavoured milk, ice‐cream, probiotic drinks) are the fastest growing segment categories – and these are the ones that into which multinationals want to invest.

• Indian dairy companies have to take a balanced approach, as it is not viable to focus on one product segment – for e.g., Prabhat Diary was earlier a B2B player and later diversified into B2C.

• The market has not noticed one particular segment KHOYA – which is used in making Indian sweets, and which is consider larger than the chocolate market. KHOYA has been unnoticed because it is largely unorganised segment.

• Transportation and logistics are still major concerns in the milk industry, but there has seen some innovation, which has reduced wastages and reduced the transportation time to two days from five earlier. Some innovations include GPS tracking, relay, temperature control, and late penalty fine.

MART – rural consultant • From 2009 to 2010, the growth in rural India started exceeding growth of urban

India and overall share of rural India increased to 50% in FY16 from 25% in FY10. • There was a growth of 17% in rural India and 8% in urban India in the last few

years, led by growth in income, consumption, and penetration. • There is a need for product customisation in rural India. • Problem with MNCs in India is that they are not willing to customise their

products because their sales accounts for 1‐2% of overall global business. • Purchasing power of rural India is much higher than urban India, per capita

income of rural India is 75% of urban India. • Biggest challenge faced by FMCG companies is rural distribution – it is easy to

target 50 cities with more than a million population, while it is challenging to



reach million customers over 650,000 villages. Good thing about regional companies is that they work in a limited geography and reaching the rural market is manageable.

• Aspiration for the products in rural India is same as urban India. • There is no brand loyalty in urban India; if there are five brands, they want to try

all; customers are switching from one brand to another. • First comer in rural India has huge advantage, if particular brand is reasonably

accepted, that brand becomes ‘brand of village’.

Cement UltraTech Cement • Asset sweating and improvement in cost efficiencies will remain focus areas for

FY17‐18. • Acquisition of Jaypee likely to be complete by the end of FY17. • Targets to increase pet coke usage to 75% in FY17 and 85% in the next couple of

years. • Outlook on demand remains positive. Expects prices to recover in FY17. JK Cement • South plant now operational. Operational concerns addressed. • All other capex complete. JK Cement has started deriving full efficiency benefits

from capex of Mangrol and white cement expansion in UAE. • White cement business will continue to grow at 20%. • No further expansions likely to be announced before the end of FY18. Utilisation

ramp up and debt reduction will remain focus areas.

HeidelbergCement India • Cost savings now visible and helped negate realisation loss in Q4. • Waste‐heat recovery of ~12MW is commissioned; savings have started

accumulating from Q4. • Demand outlook remains positive. The company sees cement prices recovering

with improving demand. • Debt repayment has begun and will remain on the radar. • No incremental comments on capex yet. • Overall, outlook was cautiously positive.

NCL Industries • Focus on pricing is back in South India. • Capacity will be expanded to 2.5 mn TPA from current 2mn TPA by the end of

FY17. • Cement utilisation in FY16 was 66%, while the target ahead will be 80% in

coming years; for April/May it is 77%. This may be a point of concern as this is still high vs. peers in the south who operate at nearly 60%.

• Outlook was positive, but utilisation cut by NCL is necessary to ensure price stability in the south.



Credit Rating Agency CARE Ratings • Revenue to grow in the range of 15‐20%, contingent upon revival in economic

activity. Kalypto, CARE’s subsidiary, has also started contributing to growth. • Card rate for bonds rating is about 8‐10bps, while for bank loan rating it is about

4bps. • Government allocated Rs 2bn to NSIC fund for subsidising SME ratings in FY17, as

against less than Rs 500mn in FY16. Increased allocation will drive growth in SME ratings. However, as EBIDTA margins are low (10‐15%) contribution to EBIDTA will not be substantial.

• Increased focus on the bond market is positive for rating agencies, as margins on bond rating is almost 2.5‐3.0x of bank loan ratings.

• Very few banks have applied to RBI for internal ratings, but no one as of now has received approval from the RBI. Given their weak asset quality positions, it does not expect any such approval for the next 4‐5 years.

Capital Goods Voltas Unitary cooling product segment: • In Q1FY17, April saw a sharp volume uptick, but momentum decelerated in May.

Next two months (June and July) are critical to shore up growth for the year. • Its focus in the current year is to highlight low‐cost of maintenance of its ACs

through advertising and promotion. In FY16, its focus was on promoting the usage of ACs in all weathers.

• Management guides for UCP segment margins at 10‐11%, assuming competitive intensity increases in FY17. If current competition continues, then there is upside risk to guidance.

Electro mechanical project segment: • Environment in the Middle East remains challenging. Its focus is to bid for mid‐

sized projects of Rs 3‐7bn with EBIT margins of 4‐5% and an execution cycle time of 2.5 years.

• Voltas will refrain from design and build contracts even as large opportunities emerge from Dubai Expo 2020 and Qatar Football World Cup 2022. It will remain a sub‐contractor to mitigate risk.

• Typically, MEP will account for 30‐35% of the cost of a football stadium. • Only 5‐10% of the current orderbook (Rs 39bn) is linked to real estate. Engineering products and services: • 50% of the segment sales are from textile machinery segment and the balance

from mining. • Product sales have lower margins compared to services. Margins will range from

25‐30% in this segment. Engineers India • Engineers India (EIL) was upbeat on its order inflow prospects for FY17. Current

guidance of Rs 20bn implies 25% yoy growth. Upside risk to order inflows if all the BS‐6 upgrade orders come in FY17 (high possibility), and if another large consultancy order for Nammami Gange (Rs 8‐10bn) comes in. If these orders fructify in FY17, there is scope for margin expansion in FY18 led by operating leverage benefits.

• It expects to recoup cost provisions (Rs 310mn) made in Q4FY16 in its turnkey segment in FY17, which should aid turnkey profitability.



Infrastructure KNR Construction • Order backlog: Current order book of Rs 45bn vs. FY16 sales of Rs 9bn – average

order execution period is 30 months. • Orders tendered are Rs 6bn while Rs 20bn worth of orders are to be tendered in

the next one month. • For all NHAI orders, the payment is released on milestones rather than on

monthly basis. • Outlook: Expect more NHAI orders (mostly 4/6‐laning projects) and will focus on

bridges (high‐end/ technologically challenging) and irrigation orders from Telangana state government.

• Outlook: Expect revenue of Rs 11bn in FY17 with EBITDA margins of 14%+. • Most orders are in the South and are from NHAI; locations are bid, which are

close to its existing quarries. • Sub‐contracts: It has subcontracted orders worth Rs 9bn. • BOT projects: Mgmt is focused on making two BOT projects (Kerala and Bihar)

viable, which are much below in daily toll collection levels vs. its projected levels while bidding.

• Management paid Rs 1.90bn worth of debt to make these projects viable (Rs 850mn unsecured loan from the promoters, Rs 250mn IT refund while Rs 150mn from SPV‐level loan).

• Idea is to sell the projects in the future, whenever they are profitable/viable. • Net working capital is likely to remain in the 45‐60‐day range. • Equipment and manpower: Owns Rs 4.7bn worth of equipment and has 2000

employees. PNC Infratech • Order backlog: Current order book of Rs 55bn (2.8x book‐to‐sales); average order

execution period is 30 months. • It will restrict its bidding activity to UP and neighbouring states ; says there is

enough opportunity in these states for the next 2‐3 years. • Lucknow‐Balia Expressway (350km) contracts should be awarded in the next 2‐3

months – 10 bidders have been shortlisted for eight packages; bidders include L&T, PNC, Afcons, NCC, Ashoka, Sadbhav, and Oriental. PNC stands a good chance of winning at least one package.

• Guidance of topline growth of 15‐20% in FY17 with margins at 13‐14%. Order inflow of Rs 50bn in FY17.

• Tax expense in FY17 is expected to be close to zero because of MAT credit, which expires in FY17. From FY18, normalised tax rate of 30% will be applicable.

• The company started toll collection on the Raibareli Jaunpur BOT project in March 2016 enabling it to receive an early‐completion bonus (Rs 340mn).

• Toll collection on Ghaziabad‐Aligarh will ramp‐up in next 2‐3 months as the project receives complete CoD (now only 103km out of 126km) and implementation of overloading charges.

DMICDC • DMICDC is not a purely government organisation; it has investment from Japan

(~26%) and domestic financial institutions (~25%). It will develop industrial cities around the Dedicated Freight Corridor (DFC) between Delhi and Mumbai, covering a length of 1,400km with end terminals at Tughlakabad and Dadri in the NCR and JNPT.

• It will develop an area of around 150‐200kms on both sides of its alignment. Its project influence area (PIA) comprises 430,000 sqm, which constitutes around 14% of India’s total geographical area.



• Developmental planning for DMIC aims to double employment potential in five years (15% CAGR), triple industrial output in five years (25% CAGR), and quadruple exports from the region in five years (32% CAGR).

• DMIC will have 24 investment regions developed in three phases out of which eight will be developed in the first phase over the next five years. Each state has one investment region, except Maharashtra, which has two. The master plan for all seven industrial regions is ready.

• Certain projects are getting support from Japan such as the water desalination project in Dahej, Gujarat, which is in the process of financial closure and a solar project in Neemrana, Rajasthan. This model 5MW solar project will have a micro grid control from Hitachi, which will replace DG. Japan is funding 70‐80% of the project cost as a grant.

• A container‐tracking project is being implemented as a pilot between JNPT and the central government. Will start commercially from July 1, 2016.

• DMICDC expects major revenue from land monetisation; this will be captured at an SPV level to create revolving corpus for future development (either in the same city the land was sold in, or for creation of other cities). It has done detailed cash‐flow analysis for all cities and expects 17‐18 years to breakeven.

• The SIR (Special Investment Region) in Gujarat (Dholera) is making rapid progress. Of the 900 sq km of total proposed area, 22.5 sq. km is the first activation area for which plan and layouts are ready. Toad and utility contracts were awarded to L&T (Rs 17.5bn) and other contracts worth Rs 28bn have also been awarded. These construction activities are expected to be complete by mid‐2019.

• Dholera will focus on defence and manufacturing, MRO part of plan. Talks are going on with anchor clients: Honda, German companies, Taiwan (wants 10 sq km). Land allotment will start in September 2016. Large industries will take 2‐3 years to come up, in line with trunk infra development.

• Apart from DMICDC, four more corridors will be developed by the Ministry of commerce, which DMC will support. Bangalore – Mumbai, Chennai – Bangalore, Amritsar ‐ Kolkata on eastern DFC, and Chennai ‐ Kolkata, where the first phase would be Chennai to Vizag.

IT Services Ex‐Accenture (MD & Chairman) • ADM increasing in absolute terms, but will shrink in 10 years. Still much

offshoring to be done in ADM. • Indian IT industry is defensive in the automation space. They lack passion in doing

this. Accenture automated 12% of BPO jobs in the last 12 months. Though it resulted in revenue decline from these accounts, the overall revenue grew as they got more projects due to the automation. Margin also improved due to automation.

• Indian IT was ahead in offshoring, but they lacked vision for digital and thus lost out to MNCs.

• For an enterprise today, the choice is between offshoring the legacy IT system or leapfrogging into the new‐age digital platforms – companies still remain largely clueless about the choice, helping the consulting business of companies like Accenture.

• For the digital transformation piece – offshoring is not a value proposition at all – strategic understanding of the business is.

• Peer pressure is driving lot of digital related investment decisions. • Indian IT companies underestimated the impact and the pace of adoption of

digital platforms. • In the analytics space, Accenture has a clear and significant lead over all other IT

companies across the world. While other pieces of digital are about technology,



analytics is about business understanding – where Accenture is way ahead of others.

• In the cloud space, IT companies are not, and should not, look to ‘compete with’ AWS (even in its software offerings) – but rather try to partner with it.

• Hiring patterns are about to undergo significant changes, with the digital adoption. People from arts, marketing, and statistics domains are likely to see an an increase in hiring activity from the IT services companies. Technology people will have to reskill themselves to remain relevant.

• Over the next decade, companies who successfully integrate current solutions will survive and thrive. For this, they need to acquire companies, especially non‐technical companies from their clients’ markets.

• Amongst companies, historically, CTS and Infosys have been more proactive in adopting technology changes – and are surely demonstrating the same, this time too.

• Wipro/HCL should do better in cloud adoption – TCS/Infy in other domains. E&Y IT Division ‐ Partner • Digital has become a CEO‐level agenda. It now consumes 85% of the board‐room

time. • There is tremendous opportunity in the IP creation. Indian IT companies have

developed many good products but there is no major breakthrough on the platforms front.

• Cultural change between the companies is driving growth. Infosys has traditionally followed business‐led consulting approach, which is now helping them to get good traction in the newer technology deals. TCS has focused on its engineering strength while HCL Tech has focused on infrastructure only.

• In the banking‐product space, design is done by MNC IT players while implementation is largely carried out by the Indian IT companies.

• Infrasoft, Nucleus, Suryasoft are some of the mid‐sized Indian IT companies that have developed good products in the BFSI space.

• Wipro has a significant presence in the analytics space. • While the Indian IT companies have relied more on traditional IT outsourcing,

their Big‐4 counterparts have built and strengthened their digital capabilities, which is now helping them in getting a larger chunk of the digital deals.

Intellect Design Arena • The company has 240 live installations across 120 customers in 30 countries. All

top‐5 UK banks are its customers. • For FY16, the company reported revenues of Rs 8.1bn with 52% gross margin. It

won 50 digital‐led deals during FY16. For FY17, the company has guided for USD revenue growth of 22‐26% with gross margin improvement. Its goal is to achieve a revenue run‐rate of US$ 200mn by FY18.

• The way the world is banking has changed on customer, competition, regulation, and technology fronts, and currently translates into a US$ 50bn opportunity. Consolidation in the industry in the 1990s era, coupled with no significant investments by the large players after the year 2000, provides significant opportunities for growth.

• Management intends to increase its revenue share from advanced markets (US and Europe) to 60% by 2018 from current 43%, which will help it to increase its gross margin by around 10%.

• GTB (Global Transaction Banking) remains its largest vertical in terms of revenue while growth will come from the insurance segment ahead.

• The company is expanding its global footprint with a ‘design centre’ in New Jersey with an investment of US$ 3‐4mn. The go‐to market partnership with IBM is bearing the dividend with an increased deal size of 2.5x of the normal deal.



• In sync with global practices, the company changed its accounting treatment for R&D costs from expensing out to capitalising in the P&L.

• Margin levers going ahead would be: (1) increasing contribution from emerging geographies, (2) cross‐selling, and (3) high AMC revenue proportion.

Intrasoft Technologies • IntraSoft Technologies is a third‐party (3P) multi‐channel e‐commerce retailer in

the USA, with its back‐end in India. It owns and operates 123stores – an online ecommerce retail business, 123greetings.com – an online greeting cards business.

• In FY16, Intrasoft shipped 1.97mn packages and added 570 vendors (100 vendor addition in Q4FY16) taking the total count to 1600+ vendors. Revenue for FY16 more than doubled to Rs 7.1bn from Rs 3.4bn in FY15.

• It is ranked 262 (improved from 392 last year) on the list of top‐500 internet retailers in 2016, and 1641 on the list of 5000 fastest‐growing private companies in the USA. It is the only such business listed in India.

• Intrasoft has tied‐up with different market places like amazon.com, ebay.com, Amazon Canada, 11main.com, sears.com, New Egg, Bestbuy.com, buy.com, and jet.com. For FY16, amazon.com was the largest marketplace partner followed by ebay.com

• Top product categories are furniture, patio, lawn and garden (30%, musical instruments (20%), home improvements, art crafts (14%), kitchen and dining (13%).

• Its value propositions are its cheapest price and customer rating on these market places. It has 97% customer satisfaction rating over its lifetime.

• Its strategy ahead would be to increase its network reach to 100% (from 95% currently) of the US online shoppers before expanding to other markets.

• Its inventory turnover cycle is 4‐6 times the annual revenue. • It has a negative working cycle as it receives money from market places in seven

days while it pays to the vendors in 30 days. Smart Cities (Consultant to World Bank) • Cost on ICD system may rise to 7‐8% in smart cities. • Smart cities framework will include – water delivery services; Solid waste

management; Intelligent transport cities • First smart city to become operational in 2‐3 years. • World Bank portfolio is US$ 200bn (Ganga cleaning, Panchayati Raj, Urban

transportation). • Funding usually deals with DEA. Money is either loan or a grant. Mostly, India gets

loan because it is a developed country now. • Interest cost is 4% and time period is 10‐20 years. • Rs 2bn is offered to each city. • 24x7 water providing will come with smart meters, which are pre‐charged. • Philosophy of smart cities is non‐control. • Per‐state spending will be in the range of Rs 30bn in the next five years. • Implementation status is overlooked by SPVs with a private partner. • SPVs for all the 20 smart cities are now set up. Private partners are not decided

yet. It will have to be a domestic entity. • Rs 25bn already coming from state and central partnership. For the balance Rs

15bn, new players will be looked at.



Logistics and Midcap Navkar Corporation Ltd • Navkar has a CFS facility at Panvel with a total capacity of 310,000 TEU per

annum handling volumes at JNPT port, Mumbai, Maharashtra. • The company has the advantage of optimum mix of export and import cargo,

helping managing empty containers and offering attractive pricing to customers. • Navkar is the only CFS at JNPT to have its own private freight terminal for

railways, thereby benefiting from handling large orders and long‐distance cargo. • Increasing capacity at JNPT to 550,000 TEU by installing six RTGS at Panvel with a

capex of Rs 370 vs. Rs 700mn planned earlier. • It has started an ICD at Vapi with a capacity of 474,000 TEU and expects to

benefit from a shift to railways from road and because it is offering competitive tariffs.

• Expects its logistic park in Vapi, Gujarat, to start operations in September 2016, complementing ICD operations.

Allcargo Logistics • Allcargo is one of the leading integrated logistic players with global presence

spread across 90 countries with shipments across 4,500 port pairs. • It is also one of India’s largest project logistics and equipment service providers and

operates over 900 equipment, five general cargo ships for coastal shipping, and has strategically located warehouses for 3PL services.

• It is the largest player in asset‐light Less than‐Container Load (LCL) consolidation in the world and is able to protect margins in the MTO business due to the cost‐plus model. It book slots on container ships in advance, with a significant discount and charges a single rate to customers (import or export) including shipping and handling with ~25‐30% gross margin. The company has been able to maintain EBITDA margins in range of 4.5% to 5.5% in MTO business.

• EBITDA margins in CFS are 31.3% and sensitive to capacity utilisation, which is ~65%. The P&E has two businesses – equipment leasing and project handling.

• New CFS at Kolkata port of 100,000 TEUs would be operational by the end of FY17 with a capital expenditure of Rs 350mn.

• Consolidating contract logistics business by creating a subsidiary Avvashya CCI Logistics (ACCI) with the acquisition of CCI logistics and transferring business of Hindustan Cargo for Rs 313mn and contract logistic business (in its standalone entity) for Rs 196mn.

• Allcargo will acquire 43.9% in ACCI for Rs 1.3bn and will hold 61.13% in ACCI. • Expect capex of ~Rs 2.8‐3.2bn in FY17 for acquisition of ACCI and expansion in

multimodal logistic park and CFS. Blue Dart • Blue Dart Express (BDEL) is a leading express service provider in India with more

than 30 years of operational experience. It has a domestic network covering 34,267 locations and more than 220 countries and territories providing reach and access to customers.

• It is the first and only scheduled cargo airline with a dedicated fleet of freighters and infrastructure support. Its infrastructure comprises a fleet of six Boeing 757 freighters offering a revenue payload of over 370 tonnes per day.

• It is a dominant leader in the domestic air express industry and commands a ~46% market share in the organised air‐express market while it has a market share of 13% in the express ground segment.

• The company derives ~80% revenue from the air‐express segment while ground segment revenue accounts for the remaining 20%. Ecommerce revenue contributes ~25% and promises high growth, considering industry growth of 30‐35% over the next five years.



• It is starting two e‐fulfilment centres at Gurgaon and Bangalore. • It has warehouses at 79 locations across the country as well as bonded

warehouses at the seven major metros of Ahmadabad, Bangalore, Chennai, Delhi, Mumbai, Kolkata, and Hyderabad.

• The implementation of GST would impact organized logistic players positively with increased 3PL activity.

GE Shipping • The company had 32 vessels in shipping (seven crude carriers, 14 product

carriers, two gas carriers, and nine bulk carriers) with 2.4mn DWT and average age fleet age of ~10 years.

• The decline in world steel production, and coal import and overcapacity in shipping has impacted freight rates in bulk segment.

• Committed capex in shipping is for 4 kamsarmax dry bulk ships with delivery in FY17.

• Expects gross fleet addition of 7% and 9% in global tanker and bulk shipping in 2016.

• It has 25 vessels in the offshore segment (four jack‐ups, 5 PSV, 8 AHTSV, 2 MPSV and 6 PSV).

• The rates in jack‐ups have fallen by ~45% over the past two years with a decline in crude‐oil prices and lower E&P spending by oil companies. The company has 95% revenue day’s coverage in jack rigs with long‐term contracts. One rig is coming up for contract renewal in Q4FY17.

• ONGC is likely to maintain E&P spend to benefit from lower cost of exploration (after fall in hire rates for offshore vessels) – this could help domestic players positively.

• The company has cash of Rs 39bn (consolidated) and Rs 28bn (standalone) with gross D/E of 0.7x on March 2016.

• The strong balance sheet is likely to help the company to expand its fleet at attractive prices.

Sintex • The company is a dominant player in the plastics and textile segment and has

created a global footprint across USA and Europe through strategic acquisitions. Its textile segment is focused on men’s shirting in the premium fashion category. It derives around 83% revenue from plastics and 9% from textile and 4% from services.

• The government’s sanitation drive has created demand for Rs10,000+ toilets; Sintex prefab toilets command 90‐95% of this market.

• Monolithic business caters to the economically weaker housing segment and is working‐capital heavy. The company is focusing on quality customers and healthy payment cycle and is working towards reducing exposure to this segment.

• Custom‐moulding is seeing traction from aerospace, defence, and electrical. Sintex is focusing on moving up the value chain and bringing global technology for Indian operations to leverage synergies. Domestic subsidiary, Bright AutoPlast, is looking for synergic integration with Nief Plastics and Wausaukee for technology and customer absorption.

• It has started 300,000 spindles in phase‐1 spinning project in 1QFY17 and announced phase‐2 expansion of a similar capacity. Expect utilisation of new spinning phase‐1 at ~55‐60% with revenue of ~Rs 90bn in FY17.

• Raised US$ 110mn FCCBs at a conversion price of Rs 93.81 due in May 2022 (duration of six years and YTM of ~5.6%). It could lead to equity dilution of ~15% post conversion. It also raised NCDs of Rs 2bn in domestic markets for funding capex.

• Capital expenditure would be ~Rs 11bn, including Rs 7bn for spinning in FY17.



PEBS • PEBS is a leading player in pre‐engineered products and has diversified into solar

structures, structural steel, engineering services, and cold‐form structures. It caters to industrial, commercial, and institutional applications (warehouses, power plants, commercial centres, hi‐rise buildings, aircraft hangers, defence installations, sports stadiums, and low‐cost housing).

• The company has taken on a third‐party Baroda factory (30,000 mt) on a job‐work basis to cater to the north India market. It is looking for a greenfield project of 30,000mtpa at Dahaj, Gujarat, at a capex of Rs 250mn.

• Expects volume growth of 20% in PEBS mainly driven by pharma, cement and warehousing.

• Revenue from complex high‐margin projects is ~35%; expects to maintain this share.

• Engineering service business is receiving traction; secured new jobs on Tekla Structures and Dollar General. Increasing manpower at Vishakhapatnam office to 50 over the next month from 25 currently, to provide engineering services to US‐based clients.

• Revenue from design engineering increased to Rs 50mn in FY16 from Rs 10mn in FY15.

• It is in process of buying an engineering services firm to expand in design outsourcing.

KDDL • Retail business (Ethos) negatively affected because of PAN card regulation

implementation in January 2016. It has started seeing recovery month‐on‐month basis beginning with lower price points.

• Adjusted its inventory accordingly at the lower end and is reducing inventory above Rs 2mn. Margins are inverted in the watch business with lowest in higher value and highest in lower value watches. The change in revenue mix may improve gross margins for the company.

• Management believes there will be wider acceptance of PAN card regulations and sales growth momentum will be back to historical levels by FY18. Expects growth of 15‐16% with margins improving by ~200bps in FY17.

• Same‐store growth was at 12% in Ethos with 23% sales to repeat customers in FY16. Revenue from online billing was up 50% to Rs 1.14bn in FY16. Average ticket size for leads generated through the internet is Rs 96,000 and offline is Rs 45,000.

• Number of website visitors for Ethos increased 36% to 7.8mn in FY16. Continue to see traction in online revenue in Ethos with 31% revenue contribution.

• It opened a new Ethos multi brand store and an exclusive TAG Heuer boutique at DLF Mall of at DLF Mall of India, Noida India. Total retail stores are now 41 including six airport terminals.

• Average investment in opening an ETHOS store is Rs 70mn; store capex is Rs 5mn and Rs 60‐80mn is in inventory.

• Plans to add two flagship stores – one each in Delhi and Mumbai. • Jewellery and accessories sales are selective and going slow. It has created

separate teams for service and repairs and set up service centres at three places, but revenue contribution is low.

Ashapura Intimates Fashion • Designing, branding, marketing and retailing of clothing products such as lounge

wear, sleep wear, innerwear and sportswear. Niche in lounge wear through brand name Valentine.

• Promoter expertise of over two decades. Network of ~115 distributors, including an overseas distributor, 10 C&F agents, and 65 salespersons all over India. It has over 15,000 point of sales, and tie‐ups with various MBOs along with online presence.



• It is able to break up its inventory cycle due to seasonality in the business, significantly reducing the working capital requirement of the company. Ashapura used to develop ~1500 designs every six months ending September and March until 2015, impacting working capital requirement. It has split summer designs into monthly distribution with ~150 designs per month now, reducing inventory and debtor levels. It also helps in managing order flow and increasing customer footfall.

• It currently has 18 EBO (Exclusive Brand Outlets) and is planning to increase it to ~200+ stores in the next three years. The intimate wear industry is still largely fragmented and the demand is shifting towards fashionable intimate wear with emphasis on branding. Migration to an organised market in lounge ware is expected at higher rates due to lower price difference of 15‐30% (~40‐50% in normal clothing). EBOs will help the company to display wider products and create stronger brands along with margin improvement (EBO has ~10‐12% higher EBITDA margins).

Goodluck Steel Tubes • It is diversified company with 30 years of experience in manufacturing cold‐rolled

steel products, structural steel, towers, tubes and pipes, forging and flanges, with total manufacturing capacity of 200,000 mtpa.

• It caters to diversified sectors such as auto, solar, railways, and defence. It has shifted its focus towards high‐margin value‐added steel products with the share of these value‐added products growing to ~50% in FY16 from 39% in FY11. It expects revenue share of value‐added products to touch 75% over next 3‐4 years.

• Good Luck is one of the largest suppliers for power transmission distribution structures for line segments up to 765 kv class. The company’s workshops are quality certified by PGCIL and has supplied structure for GIS for Power Grid Corporation for smart cities.

• The company has increased capacity in engineering structures from 24,000 mtpa to 48,000 mtpa with capital expenditure of Rs 300mn. It is the leading supplier for transmission towers.

• Precision tubes contribute ~25% of revenue, which includes CDW tubes, seamless tubes, boiler tubes and is a major supplier for automobiles.

• Exports to ~100 countries account for ~30% of revenue (mainly forging, precision tubes and engineering structures). It targets more countries with smaller exposure. MIP is exempted from export and it will reduce competition from small players.

• The company is expecting strong demand from 765kv substations, solar, and railways.

KEI • B2C/B2B business share to touch almost ~50% each of revenue (vs. 27%/73%

currently) by FY19 due to expansion in retail distribution channel. Will add ~100 dealers in FY17.

• Extra high voltage (EHV): With a strong order book (of Rs 1.4bn in FY16) and capacity addition (will start 400KV cable production by October 2016), it expects this division to show strong revenue with a healthy margin of 12‐15%.

• EPC: KEI has the advantage of manufacturing (in house) EHV, HV, and LT cables, leading to superior margins. In this vertical, it has an order‐book of Rs 6.9bn and it is L1 in Rs 6bn worth of orders.

• Exports: It is present in more than 45 countries. It offers competitive pricing, customised solutions, and specialty cables. This helped it to win strong orders in FY16 worth Rs 1.9bn; expects exports to grow ~50% in FY17.

• The company expects volume growth of ~20% in FY17 with an improvement in CUF to 90‐92% vs. 85% in FY16.



• It is ramping up its high‐margin businesses (EHV, EPC, and retail). All these divisions enjoy 12‐15% margins. This will also help KEI to improve its overall EBITDA margin to 10.5% in FY17.

• Improvement in margin and working capital cycle. KEI expects to pay off its term loan in the next 2‐3 years (with annual payments of ~Rs 600mn).

APL Apollo • It has a total capacity of 0.9mn tonnes, operating at 85‐90% CUF. Steel pipes and

tubes market in India is still dominated by the local and unorganised players, constituting ~60% of the total market.

• The company has a wide product basket of ~400 products rendering it a one‐stop shop for customers. Of the product mix, the value chain is as follows: (1) pre‐ galvanized tubes, (2) galvanized tubes, (3) hollow sections, and (4) MS black pipes.

• Exports constitute only 6% of FY16 revenues and could offer a significant opportunity in the future. It is planning greenfield projects of ~0.1mn tonnes in Dubai.

• Business environment is improving gradually with initiative like SMART cities and AMRUT expected to result in higher infrastructure investment. It expects its revenues and volumes to see a CAGR of ~22% over 2017‐19 with the company gaining market share from unorganised players.

• APL has the latest technology for making hollow sections directly, which saves 3‐7% of material and gives the company a competitive advantage.

• Expects lower interest rates to lead to savings in interest costs. • APL continues to focus on strong distribution network and brand building (will be

spending ~ Rs 100mn in FY17). • The company is planning capex of Rs 5bn over FY17‐19, which would increase its

capacity to 2.5mn tonnes in FY20 from 0.9mm tonnes. This capex will be funded through internal accruals.

• By 2020, APL Apollo expects to achieve volume sales of ~ 2.5mn tonnes, reducing working capital requirement and becoming debt free.

Media HT Media Ltd • Ad‐revenue environment to improve from H2FY17 led by recovery in macro

economy. • Management foresees EBIT losses in digital reducing 50% in FY17 and the

division achieving breakeven in FY18. • Newsprint prices might remain elevated in the near term due to increase in

energy cost and US presidential election. • Good listenership traction in newly launched radio Nasha in Mumbai and Delhi. • Gross borrowings will decrease in FY17 as it plans to pay off debt from internal

accruals. • UP ad environment remains benign and might see a spurt from government ad

spends because of the upcoming state assembly election. • Actively scouting for inorganic opportunities, but there is nothing in the pipeline

in the near term. DB Corp Ltd • Advertising rates increased by 10‐11% in FY16 because of a yield improvement

exercise. Low‐yielding categories have shifted to its nearest competitor. • Confident of volume‐led recovery in ad‐revenue growth in FY17 (Q1FY17 has

been good so far, in terms of ad volume) • Circulation revenue will grow in high single digits in FY17 on a like‐to‐like basis. • Still some scope to increase cover price in some of the markets.



• Imported newsprint prices have gone up in the last 2‐3 months due to increase in energy cost but the global demand outlook remains bleak; hence, long term prices should trend down.

• Gocused on growing its digital properties – dainikbhaskar.com is now the 2nd most visited news website in India.

• Radio business is complementing its print business in a significant way. Intends to scale‐up its radio business in non‐metro cities where it has a significant print media footprint.

• Committed towards maintaining its dividend payout. Ortel Communications Ltd • Confident of achieving 1mn RGUs by FY17. Confidence stems from the fact that

they have added 170,000 RGUs in FY16 and have 87,000 in the pipeline which are in the process of integration.

• Seeing strong growth from AP, Telegana, and Chattisgarh with 65% of incremental RGU coming from non‐Orissa market.

• Committed towards implementing last‐mile connectivity model in non‐Orissa states, which enables it to capture full revenue stream and effectively launch high‐speed broadband services.

• Has been able to narrow its EBITDA loss in emerging markets in FY16 and will achieve breakeven in the second half of FY17 primarily because of scale.

• Carriage revenue to increase by 15% in FY17 (lower than 35% clocked in FY16) as there are no plans to launch new regional language channels.

• Content cost on a per subscriber basis to remain Rs 55‐60. • Has aggressive growth target for its broadband business on new network rollout,

attractive broadband packages, and various other value‐added services. • Ortel might be raising debt to fund its acquisition, but no near‐term equity

dilution is on the cards. Dish TV Ltd • Dish99 (low‐value pack) contributes to 30‐35% of the monthly gross adds for the

company. • Has been seeing traction in its HD subscriber addition over the last two months. • Price hike (6‐8%) taken in March will aid near‐term ARPU improvement.

However, due to higher incremental subscriber coming from the Dish99 pack and Zing, long‐term ARPU growth might be 2.5‐3.0%

• Absolute increase in content cost will be less than revenue growth in FY17. • Promotional expenses will continue to remain at an elevated level due launch of

two new ad campaigns. However, the company is confident of improving its EBITDA margin to 35%+ by FY17, as it believes it will achieve cost optimisation.

• Full‐year net subscriber addition guidance maintained at 1.5mn (assuming no thrust from the regulatory bodies towards digitisation).



Metals Flat steel trader • Trader based out of Delhi. Authorised dealer of SAIL & JSPL for GP/GC and

structural steel. Also deals in HR, CR & TMT products. • Demand in North India is sluggish. End of FY16, lot of inventory was pushed into

the system, which resulted in euphoria of MIP and subsequent price hikes. • SAIL hiked prices by Rs 1000/tonne each in April & May despite sluggish demand.

Hence, off take was low in these months. SAIL later announced Rs 500/tonne in the form of rebate, but has rolled over the price for June. Expect SAIL to either reduce prices for June or give higher rebates compared to May.

• Has not lifted any material due to lack of demand and enough inventories. Some MOUs are about to expire in June, so, to achieve the target and maintain eligibility, some material may be lifted in June.

• Expect production to drop after 2‐3 months once the inventory levels peak. Prices may fall by Rs 1000/tonne for HR and CR and by Rs 3000/tonne for GP.

• TMT prices in the secondary segment had risen to Rs 40,000/tonne but have now corrected to Rs 33,000/tonne.

• From 27th March 2016 onwards, SAIL delivery offers are ex‐stockyard (were earlier ex‐dealer factory). This has increased the cost of logistics and administration for dealers.

• SAIL products sell at Rs 1000/3000 per tonne discount to competition for HR and GP/GC due to poor quality. However, CRM‐3 mill material is comparable with other producers.

• End‐user industries like nut and bolts (Ludhiana) and ball bearings have been completely substituted by imports.

• JSW Steel had earlier replaced SAIL as a supplier to tube mills in the North. However, after their strategy to focus more in the west and south India, SAIL has recaptured these players.

Hindustan Zinc • Production: Mining sequence will see production more back‐ended. The

company has guided for volume proportion of H2:H1 as 2:1. • Rampura‐Agucha (RA) ore volume share declined to 40% in FY16 from 60% in

FY15 and will be 28% in FY17. Given higher grade, metal proportion may be ~40% in FY17. RA production will be 4.25mn tonnes in FY17 (3mn tonnes OC and 1.25mn tonnes UG). Once shafts are online, it expects production of 3.75mn tonnes.

• During Q1FY17, there will be no ore from RA, but excavation work is still on. Hence, costs will be higher but they will go down by Q4FY17.

• Have imported small amount of concentrate and finished metal (10,000 tonnes) just to meet the customer requirement.

• Expansions: RA OC life has been extended by three years until 2020. UG expansion is much slower due to geotechnical reasons.

• Other projects are ramping up faster and will offset the ramp down at RA. Sindesar‐Kurd (SK) mines was initially planned to ramp up to 3.75mn tonnes by FY20, but will achieve this in FY17 itself. Kayar mine was also ahead of schedule and will reach 1mn tonnes in FY17.

• Slowed down Zawar mine production expansion deliberately as zinc prices reached US$ 1500. Since then, prices have rebounded and the company will resume its expansion. Ore production from the mine may increase to 1.6‐1.7mn tonnes in FY17 from 1.2mn tonnes in FY16.

• Premiums: Domestic Premiums is based on import parity. Domestic premiums are firming up and had spiked up recently due to low production causing shortage.



• Costs: Despite increasing share of under‐ground (UG) mining, cost of production will remain stable in USD terms and increase in low‐single digits in INR terms due to depreciation. Once it goes completely UG, it will increase in line with inflation. Fluctuation in production will minimise from FY18, as most of it will be from UG.

• Economically, it is better to go UG after reaching a point in open cast (OC). • Undertaking pilot projects to improve efficiencies. Some of them include

exploring mill tailings, Fumer technology (can give 2% higher volume), etc. • Coal requirement is 1.6mn tonnes out of which 1.3mn tonnes is imported at spot

prices. Mainly high grade (6000+GCF) from Indonesia and South Africa. Building in US$ 55/tonne price for FY17. It is trying to use pet coke (replacing coal) on experimental basis, for which trials are on‐going.

• Guidance: Total ore production of 11.25mn tonnes in FY17 vs. 10.5mn tonnes in FY16. FY17 mined metal production would be marginally higher than 0.88mn tonnes in FY16. Refined zinc would be at similar levels while lead and silver (475‐500 tonnes) would be higher in FY17.

• Zinc price outlook: Expect US$ 1900‐2100 to be a good equilibrium range for LME Zinc. Do not expect very bullish calls of US$ 2400‐2600 to materialise because at US$ 2200, many Chinese mines may reopen and limit the upside.

• Capex: Capex for FY17 is ~US$ 300mn tonnes, which include new mills at SK, Zawar Mill and equipping shafts at RA and SK. Current refined metal capacity of 1mn tonnes can be increased to 1.1mn tonnes through debottlenecking. To increase it to 1.2mn tonnes would require significant capex.

• Dividend Policy: No stated dividend policy, 28% payout in FY16 (ex‐spl dividend). Has a history of improving the payout marginally; expect this to continue.

• Inter‐company debt of 10% of sales can be provided. Beyond that, minority approval is required as per law.

• Cash and cash equivalents of Rs 245‐250bn as of now (after special dividend). • Company interested in mining auctions of base metals, phosphates, and potash. Nalco • Production: Pot start‐up will be in a sequence, which will continue this year as

well. Ramp up will be slower than expected. Expect 385,000‐390,000 tonnes of aluminium metal in FY17 (assuming coal under bridge linkage policy starts in Q4FY17) and full volume of 460,000 tonnes in FY18.

• The company is currently working on securing additional coal under the bridge‐linkage policy. Any early start will see higher production in FY17. Pricing will be marginally higher than normal linkage, but lower than e‐auction prices.

• Capitve coal mines: Expect Utkal D&E to start production in 24 months and fully ramp up in 48 months. Looking to appoint MDO for these coal mines and a tender will be floated shortly. MDO will also get all the statutory clearances.

• Utkal mines are a distance of ~40 kms from plant. Initially block – D can start transportation with road, but not at full capacity. In the long term, rail is the logistically viable option. Conveyor belt is not suitable, as it passes through a densely populated area and involves land acquisition.

• Alumina: FY17 targeted alumina production is 2.1‐2.15mn tonnes, which will continue in FY18 too.

• As per new IBM rules, reactive silica content tolerance has been increased and therefore the company has to mine more bauxite. This also requires higher caustic‐soda consumption. Caustic soda consumption has increased to 110kg/MT from 70kg/MT. It requires 3.2mn tonne of bauxite per tonne of alumina from 3mn tonne earlier. A study is being conducted by a technology supplier to find optimum amount of caustic soda and finding the best blend for bauxite.

• Refinery expansion: 1mn tonne refinery brownfield expansion already on. Right now, getting the necessary clearances. Zero date is August 2016, project cost Rs 56bn with four‐years of gestation. It will source bauxite from Potangi and Panchpatmali.



• Looking for a toll smelting agreement with Iran with no capex and will pay conversion charges. Energy prices are half of that in India. Right now exporting 1.3mn tonnes of alumina and looking to toll smelt only part of it, if it is remunerative.

• Looking for technological upgradation at its existing smelter by increasing the amperage to 195kA from 180kA without much capex. This can increase the production capacity by 25‐30k tonnes. Further, to upgrade it to 220kA, capacity increases by 90‐100k tonnes. This would require higher capex along with new 2x250 MW CPP. This can cost Rs 20bn (ex CPP) with a timeline of seven years.

• After a Rs 28bn buyback, the company will have Rs 30bn cash. New expansion plans will be funded through internal accruals, but the company is not averse to take debt.

• Regional premiums: Change in LME warehousing rules effective May 2016 have resulted in shorter queues and better availability of physical aluminium. This has reduced the premiums off late. US$ 100‐120 MJP premiums are sustainable.

• Safeguard duty may not happen, as the injury to industry is not established. Do not expect much intervention further.

• FY17 capex guided at Rs 10bn. • Employee costs: Staff strength of 7,000. Wage hike due in CY17. Out of Rs 140bn

of annual employee cost, Rs 3bn is not linked with wage hike. Expects hike of ~15‐20%. However, a chunk of employees are getting super‐annuated in next year, hence the impact may not be as steep.

Steelmint • Scrap prices have corrected due to drop in Chinese billet export offers. Turkey,

which is a major importer of scrap, has reduced scrap imports and started billet imports. This has resulted in bulk imports of scrap into India, thereby impacting sponge prices.

• India iron ore production in FY16 was 155mn tonnes. Odisha iron ore production increased in FY16 to 75mn tonnes from 47mn tonnes in FY15. For FY17, Odisha ore production target is 100mn tonnes. Since the lease for merchant miners is expiring in 2020, and to cover up the royalty collections due to decline in prices, the target is possible.

• Limit imposed by NGT / Shah Commission was not on mining, but on transportation, given the available infrastructure. Infrastructure has now improved and currently there is no cap on production.

• Wire rod imports from China increased. Secondary Rebar has lot of over capacity. Longs prices are back to pre‐MIP levels. Do not see any recovery in longs prices till scrap/sponge price is weak.

• Essar Steel sourced 7mn tonnes of iron ore from India in FY16 vs. 5mn tonnes in FY15. They have not imported significant amount of scrap.

• MIP flats prices have risen by Rs 5,000‐6,000/tonne. Domestic prices are at a Rs 1000/tonne premium over MIP parity currently. Prices can come down since dealers who imported before MIP have a lot of inventory and have not yet been able to sell.



NBFC Gruh Finance • Demand continues to remain sluggish for individual home loans; incremental

share of loans have been coming largely from loan against properties (LAP). • Competition in the home loan segment has been intensifying; it does not see

new housing finance companies entering the market as potential threat but expects banks to get more aggressive in their pricing which will pose a threat in a slowing growth environment.

• LAP, which is funding small‐scale businesses, may pose a risk of default in case of delay in economic revival, as they are already leveraged.

• NIM is unlikely to expand from here as yields are under pressure. In FY16, NIM declined by 10bps to 4.08%.

• Although NHB has revised interest rates and the lending cap on under the rural housing fund to 3.5% from 2% for loans up‐to Rs 1.5mn, this is positive for margins. However, the fund allocated under this scheme is not significant, and the incremental lending by HFCs may be very marginal compare to their balance sheet and may not have a very material impact.

Shriram City Union Finance • Balance sheet to grow by 20% CAGR over next three years. Looking to increase

the tenure to 48 months from 36 months earlier on new book, which will support growth.

• SCUF is leading financier of two‐wheelers in India with market share of 25%. As a proportion of total domestic sales of two‐wheeler, SCUF finance is almost 6%. Management aims to take that share to 10%. The yield in the two‐wheeler segment is 22‐24% with average ticket size of Rs 40,000.

• Global consultant McKinsey is doing a study on Shriram City Union on how to accelerate growth and improve the quality of credit. It’s a 18‐month project, which will run across 500 branches.

• Looking at a bigger growth in the housing subsidiary. The management is working on the liability side to support accelerated growth.

• GNPA likely to increase to 7% on 120dpd and 9% on 90dpd in Q4FY17/Q4FY18. The management aims to bring down the provision cover to 50% on 90dpd.

• In the chit fund’s 30‐year history, the write off has always been less than 2%. The management does not see this ratio to rise.

Mahindra Finance • Strong recovery was helped by higher repossession and repayment; more than

60% of GNPA accounts show activity; 24,000 vehicles were repossessed in FY16 of which a major chunk were in Q4 alone.

• Will continue to spend 60‐70% of time and effort on recovery, while maintaining market share.

• Disbursement growth can improve to 15‐18% if CV/CE and SME segments gain scale. Monsoon remains the key for sustained growth.

• Looking at 20‐25% business from semi‐urban markets. Plans to grow the SME book to Rs 120bn in five years.

• Transitioning to 90dpd from 120dpd will result in 400bps impact on GNPA. GNPA likely to rise to 12% from current 8% on 90dpd.

Shriram Transport Finance • AUM growth to remain upwards of 15% with credit cost likely to remain 2‐2.5%

in FY17. • 20% of the portfolio is of vintage less than four years, another 73% of 4‐10 years

vintage, and another 7% of more than 10 years vintage.



• Historically, new CV finance proportion has touched a high of 25%. Likely to keep 25% as cap for new CV proportion.

• Key positives ‐ higher rabi production, likely increase in infrastructure spending, and projection of good monsoon. However, H1FY17 will remain tough as activity is likely to pick up only after monsoon.

• Significant recovery in construction equipment likely only by H2FY17, as utilisation level remains low in the monsoon season. Substantial provision reversal is likely in the equipment division in FY17.

• Do not see much improvement in asset quality in H1. To shift to 120dpd by FY17 and 90dpd by FY18, impacting GNPA by 1.5% each at both the transition phase.

Pharma and Specialty Chemicals Meghmani Organics Operating leverage will drive value growth in the future Key takeaways from the conference: • Basic chemicals:

o The company expects to sweat its assets further leading to 20% revenue growth over the next two years and guides for stable EBITDA margin at 32% over next two years.

o The company recently commenced its caustic potash plant with capacity of 21,000 MTPA, which will add to incremental growth for the company from Q1FY17.

• Pigments: o In FY16, pigments business saw improvement in utilisation at 63% (from

51% in FY15) with 16% EBITDA margin. o Almost 72% of the business’ revenues are earmarked for exports with

strong brand presence in the US and LatAm markets. It indicates top‐end customers are ink companies, followed by paints.

o It indicates its top client is an ink manufacturer which contributes ~25% of pigment sales and this top client has recently acquired three ink companies in S. Africa which can give incremental sales opportunity for Meghmani in the near future.

o It expects utilisation to gradually improve and drive stable 10‐12% revenue CAGR with margin expansion of 200bps at 18% over next two years.

• Agrochemicals: o Adversely impacted in FY12/13 due to intervention of Pollution Control

Board – had to relocate plant from Chharodi to Dahej (both in Gujarat). However, after relocation, the company focused on improving capacity utilisation.

o The company expects 3x jump in branded formulation sales over the next three years. To achieve this, it has inducted a senior industry veteran as an independent director on its board. It also expects to expand its domestic distribution network to 9,000‐10,000 pan‐India from current 2,370.

o It guides for 16% EBITDA margin over the next two years (14% in FY16). • Invested Rs 5bn in capex in the past five years; focus from here is to improve

utilisation, efficiently manage working capital, and pay down debt (debt is Rs 5.8b); expects to retire Rs 1bn annually for the next three years). It indicated no additional/major capex required in the next two years and also indicated that it will repay all long term debt by FY19.

• With improved utilisation, it expects OPM margins to improve steadily – by 150bps each year to 23% by FY18 from 21.5% in FY16.



Vinati Organics ATBS and downstream products to drive value growth • Expects Rs 2bn capex over FY16 and FY17, of which Rs 900mn is over in FY16

(through internal accruals) and the rest will be complete by the end of FY17. • To have asset turn over (ATO) of 1.5‐2.0x from this capex, over next two

years. • Break‐up of capex: (1) ~Rs 1.5bn for capacity expansion/creation for isobutyl

benzene (IBB)/new product line, and (2) Rs 500mn for power plant (expected to be complete by H2FY18), which will help to save Rs 80mn from FY18.

• No capex guidance beyond FY17, but indicated that the next major capex would be to ramp‐up new products that are introduced in FY17.

• Sees gradual pick in sales for its new products line; new products to contribute ~10‐15% of total sales over next two years.

• Four criteria to start new projects: (1) products should belong to a niche market (limited players, difficult chemistry), (2) company should have technology advantage, (3) product manufacturing should be in clean and green science, and (4) payback period of around five years. Additional but optional criteria – synergy of the new product with existing products.

• Expects to start supplying customised products for its USA and Japan‐based chemical companies from Q2FY17; sees full‐year incremental sales of Rs 450mn in FY18.

• Fall in crude prices have impacted ATBS (Leading product of the company with 45% sales contribution) volume in FY16 as the demand enhanced oil recovery application (account 20% ATBS demand) declined significantly. Sees 10‐15% volume growth in ATBS for FY17 (on like to like basis), 3% growth for IBB, and >10% growth for IB sales in FY17.

• Sees revenue growth of 15%, EBITDA margin at 28‐29%, and PAT to move along same lines in FY17.

Fineotex Chemicals Focus is on specialisation and Chinese products replacement • Textile chemical business has high entry barriers as customers require

reliability and steady supplies. Chemical cost is just 2‐3% of textile cost, hence not an issue.

• As Fineotex was supplying to MNCs earlier, quality levels are high. Hence, the company has goodwill.

• CY05‐10 was challenging as customers were very sticky. • Fineotex uses local components to manufacture its products, which are

highly customised. • Textile sector payment clearance is slow compared to other sectors. • In 2011, Fineotex acquired major stake in a well‐known European chemical

company ‘Biotex’ (Malaysia) as a JV with a European partner. Biotex has a diverse basket of >50 high‐value products which complement its range.

• Sales can be raise by 2x from existing customers. • 10‐20% under direct selling, mostly through local distributors. • Current capacity utilisation at 50‐55% in FY16. • Capex of Rs 40‐50mn, largely on office expansion and factory expansion in

FY16.



I.G. Petrochemicals Phthalic Anhydride leadership to maintain growth momentum • IGPL is the leading manufacturer of Phthalic Anhydride (PA) from India and

claims to be the third largest in the world with a capacity of 170,000 tonnes annually. It is amongst the lowest‐cost PA manufacturers in the world.

• Phthalic Anhydride is a downstream product of petrochemical orthoxylene. It is used as an intermediate for the production of plasticisers, polyster resins, alkyd resins, and polyols.

• PA has a wide range of application in end‐user industry such as textile dyes, printing inks, plastic products, paints, and packaging materials. For IGPL, plasticiser (41% of sales) contributes the highest to sales followed by paints (16%), CPC pigments (10%), polyester resin (14%), and others (19%) in FY16.

• It has three manufacturing units at a single location (Taloja, Maharashtra) creates a proximity to India’s chemicals hub.

• I.G. Petrochemicals (IGPL) reported sales/PAT were Rs 9528mn/604mn with robust margin expansion of 500bps at 11.9% in FY16.

• In FY14, with a brownfield expansion, it enhanced its capacity by 45% to 169,250 MTPA for PA. It currently operates at 97% utilisation and expects capacity addition of 50,000 tonnes with an investment of Rs 3bn over FY17‐18.

• Expects India PA industry to see 7‐8% growth annually. • In FY16, through its wholly‐owned subsidiary, IGPL (FZE) entered into a JV

with Dubai Natural Gas Company for manufacturing of maleic anhydride with a capacity of 45,000MTPA.

• It has wide customer base – Berger, Ashland, KLJ, Kansai Nerolac, AOC, Meghmani Organics, AkzoNobel, Aarti Industries, Scott Bader, Sabic, PCL Oil and Solvents.

• ICRA recently upgraded IGPL’s credit rating for long‐term borrowings from IND BBB+ to IND A‐ and short‐term borrowings from IND A2+ to IND A1.

Biocon One of the leading global players of Biosimilars from India • Biocon’s global phase‐3 clinical development program for Glargine,

Trastuzumab and Pegfilgrastim has already completed and met primary endpoints of demonstrating clinical equivalence with the reference product. Global clinical developments of other biosimilar products (like Adalimumab) are in advanced stages. Biocon expects regulatory filing for some of these products in Europe and the US in FY17.

• Biocon will file Glargine with USFDA through 505(b)(2) route but other biosimilar MABs through the 351(K) route.

• Expects biosimilar approval and launch in EU in about 12 months from the date of filing, but US could take 18‐24 months.

• Biocon created a 100% subsidiary – Biocon Biologics Ltd – in the UK, and transferred its entire biosimilar pipeline into it. This is a strategic move and could lead to potential value unlocking in the future.

• It expects to launch Glargine in the Japanese market through its partner (Fujifilms) in H1FY17; expects to launch Glargine in Russia, South Africa, and Turkey soon.

• Biocon expects US approval / launch to take 18‐24 months per asset while EU launch could take more than 12 months from the date of filing.

• Expects commercialisation of Malaysia facility in H2FY17 and would manufacture all forms of insulin including Glargine.



Syngene International 2nd largest CRO of Asia moving towards CRAMS • Syngene reported 26% sales growth to Rs 10.9bn in FY16. EBITDA margin

remained strong at 31% (vs. 32.7% in FY15), resulting in 26% PAT growth to Rs 2.21bn.

• Manufacturing services was the leading sales contributor in FY16 – with ~42% contribution – followed by dedicated services (33%) and biology services (25%). Incremental sales from recent commercial supply of two patented molecules boosted manufacturing services sales.

• Syngene raised ECB of US$ 100mn (at 150bps + libor) to fund its planned capex of US$ 200mn. It has already executed ~25% of its planned capex and plans to finish the rest over the next two years.

• Expects to complete regulatory approval process for its greenfield plant at Mangalore by FY18 and scheduled commercial operation by FY19. Moreover, its other plans (research centre, biologics manufacturing plant, formulation facility) are progressing well.

• Expects to maintain strong growth momentum over the next two years; says it will meet its revenue guidance of US$ 250mn by FY18, which implies 22% sales CAGR over FY16‐18.

• It has strong clientele of 255 global peers (including eight out of top 10) and sees 10% new client additions annually, which will support its growth momentum.

NOCIL Undisputed leader of Rubber chemicals in India • 50% of revenues currently are from speciality rubber chemicals where there is

margin protection due to significant specialised value addition. The remaining revenues come from commoditised rubber chemicals, which are currently protected by anti‐dumping duties on Chinese players. Hence, margins are satisfactory.

• The anti‐dumping duties on Chinese players are in place until CY19 and cannot be revisited until then.

• Benzene derivatives are a key raw material for NOCIL (~50% of total raw material cost); it relies largely on imports. It procures other raw materials from GNFC and Aarti Industries.

• The company is consciously chasing profitability not volumes. Hence, it is selectively exporting in order to maintain margins.

• On the working capital front, NOCIL has deliberately opted for lower credit, due to lucrative commercial terms. The resulting improvement in operating profitability is significantly more than the possible outflow of interest on working capital borrowings, thereby boosting overall cash flows.

• Capex: The management envisages Rs 1.5bn of towards augmenting its capacity in Dahej in FY17. However, the specific product line and finer details are yet to be finalised.

• NOCIL is also keen on backward integration into relevant raw materials. However, it will not carry out capex until it achieves a minimum critical size of output in its rubber chemical business, to ensure complete captive utilisation of raw materials. Such capex is still 24‐36 months away.



Telecom Capitel Partners: Pankaj Agrawal (Founder & Director) Capitel Partners is a leading telecom consultancy firm that advises investors and companies on techno‐commercial deals in the TMT domain. Key takeaways of the meetings: • Delay in Reliance Jio’s launch has led to the company conceding some advantage

in 4G services to Bharti Airtel. • Bharti and others could buy 700MHz in areas where coverage will be more

critical. This will include circles like Bihar where cost of spectrum is not very high. • Incumbents are unlikely to buy 700MHz in metros where cost of spectrum is very

high. • Bharti is the only incumbent that is trying to match Jio on product offering.

Vodafone and Idea have adopted different strategies. • Vodafone wants to migrate subscribers to 3G and eventually 4G but it has

become aggressive on 4G services. 3G offers the benefit of both voice and data but in 4G services voice cannibalisation starts happening. Thus, Vodafone’s strategy makes great commercial sense. Strategically the market could run ahead of Vodafone product offering if it does not adapt sufficiently.

• Bankers are quite optimistic about the Vodafone IPO (expected in the later part of the fiscal year).

• Idea cellular is more focused on coverage‐based data products and it is trying to reach as many towns as possible. This will help it to sustain market share in the wake of Jio’s launch.

• Incumbents could be the biggest beneficiaries if Jio’s launch has any hiccups. • Mergers in the sector will accelerate as it is the only way for exiting for some

players. Reliance Communications • Reliance Communications (RCOM) is leading the Indian telecom consolidation

story. It is in the process of merger with Sistema and its talks with Aircel are proceeding well.

• The tower assets will be sold to bring down the debt (at some point in time). The sale of tower assets may not affect the merger negotiations with Aircel.

• With spectrum‐sharing deals with Reliance Jio, RCOM will have access to Jio’s 4G product.

• RCOM will have best in class product offering with strong 3G footprint after the Aircel merger and Jio’s 4G product launch.

• RCOM is well‐poised to benefit both from growth in data services and industry consolidation.



Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL ‐15% > to < +15% Target price is less than +15% but more than ‐15%

SELL <= ‐15% Target price is less than or equal to ‐15%.

Contact Information (Regional Member Companies)

SINGAPORE: Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 Raffles City Tower,

Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

MALAYSIA: Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG: Phillip Securities (HK) Ltd 11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN: Phillip Securities Japan, Ltd 4‐2 Nihonbashi Kabutocho, Chuo‐ku

Tokyo 103‐0026 Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141

www.phillip.co.jp

INDONESIA: PT Phillip Securities Indonesia ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A,

Jakarta 10220, Indonesia Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809

www.phillip.co.id

CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd. No 550 Yan An East Road, Ocean Tower Unit 2318

Shanghai 200 001 Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940

www.phillip.com.cn

THAILAND: Phillip Securities (Thailand) Public Co. Ltd. 15th Floor, Vorawat Building, 849 Silom Road,

Silom, Bangrak, Bangkok 10500 Thailand Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921

www.phillip.co.th

FRANCE: King & Shaxson Capital Ltd. 3rd Floor, 35 Rue de la Bienfaisance

75008 Paris France Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017

www.kingandshaxson.com

UNITED KINGDOM: King & Shaxson Ltd. 6th Floor, Candlewick House, 120 Cannon Street

London, EC4N 6AS Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835

www.kingandshaxson.com

UNITED STATES: Phillip Futures Inc. 141 W Jackson Blvd Ste 3050

The Chicago Board of Trade Building Chicago, IL 60604 USA

Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA: PhillipCapital Australia Level 37, 530 Collins Street

Melbourne, Victoria 3000, Australia Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309

www.phillipcapital.com.au

SRI LANKA: Asha Phillip Securities Limited Level 4, Millennium House, 46/58 Navam Mawatha,

Colombo 2, Sri Lanka Tel: (94) 11 2429 100 Fax: (94) 11 2429 199

www.ashaphillip.net/home.htm

INDIA: PhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

Management(91 22) 2483 1919

Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6667 9946(91 22) 6667 9735

Research IT Services Pharma & Speciality Chem

Dhawal Doshi (9122) 6667 9769 Vibhor Singhal (9122) 6667 9949 Surya Patra (9122) 6667 9768Nitesh Sharma, CFA (9122) 6667 9965 Shyamal Dhruve (9122) 6667 9992 Mehul Sheth (9122) 6667 9996Banking, NBFCs Infrastructure StrategyManish Agarwalla (9122) 6667 9962 Vibhor Singhal (9122) 6667 9949 Naveen Kulkarni, CFA, FRM (9122) 6667 9947Pradeep Agrawal (9122) 6667 9953 Deepak Agarwal (9122) 6667 9944 Anindya Bhowmik (9122) 6667 9764Paresh Jain (9122) 6667 9948 Logistics, Transportation & Midcap TelecomConsumer & Retail Vikram Suryavanshi (9122) 6667 9951 Naveen Kulkarni, CFA, FRM (9122) 6667 9947Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Media Manoj Behera (9122) 6667 9973Jubil Jain (9122) 6667 9766 Manoj Behera (9122) 6667 9973 TechnicalsPreeyam Tolia (9122) 6667 9950 Metals Subodh Gupta, CMT (9122) 6667 9762Cement Dhawal Doshi (9122) 6667 9769 Production ManagerVaibhav Agarwal (9122) 6667 9967 Yash Doshi (9122) 6667 9987 Ganesh Deorukhkar (9122) 6667 9966Economics Midcap EditorAnjali Verma (9122) 6667 9969 Amol Rao (9122) 6667 9952 Roshan Sony 98199 72726Engineering, Capital Goods Mid‐Caps & Database Manager Sr. Manager – Equities SupportJonas Bhutta (9122) 6667 9759 Deepak Agarwal (9122) 6667 9944 Rosie Ferns (9122) 6667 9971

Oil & GasSabri Hazarika (9122) 6667 9756

Sales & Distribution Ashvin Patil (9122) 6667 9991 Sales Trader Zarine Damania (9122) 6667 9976Shubhangi Agrawal (9122) 6667 9964 Dilesh Doshi (9122) 6667 9747 Kishor Binwal (9122) 6667 9989 Suniil Pandit (9122) 6667 9745Bhavin Shah (9122) 6667 9974Ashka Mehta Gulati (9122) 6667 9934 ExecutionArchan Vyas (9122) 6667 9785 Mayur Shah (9122) 6667 9945

Corporate Communications

Vineet Bhatnagar (Managing Director)

Jignesh Shah (Head – Equity Derivatives)

Automobiles



Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance. This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice. Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request. Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co‐managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report: Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No 4 PCIL or its affiliates have managed or co‐managed in the previous twelve months a private or public offering of securities for the

company(ies) covered in the Research report No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors.



Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results. Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document. Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety. Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. The recipient should carefully consider whether trading/investment is appropriate for the recipient in light of the recipient’s experience, objectives, financial resources and other relevant circumstances. PCIPL and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by the recipient. The recipient is further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek trading/investment advice before investing. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PCIPL and any of its employees, directors, associates, group entities, affiliates are not inducing the recipient for trading/investing in the financial market(s). Trading/Investment decision is the sole responsibility of the recipient. For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.‐regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account. This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the 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 a 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, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer. If Distribution is to Australian Investors This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827). This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately. PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

Documents

INSTITUTIONAL EQUITY RESEARCH GV Investor Conferencebackoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_GV_Key... · INSTITUTIONAL EQUITY RESEARCH ... PHILLIPCAPITAL INDIA