INSTITUTIONAL EQUITY RESEARCH Saregama India Ltd (SARE IN ...backoffice.phillipcapital.in/Backoffice/Research... · monetising digital content with constant surveillance on various

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

Saregama India Ltd (SARE IN)

The Carvaan has set off strong footed

INDIA | Media | Company Visit Note

19 September 2017

We met the CEO Mr Vikram Mehra and CFO Mr G B Aayeer of Saregama India recently, and came back with a positive outlook on the company. Saregama is an Indian entertainment content company with a music library of 120,000 songs and 3,000 hours of Tamil TV serials. It generates revenues from B2B solutions such as music rights, and it has recently made inroads into the B2C market with its new product Carvaan – portable digital music players. The key takeaways of our meeting: Music library content monetisation is likely to accelerate: Saregama’s ownership of a huge content library is its biggest strength. Digital Content licensing accounts for 63% of the total revenues, content production 31%. There is immense potential in accelerating content monetisation. This is because online platforms such as Apple Itunes, YouTube, and Saavn are investing substantial capital in acquiring consumers, but depend on content producers like Saregama for driving subscription revenues. The key to monetising content on such platforms is metadata (data about content – description), which makes search engines latch on to the content, based on parameters such as key words. Saregama has spent significant time in building metadata over the last two years, and it is investing resources on monetising digital content with constant surveillance on various online mediums. Carvaan B2C innovation holds tremendous promise; Mini Carvaan also launched: Saregama’s recently launched Carvaan, a portable digital music player, is preloaded with 5,000 greatest hit Hindi songs. The music player also has radio and Bluetooth. The product is positioned as a gifting item for the older crowd, who is not very internet or smartphone savvy, and prefers the old radio-style playlists. We believe the product has been well received in the market, notwithstanding the seemingly high price tag of ~US$ 100. The company also launched yesterday mini Carvaan at price point of US$40 with 251 pre-loaded songs with an intention of expanding addressable market. The products gross margin (back of the envelope calculations) seems to be 17-20% and if the current market traction continues, we believe Saregama will be able to sell around 200,000 units in FY18. Reasonable scope in content production: Saregama produces significant content for Sun TV. As per its deal with Sun TV, the content’s IP remains with Saregama, which provides it with further avenues to monetise the content. Apart from Tamil content, Saregama is also involved in small-ticket niche movie production, which has lower risk but higher profitability and better investment returns in the long-term. We like this low-risk strategy in scaling up content production, as it has the potential to deliver higher long-term returns. Margin improvement will be led by operating leverage: Saregama has a high cost structure for its nature of business. Content licensing is a very high margin and stable business, but Saregama’s EBIDTA margins are relatively low at just 5% (FY17). The management contends that its higher employee costs (22% of sales in FY17) because of the legacy nature of business may not change much in the near to medium term. However, it indicated that wage inflation would be insignificant in the medium term. As revenue growth improves, the scope for operating leverage is very high, as incremental revenues will not need large expenditure or investment. Valuations stretched but the future is promising: Saregama is not inexpensive on historical valuations, and trades at 140x on FY17 PER. However, the future is much brighter now with multiple revenue-growth drivers visible. Content production is a niche business and is rather challenging. High-quality legacy content owners tend to have a fairly long tail, and are likely to trade at steep valuations. As visibility on content monetisation improves, the stock could continue to re-rate even from current levels.

Not Rated CMP RS 484

COMPANY DATA

O/S SHARES (MN) : 17

MARKET CAP (RSBN) : 8.4

MARKET CAP (USDMN) : 131

52 - WK HI/LO (RS) : 522 / 761

LIQUIDITY 3M (USDMN) : 2.1

PAR VALUE (RS) : 10

SHARE HOLDING PATTERN, %

Jun 17 Mar 17 Dec 16

PROMOTERS : 59.1 59.1 59.1

FII / NRI : 0.0 0.0 0.1

FI / MF : 0.1 0.1 0.1

NON PRO : 21.0 23.7 24.2

PUBLIC & OTHERS : 19.9 17.1 16.5

PRICE PERFORMANCE, %

1MTH 3MTH 1YR

ABS 30.8 110.6 105.1

REL TO BSE 27.8 107.2 91.7

PRICE VS. SENSEX

Source: Phillip Capital India Research

KEY FINANCIALS

Rs mn FY17 FY18E FY19E

Net Sales 2,185 3,272 3,822

EBIDTA 191 387 501

Net Profit 60 213 283

EPS, Rs 3.4 12.3 16.2

PER, x 140.3 39.1 29.5

EV/EBIDTA, x 42.8 21.0 15.8

P/BV, x 2.8 2.4 2.0

ROE, % 2.0 6.2 6.9

Debt/Equity, % 1.0 0.9 0.7

Source: PhillipCapital India Research Est.

Naveen Kulkarni, CFA, FRM (+ 9122 6246 4122) [email protected] Preeyam Tolia (+ 9122 6246 4129) [email protected]

0

50

100

150

200

Apr/16 Oct/16 Apr/17

Saregama BSE Sensex


SAREGAMA INDIA LTD COMPANY VISIT NOTE

Music content monetisation set to accelerate A FICCI-KPMG report pegs the music industry CAGR at 16% over 2016-21. Digital revenues now contribute an estimated 70% of the revenues, while synchronisation, performance rights, and physical channels contribute the rest. Growth in the Indian music industry over the last few years has been uninspiring, but with the advent of OTT platforms, the music industry is poised to grow faster.

Indian music consumption

Source: Company, PhillipCapital India Research

The Indian music industry has seen a consistent increase in digital music consumption, which is growing much faster than the Indian music industry, as physical sales have been in a long-term structural decline.

Sharp growth in OTT streams and TV channels


Bollywood, 40%

International, 10%

Regional, 30%

Others, 20%

7,235

14,411

19,718

-

5,000

10,000

15,000

20,000

25,000

FY16 FY17 FY18

No of OTT streams (L)

72

156

236

320

-

50

100

150

200

250

300

350

FY15 FY16 FY17 FY18

No of TV channels: License Issued



Youtube monthly views

Source: Company

As demand for digital content increases, demand for vintage music also increases. This trend is a significant long-term positive for a company such as Saregama, which has huge content library, primarily comprising of evergreen hits and old music.

Indian music industry (Rs bn)


While demand for online content is growing fast, content monetisation presents a challenge, as content discovery is very critical. Content discovery depends on not just ownership of content, but highly structured metadata. In fact, the key to online content monetisation is metadata, which, in this context, is descriptive data for better discovery of content by online search engines. Searches involve parameters such as key-word search, and if the metadata has those key words (or related) then the content discovery improves substantially. Saregama has spent more than two years in building metadata for music content. Now every song has a ranking and the company understands very well how people listen to songs online. Growth in B2B business is likely to be better than the growth in the last few years.

9 11 10 10 11

12 14

16 19

22

25

18

-9

2

10 13

15 16 17 16 15

(15)

(10)

(5)

-

5

10

15

20

25

30

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenue (Rs bn) Growth (%)



Digital and publishing income (Rs mn) Digital and publishing income growth (%)


Digital revenues have seen consistent growth for the company, and physical sales have been in a structural decline. It has witnessed some growth in physical sales last year, but we do not expect meaningful recovery in forthcoming years. As the industry has largely moved to the digital format, the industry’s growth is more likely to trend in line with digital-music-content growth. As the number of OTT platforms rise, and willingness to pay for quality content also increases, we see digital revenue growth being robust ahead.

Physical sales and others (Rs mn) Physical sales and others growth (%)


567 659

829

1,087 1,088 1,167

1,287 1,377

-

200

400

600

800

1,000

1,200

1,400

1,600

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Digital & Publishing Income …

16.2

25.9

31.0

0.1

7.3

10.3

7.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

FY11 FY12 FY13 FY14 FY15 FY16 FY17

Growth (%)

592

539

347

124

54 82

139

-

100

200

300

400

500

600

700


Physical sales & Others

-80

-60

-40

-20

0

20

40

60

80


Growth (%)



Digital and publishing income contribution (%) Physical sales and others (%)


Saregama’s other focus area for content monetisation is its publishing business. This segment faced challenges for a long time because of conflict with the artists’ fraternity over how the revenue should be split. The dispute is settled now, with both parties agreeing to a 50:50 split. This segment holds tremendous revenue potential as Saregama has the best legacy music content in the business.

52 48

52

59 61 63

58

63

-

10

20

30

40

50

60

70


Digital & Publishing Income (c.%)

39

43

34

19

7

3 4 6

-

5

10

15

20

25

30

35

40

45

50


Physical sales & Others (c.%)



Carvaan- A blockbuster product Carvaan is a portable digital music player with 5,000 preloaded songs classified by artists and moods. The music player also has Geetmala (a vintage radio countdown show) which was hosted by legendary radio jockey Ameen Sayani. The product offers the ease of playlists of evergreen songs and is positioned for the older audience.

The product is showcased as a gifting item and the target market is set towards parents who are not very internet savvy. The product also features Bluetooth and FM radio, which helps widen its target market.

The product is priced at Rs 5,990, which according to us is high, but the management contends that GST on the product is high at 28% and channel margins are also quite high (close to 20%). Thus, the net realized value for the product is about Rs 4,000. We estimate gross margins for the product to be 15-20%, considering that initial volumes will be low. Gross margins are likely to improve as volumes start picking up.



For now, we find the product promising, as this a solid attempt at monetising its music database with a B2C offering. The company has conducted extensive market research before coming out with this offering. Based on our channel checks, we believe it has the potential to sell 200,000 units of Carvaan in FY18.



Mini Carvaan launched

With the initial success of Carvaan, Saregama has launched mini Carvaan with pre-loaded 251 greatest hit songs of legendary Indian music artists. Mini Carvaan comes with USB and Bluetooth features. It is for users who want to listen to music anywhere and anytime. The compact nature of the product and attractive price point of Rs 2490 will attract younger crowd which will significantly enhance the addressable market. This product will also be a very attractive option in the corporate gifting segment which is seeing healthy growth rate over the years. According to the internet reviews the quality of the speakers is decent and sufficiently loud to attract targeted customer base. The launch of mini Carvaan, and Carvaan seeing decent traction, the company has significantly scaled up its B2C offering and it has mitigated the challenges to revenue growth in the medium term.



Operating leverage will result in margin gains Considering that Saregma’s primary business is content licensing, its EBIDTA margins should be high, but that is not the case. Its consolidated margins in FY17 were just 5% of revenues; they have been volatile through the years.

EBIDTA margin (% of sales)

Even though Saregama has managed to double its revenues in the last 7-8 years, significant growth has come because of TV serial production (this increased +6x). Content production is a relatively low-margin business.

Total revenues Television content production


Apart from growth coming from low-margin products, higher employee expenses are also a drag on the profitability. Employee expenses have remained at elevated levels.

-15

-10

-5

0

5

10

15


EBIDTA (%)

-

500

1,000

1,500

2,000

2,500


Total revenues

-

100

200

300

400

500

600

700

800

900


TV Software



Employee expenses (% of sales)


Employee expenses are unlikely to reduce in absolute terms, but they are unlikely to increase significantly in the future. Revenue growth will result in employee expenses declining as a percentage of sales.

Employee expenses growth (%)


The largest expense (line item) for Saregama is production expense, attributable to television serials. It has taken proactive steps to reduce loss-making ventures and focus on profitable ones. While television serial product expenses are likely to remain in a band, royalty expenses are likely to grow in line with digital revenues.

27.4

22.3 21.1 20.7 21.2

20.1 22.2 22.4

0

5

10

15

20

25

30


Employee expenes (% of sales)

2.4 1.3

9.3

13.5

-2.2 -0.3

31.5

-0.8 -5

0

5

10

15

20

25

30

35


Employee expenses growth (%)



Production expense as a % of sales

We expect production expenses to be more calibrated ahead, which will result in improvement in profitability.

Production expenses growth (%)


Production expenses breakup


20.6

29.8 30.9

35.4

41.1

49.0

43.3 42.5

0

10

20

30

40

50

60


Production expenses (% of sales)

-14

81

20

33

11

25

5

-3

-20

0

20

40

60

80

100


Production expenses growth (%)

13

179 265

402 525

732 740 681

108

139

150 159

176 157 170 204

108

97 82 97

29 25 49 43

0%

20%

40%

60%

80%

100%


Television Royalty Others



Sharp rise in Television content production expenses


We believe the scope for margin improvement is very high because the quality of revenue growth is improving rapidly. Revenue growth led by digital licensing and B2C products (Carvaan) will help drive operating leverage, as most of the costs associated are variable (bill of materials etc) and gross profits of these products will result in operating leverage. While there will be increase in selling and marketing expenses but with scale the profit growth will be significant. If Carvaan succeeds, and Saregama manages to scale up its B2C offering while maintaining traction on licensing income, its operating-leverage gains could push margins into double digits.

-

100

200

300

400

500

600

700

800


Television Royalty Others



Financials

Income Statement Y/E Mar, Rs mn FY16 FY17 FY18e FY19e

Net sales 2,217 2,185 3,272 3,822

Growth, % 19 -1 50 17

Other income 122 88 131 153

Total income 2,338 2,273 3,403 3,975

Raw material expenses -73 24 -650 -800

Employee expenses -493 -489 -489 -498

Other Operating expenses -1,506 -1,617 -1,878 -2,175

EBITDA (Core) 266 191 387 501

Growth, % 21.2 (28.1) 102.1 29.5

Margin, % 12.0 8.8 11.8 13.1

Depreciation -54 -43 -65 -76

EBIT 212 149 322 425

Growth, % 34.9 (29.9) 116.5 32.1

Margin, % 9.6 6.8 9.8 11.1

Interest paid -5 -3 -3 -3

Other Non-Operating Income 0 0 0 0

Non-recurring Items -116 0 0 0

Pre-tax profit 91 145 319 422

Tax provided -22 -84 -105 -139

Profit after tax 69 62 213 283

Others (Minorities, Associates) 0 -2 0 0

Net Profit 68 60 213 283

Growth, % 17.3 (67.7) 258.6 32.4

Net Profit (adjusted) 68 60 213 283

Unadj. shares (m) 17 17 17 17

Wtd avg shares (m) 17 17 17 17

Balance Sheet Y/E Mar, Rs mn FY16 FY17 FY18e FY19e

Cash & bank 260 190 250 442

Debtors 461 523 720 841

Inventory 13 103 131 153

Loans & advances 817 972 1,118 1,285

Other current assets 36 30 35 40

Total current assets 1,586 1,818 2,253 2,760

Investments 397 397 397 397

Gross fixed assets 2,028 3,173 3,673 4,173

Less: Depreciation -1,181 -1,187 -1,253 -1,329

Net fixed assets 847 1,985 2,420 2,844

Non-current assets 66 72 82 93

Total assets 2,896 4,273 5,152 6,094

Current liabilities 1,224 1,346 1,759 1,976

Total current liabilities 1,224 1,346 1,759 1,976

Non-current liabilities -90 -81 -73 -69

Total liabilities 1,134 1,265 1,685 1,908

Paid-up capital 174 174 174 174

Reserves & surplus 1,566 2,811 3,249 3,944

Shareholders’ equity 1,761 3,009 3,447 4,142

Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY16 FY17 FY18e FY19e

Pre-tax profit 91 145 319 422

Depreciation 54 43 65 76

Chg in working capital 183 -180 36 -104

Total tax paid -53 -81 -105 -139

Other operating activities 42 33 225 450

Cash flow from operating activities 319 -40 540 705

Capital expenditure -63 -1,182 -500 -500

Other investing activities 23 1,190 0 0

Cash flow from investing activities -40 9 -500 -500

Free cash flow 279 -32 40 205

Other financing activities -72 -34 0 0

Cash flow from financing activities -78 -34 0 0

Net chg in cash 201 -65 40 205

Valuation Ratios

FY16 FY17 FY18e FY19e

Per Share data

EPS (INR) 3.9 3.4 12.3 16.2

Growth, % 17.3 (67.7) 258.6 32.4

Book NAV/share (INR) 100.0 171.5 196.7 236.6

FDEPS (INR) 10.6 3.4 12.3 16.2

CEPS (INR) 20.4 5.9 16.0 20.6

CFPS (INR) 20.0 (3.4) 18.6 15.3

Return ratios

Return on assets (%) 2.6 1.8 4.6 5.1

Return on equity (%) 10.6 2.0 6.2 6.9

Return on capital employed (%) 4.4 2.8 6.9 7.7

Turnover ratios

Asset turnover (x) 2.0 1.3 1.3 1.3

Sales/Total assets (x) 0.8 0.6 0.7 0.7

Sales/Net FA (x) 2.6 1.5 1.5 1.5

Working capital/Sales (x) 0.0 0.1 0.1 0.1

Receivable days 75.8 87.3 80.3 80.3

Inventory days 2.1 17.3 14.6 14.6

Payable days 53.2 67.4 59.4 60.2

Working capital days 16.9 47.1 27.3 32.7

Liquidity ratios

Current ratio (x) 1.3 1.4 1.3 1.4

Quick ratio (x) 1.3 1.3 1.2 1.3

Interest cover (x) 44.2 48.9 105.9 140.0

Total debt/Equity (%) 2.1 1.0 0.9 0.7

Net debt/Equity (%) (12.8) (5.4) (6.4) (10.0)

Valuation

PER (x) 45.3 140.3 39.1 29.5

PEG (x) - y-o-y growth 2.6 (2.1) 0.2 0.9

Price/Book (x) 4.8 2.8 2.4 2.0

EV/Net sales (x) 3.7 3.7 2.5 2.1

EV/EBITDA (x) 30.5 42.8 21.0 15.8

EV/EBIT (x) 38.4 55.2 25.3 18.7



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%.

Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919

Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101

Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735

Research

Automobiles

Engineering, Capital Goods

Pharma & Specialty Chem

Dhawal Doshi (9122) 6246 4128

Jonas Bhutta (9122) 6246 4119

Surya Patra (9122) 6246 4121

Nitesh Sharma, CFA (9122) 6246 4126

Vikram Rawat (9122) 6246 4120

Mehul Sheth (9122) 6246 4123

Banking, NBFCs

IT Services & Infrastructure

Strategy

Manish Agarwalla (9122) 6246 4125

Vibhor Singhal (9122) 6246 4109

Naveen Kulkarni, CFA, FRM (9122) 6246 4122

Pradeep Agrawal (9122) 6246 4113

Shyamal Dhruve (9122) 6246 4110

Neeraj Chadawar (9122) 6667 9764

Paresh Jain (9122) 6246 4114

Logistics, Transportation & Midcap

Telecom

Consumer & Retail

Vikram Suryavanshi (9122) 6246 4111



Media

Preeyam Tolia (9122) 6246 4129

Naveen Kulkarni (9122) 6246 4122

Technicals

Metals

Subodh Gupta, CMT (9122) 6246 4136

Cement

Dhawal Doshi (9122) 6246 4128

Production Manager

Vaibhav Agarwal (9122) 6246 4124

Ganesh Deorukhkar (9122) 6667 9966

Economics

Mid-Caps & Database Manager

Editor

Anjali Verma (9122) 6246 4115

Deepak Agarwal (9122) 6246 4112

Roshan Sony 98199 72726

Shruti Bajpai (9122) 6246 4135

Oil & Gas

Sr. Manager – Equities Support

Sabri Hazarika (9122) 6667 9756

Rosie Ferns (9122) 6667 9971

Sales & Distribution

Corporate Communications

Ashvin Patil (9122) 6246 4105

Sales Trader

Zarine Damania (9122) 6667 9976

Shubhangi Agrawal (9122) 6246 4103

Dilesh Doshi (9122) 6667 9747

Kishor Binwal (9122) 6246 4106

Suniil Pandit (9122) 6667 9745

Bhavin Shah (9122) 6246 4102

Ashka Mehta Gulati (9122) 6246 4108

Execution

Archan Vyas (9122) 6246 4107

Mayur Shah (9122) 6667 9945

Contact Information (Regional Member Companies)

SINGAPORE: Phillip Securities Pte Ltd

250 North Bridge Road, #06-00 RafflesCityTower,

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

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ANZTower Level 23B, Jl Jend Sudirman Kav 33A,

Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809

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Shanghai 200 001

Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940

www.phillip.com.cn

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15th Floor, VorawatBuilding, 849 Silom Road,

Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921

www.phillip.co.th

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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 TradeBuilding

Chicago, IL 60604 USA

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

AUSTRALIA: PhillipCapital Australia

Level 10, 330 Collins Street

Melbourne, VIC 3000, Australia

Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899

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 400013Tel: (9122) 2483 1919 Fax: (9122) 6667 9955 www.phillipcapital.in

http://www.phillip.com.sg/

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http://www.phillip.com.hk/

http://www.phillip.co.jp/

http://www.phillip.co.id/

http://www.phillip.com.cn/

http://www.phillip.co.th/

http://www.kingandshaxson.com/

http://www.kingandshaxson.com/

http://www.phillipcapital.com.au/

http://www.ashaphillip.net/home.htm

http://www.phillipcapital.in/



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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.

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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 thecompany(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. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

Kindly note that past performance is not necessarily a guide to future performance.

For Detailed Disclaimer: Please visit our website www.phillipcapital.in

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

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