“SUBSCRIBE” to

Galaxy Surfactants Ltd.

Global player in the personal and home care ingredients industry

Salient features of the IPO: • Galaxy Surfactants Ltd. (Galaxy) is one of the India’s leading

manufacturers of surfactants and other specialty ingredients for the personal care and home care industries.

• The issue is completely OFS, thus the company will not receive any proceeds from it.

Key competitive strengths: • Established global supplier to major FMCG brands • Robust product portfolio addressing diverse customer needs • Strong presence in high growth markets of India and AMET region • Track record of robust financial performance Risk and concerns: • Volatility and availability of key raw materials • Unfavorable sales-mix • Difficulty in identifying and adapting the changes in the consumer

preferences and tastes • Exchange rate risk Valuation & recommendation: At the higher price band of Rs. 1,480 per share, Galaxy’s share is valued at a P/E multiple of 35.9x (to its restated FY17 EPS of Rs. 41.3), which is at a premium to the peer average of 20x. Below are few key observations of the issue: (For detailed valuation, refer to page 7 of the report) • According to the Galaxy management, it is a dominant supplier of

surfactants and other specialty ingredients to the personal and home care industry. Its products find application in a host of consumer-centric personal care and home care products such as skin care, oral care, hair care, cosmetics, toiletries and detergent products.

• Currently, the company’s product portfolio comprises over 200 product grades, which are marketed to more than 1,700 customers in over 70 countries. As of FY17 end, it derived 35% of the gross revenue from the domestic customers, while the rest was derived from overseas markets. Around 52% of the revenue was generated from the multinational customers.

• Galaxy’s customers base comprises a host of multinational, regional and local FMCG companies, which includes Cavinkare Pvt. Ltd., Colgate-Palmolive (India) Ltd., Dabur India Ltd., Henkel, Himalaya, L’ORÉAL, Procter & Gamble Home Products Pvt. Ltd., Reckitt Benckiser, Ayur Herbals (Pvt.) Ltd., Jyothy Laboratories Ltd. and Unilever. The company enjoys a long standing customer relation with almost all its customers, which demonstrates the guarantee of quality product & supply and innovation.

22nd Jan. 2018

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Recommendation SUBSCRIBE

Price Band (Rs.) Rs. 1,470 - 1,480 per Share

Face Value (Rs.) Rs. 10

Shares for Fresh Issue (mn)

Nil

Shares for OFS (mn) 6.3mn Shares

Fresh Issue Size (Rs. mn) N/A

OFS Issue Size (Rs. mn) Rs. 9,307.6 - 9,370.9mn

Total Issue Size (Rs. mn) Rs. 9,307.6 - 9,370.9mn

Bidding Date 29th Jan. – 31st Jan. 2018

MCAP at Higher Price Band

Rs. 52,473mn

Enterprise Value at Higher Price Band

Rs. 55,554mn

Book Running Lead Manager

ICICI Securities Ltd.; Edelweiss Financial Services Ltd. and JM Financial Institutional Securities Ltd.

Registrar Link Intime India Pvt. Ltd.

Sector/Industry Specialty Chemicals

Promoters

Mr. Unnathan Shekhar, Mr. Gopalkrishnan Ramakrishnan, Mr. Sudhir Dattaram Patil and Mr. Shashikant Shanbhag

Pre and Post - Issue Shareholding Pattern

Pre - Issue Post - Issue

Promoter and Promoter Group

77.0% 70.9%

Public 23.0% 29.1%

Total 100.00% 100.00%

Retail Application Money at Higher Cut-Off Price per Lot

Number of Shares per Lot 10

Application Money Rs. 14,800 per Lot

Analyst

Rajnath Yadav

Research Analyst (022 - 6707 9999; Ext: 912)

Email: rajnath.yadav@choiceindia.com

• Since the company’s product are the ingredients for the personal and home care products, whose demand are inelastic in nature i.e. end users demand is hardly impacted by the change in the product price. Thus the company’s products will continue to be in demand and would have minimal impact from the financial position of the end users.

• The manufacturing facility in Egypt was established in 2011 and enjoys a concessional tax regime for around 25 years. Pursuant to which, it is exempted from all the direct and indirect taxes. Additionally, it has a manufacturing facility in the USA. Here also, Galaxy would benefit from the proposed lower corporate tax rate by the USA government.

• On financial performance front, the company is consistently reporting growth, except in FY16 where the business was impacted mainly due to unprecedented fall in raw material prices. Over FY13-17, Galaxy reported an 8.1% CAGR rise in total operating revenue. Consolidated EBITDA increased by 22.3% CAGR, with expansion in the EBITDA margin by around 5ppts during the period to 12.4% in FY17. Reported PAT increased by 379% CAGR (from Rs. 2.8mn in FY13 to Rs. 1,463.1mn in FY17). PAT margin expanded by around 7ppts over the period to 6.8% in FY17.

• H1 FY18 performance was mainly impacted by the implementation of GST and LBT, thereby leading to a lower EBITDA and PAT margin came at 11.8% and 6.3%, respectively as compared to FY17 levels. However, the management has indicated that all the issues related to GST and LBT has been settled and the operations are at normal levels.

• On valuation front, Galaxy is demanding a P/E valuation of 35.9x as compared to peer average of 20x. Its overseas peers are in the matured market and thus comparing with them will be inappropriate. If the demanded valuation of Galaxy is compared with the BSE FMCG index, then it is available at a discount. Thus considering the growth outlook of personal and home care products, the inelastic demand nature and the positioning of the company in the market, we strongly feel that it would create value in future.

Thus considering the above observations, we assign a “SUBSCRIBE” rating for the issue.

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Offer Opens on 29-Jan-2018

Offer Closes on 31-Jan-2018

Finalization of Basis of Allotment 05-Feb-2018

Unblocking of ASBA Account 06-Feb-2018

Credit to Demat Accounts 07-Feb-2018

Listing on Stock Exchanges 08-Feb-2018

About the issue: • Galaxy is coming up with an initial public offering (IPO) with 6.3mn shares (fresh issue: nil; OFS shares: 6.3mn shares) in

offering. The offer represents around 17.9% of its post issue paid-up equity shares of the company. Total IPO size is Rs. 9,307.6 - 9,370.9mn.

• The issue will open on 29th Jan. 2018 and close on 31st Jan. 2018.

• The issue is book building with a price band of Rs. 1,470 - 1,480 per share.

• 50% of the issue shall be allocated on a proportionate basis to qualified institutional buyers, while rest 15% and 35% is reserved for non-institutional bidders and retail investors, respectively.

• Since the issue is an OFS, the company will not receive any proceeds. • Its promoter holds 77.0% stake in the company and post IPO this will come down to 70.9%. Public holding will increase

from current 23.0% to 29.1%.

Pre and Post Issue Shareholding Pattern (%)

Pre Issue Post Issue (at higher price band)

Promoter & Promoter Group (%) 77.0% 70.9%

Public (%) 23.0% 29.1%

Source: Company RHP

Unrealized IPO Process Time Line:

3

Company Introduction: Galaxy is one of the India’s leading manufacturers of surfactants and other specialty ingredients for the personal care and home care industries. Its products find application in a host of consumer-centric personal care and home care products, including, inter alia, skin care, oral care, hair care, cosmetics, toiletries and detergent products. Since its incorporation in 1986, the company has significantly expanded and diversified its product profile, client base and geographical footprint. Galaxy’s customers include some of the leading multinational, regional and local players in the home and personal care industries. Currently, the company’s product portfolio comprises over 200 product grades, which are marketed to more than 1,700 customers in over 70 countries. Galaxy’s products are organized into the following product groups: • Performance surfactants: Its portfolio of performance surfactants comprises over 45 product grades, and includes

anionic surfactants and non-ionic surfactants; and

• Speciality care products: Galaxy’s specialty care products group comprises over 155 product grades, and includes amphoteric surfactants, cationic surfactants, UV filters, preservatives, preservative blends and surfactant blends, specialty ingredients such as mild surfactants, syndet and transparent bathing bars and proteins, fatty alkanolamides and fatty acid esters, and other care products.

While it commenced its operations as a local supplier to FMCG companies in India, the company has significantly expanded and diversified its scale and scope of operations over the years so as to become a global supplier to FMCG companies across major geographies, such as Africa Middle East Turkey (AMET), Asia Pacific, Americas and Europe. Galaxy’s diversified customer base currently comprises multinational, regional and local FMCG companies, including, inter alia, Cavinkare Pvt. Ltd., Colgate-Palmolive (India) Ltd., Dabur India Ltd., Henkel, Himalaya, L’OREAL, Procter & Gamble Home Products Pvt. Ltd., Reckitt Benckiser, Ayur Herbals (Pvt.) Ltd., Jyothy Laboratories Ltd. and Unilever. In addition to domestic sales in India, the company has significantly increased its geographical footprint in recent years by focusing on certain emerging markets such as AMET. Its step-down subsidiaries, coupled with manufacturing facilities in Suez (Egypt) and New Hampshire (USA), enable it to service the international demand for its products. Galaxy has set-up sales offices in India, Egypt and USA, and representative offices in Netherlands and Turkey so as to get enabled to market its products as well as understand customer needs in these regions, and consequently, develop products to service such requirements. The company continuously monitors industry trends so as to ensure that its products continue to remain relevant and help its customers meet the evolving market demands and enhance their brand value. Galaxy’s qualified and experienced in-house R&D team focuses on the development of high-performance products and formulations for the consumer-centric home and personal care industries, including collaborative product development with its customers as part of its “Consumer to Chemistry” motto. The company has adopted an innovation funnel model, which allows it to customize its products in line with customer expectations and end-user preferences, whilst simultaneously ensuring shorter lead-times. Since 2002, a total of 47 patents have been granted to it. Currently, 10 patents in USA, and two patents each in China, the European Union, India, Japan and Russia, are being maintained by the company. Galaxy has applied for an aggregate of 38 patents globally, of which 21 applications have been made in India, and an aggregate of 17 applications have been made for the registration of patents in Brazil, China, the European Union, Russia and USA. At present, the company has seven strategically located manufacturing facilities, out of which five are located in India and two are located overseas. It has also have setup one pilot plant at Tarapur, Maharashtra, for the scaling up of new products and processes from lab-scale to plant-scale. Out of its five manufacturing facilities in India, three are located at Tarapur (Maharashtra), one is located at Taloja (Maharashtra) and one is located at Jhagadia (Gujarat). Many of its key customers have audited and approved the manufacturing facilities and processes, which has helped the company to establish its reputation and reliability as a supplier of high-quality products and customized solutions, and also enabled it to receive recurring business as well as attract new customers.

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Company Introduction (Contd…): Competition: The company believes that its primary competitors in the business segments in which it operate are multi-national companies such as BASF Corporation, Clariant Ltd., Croda International PLC., Evonik Industries, Solvay S.A., Stepan Company and The Dow Chemical Company. The company also competes with several low cost domestic players. Financial performance: Over FY13-17, Galaxy reported a 8.1% CAGR rise in total operating revenue to Rs. 21,613.4mn in FY17. For the half year ended Sept. 2017, top-line stood at Rs. 11,924.8mn. Total Operating expenditure increased at a lowest pace of 6.7% as compared to top-line, thereby leading to a 22.3% CAGR rise in consolidated EBITDA over the period. Consequently, EBITDA margin expanded by around 480bps over FY13-17 to 12.4% in FY17. For H1 FY18, EBITDA margin stood at 11.8%. Depreciation charges was flat over FY13-17, while with the reduction in the debt levels, finance cost declined by 16.6% CAGR. Consequently, reported PAT increased by 379% CAGR to Rs. 1,463.1mn in FY17. PAT margin stood at 6.8% and 6.3% in FY17 and H1 FY18, respectively. Given below is the snapshot of the consolidated financial performance:

Note: All data are pre-issue; Source: Company RHP

FY13 FY14 FY15 FY16 FY17 H1 FY18 CAGR (%) Y-o-Y (%)

Revenue from Operations (Net) 15,807.4 16,972.9 18,739.4 18,019.1 21,613.4 11,924.8 8.1% 19.9% EBITDA 1,197.1 2,155.2 1,896.7 2,327.5 2,676.9 1,403.3 22.3% 15.0% EBIT 697.3 1,602.6 1,445.9 1,875.2 2,193.5 1,156.9 33.2% 17.0% Reported PAT 2.8 760.0 674.6 1,027.2 1,463.1 751.6 379.0% 42.4%

Restated Reported EPS (Rs.) 0.1 21.4 19.0 29.0 41.3 21.2 379.0% 42.4%

Cash Flow from Operating Activities 761.5 1,707.9 593.6 1,841.8 1,128.6 736.3 10.3% -38.7% NOPLAT 10.3 989.9 868.6 1,178.2 1,570.9 822.6 251.4% 33.3% FCF 471.5 903.9 (74.7) 1,030.0 -1478.9%

RoIC (%) 0.2% 18.7% 16.7% 18.5% 22.8% 11.3% 0.2255 0.0428

Revenue Growth Rate (%) 7.4% 10.4% -3.8% 19.9% EBITDA Growth Rate (%) 80.0% -12.0% 22.7% 15.0% EBITDA Margin (%) 7.6% 12.7% 10.1% 12.9% 12.4% 11.8% 481 bps (53) bps EBIT Growth Rate (%) 129.8% -9.8% 29.7% 17.0% EBIT Margin (%) 4.4% 9.4% 7.7% 10.4% 10.1% 9.7% 574 bps (26) bps Reported PAT Growth Rate (%) 27237.1% -11.2% 52.3% 42.4% Reported PAT Margin (%) 0.0% 4.5% 3.6% 5.7% 6.8% 6.3% 675 bps 107 bps

Inventories Turnover Ratio (x) 8.5 8.2 7.9 7.5 7.8 4.4 -2.1% 4.5% Trade Receivable Turnover Ratio (x) 8.9 8.9 8.8 7.6 7.2 3.1 -5.1% -5.2% Accounts Payable Turnover Ratio (x) 8.7 8.3 9.2 9.7 9.7 5.2 2.6% -0.3% Fixed Asset Turnover Ratio (x) 3.3 3.5 4.0 3.7 4.5 2.5 8.1% 20.9% Total Asset Turnover Ratio (x) 1.7 1.7 1.8 1.6 1.7 0.9 0.4% 3.5%

Current Ratio (x) 1.0 1.1 1.1 1.3 1.4 1.5 9.0% 2.3% Debt to Equity (x) 1.5 1.1 1.0 0.8 0.6 0.5 -21.7% -22.9% Total Debt (Rs.) 3,737.0 3,458.5 3,742.2 3,381.5 3,335.4 3,133.9 -2.8% -1.4% Net Debt (Rs.) 3,598.1 3,249.3 3,554.2 3,221.7 3,081.4 2,815.3 -3.8% -4.4% Net Debt to EBITDA (x) 3.0 1.5 1.9 1.4 1.2 2.0 -21.3% -16.8%

RoE (%) 0.1% 23.6% 17.9% 22.9% 25.6% 11.8% 2,544 bps 261 bps RoA (%) 0.0% 7.4% 6.4% 9.3% 11.4% 5.7% 1,135 bps 212 bps RoCE (%) 14.1% 28.8% 26.4% 27.8% 29.8% 15.0% 1,567 bps 200 bps

Competitive Strengths: • Established global supplier to major FMCG brands with demonstrated track

record • Robust product portfolio addressing diverse customer needs • Proven R&D capabilities with dedicated focus on innovation • Global footprint supporting local reach • Strong presence in high growth markets of India and AMET region • Professional and experienced management team • Track record of robust financial performance

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Business Strategy:

• Increasing the share of specialty care products in the sales mix • Continue to focus on R&D and product innovation • Increase wallet share with existing customers and continued focus to

expand customer base • Mutually complimentary two-pronged strategy to drive growth in both

emerging and mature markets • Continue improving financial performance through operational efficiencies

and functional excellence

Risk and Concerns:

• Subdued domestic economic expansion • Volatility and availability of key raw materials • Unfavorable sales-mix • Difficulty in identifying and adapting the changes in the consumer

preferences and tastes • Exchange rate risk

Peer Comparison and Valuation:

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Company Name Debt Equity

Ratio Fixed Asset

Turnover Ratio RoE (%) RoCE (%)

P / E (x)

P / B (x)

EV / Sales (x)

EV / EBITDA (x)

MCAP / Sales (x)

Earnings Yield (%)

Galaxy Surfactants Ltd. 0.6 4.5 25.6% 29.8% 35.9 9.2 2.6 20.8 2.4 2.8% BASF SE 0.5 0.8 12.9% 10.0% 17.4 2.8 1.6 8.6 1.4 5.7% Clariant AG 1.1 0.7 10.4% 6.9% 28.3 3.9 1.9 14.1 1.7 3.5% Croda International PLC 0.7 0.9 32.8% 20.3% 27.0 8.6 4.4 16.2 4.4 3.7% Evonik Industries AG 0.4 0.7 11.1% 9.9% 16.0 2.0 1.0 5.7 1.1 6.3% Solvay SA 0.5 0.5 7.3% 5.1% 10.9 1.3 1.4 6.4 1.1 9.2% Stepan Company 0.5 1.4 14.5% 10.5% 20.2 2.5 1.0 9.1 1.0 5.0% Average 0.6 0.8 14.8% 10.4% 20.0 3.5 1.9 10.0 1.8 5.6%

Company Name Currency CMP MCAP (mn)

EV (mn)

Total Operating Revenue

(mn)

EBITDA (mn)

PAT (mn)

EBITDA Margin (%)

PAT Margin

(%) EPS BVPS DPS

Galaxy Surfactants Ltd. * INR 1,480 52,473 55,554 21,613.4 2,676.9 1,463.1 12.4% 6.8% 41.3 161.5 6.0 BASF SE EUR 97.8 89,802 104,203 63,222.0 12,186.0 5,152.1 19.3% 8.1% 5.6 35.4 0.0 Clariant AG CHF 29.3 9,731 11,269 5,847.0 801.0 343.3 13.7% 5.9% 1.0 7.6 0.5 Croda International PLC GBX 4,534 5,958 6,322 1,342.2 367.3 220.4 27.4% 16.4% 1.7 5.3 1.8 Evonik Industries AG EUR 32 14,898 13,745 14,057.0 2,402.0 933.1 17.1% 6.6% 2.0 15.8 1.2 Solvay SA EUR 119 12,650 17,105.8 11,889.0 2,658.0 1,163.4 22.4% 9.8% 11.0 91.7 3.5 Stepan Company USD 81 1,827 1,918.2 1,871.8 210.0 90.6 11.2% 4.8% 4.0 32.6 0.8 Average 18.5% 8.6% 1.3

Note: “*” FY17 financials; For others it is TTM financials; Company financials are in their respective currencies Source: Choice Broking Research, Company RHP

There are no listed companies in India, which is engaged in the line of business similar to Galaxy. However, in terms of product profile, we have taken the above companies as the proxy peers for it. At the higher price band of Rs. 1,480 per share, Galaxy’s share is valued at a P/E multiple of 35.9x (to its restated FY17 EPS of Rs. 41.3), which is at a premium to the peer average of 20x. Below are few key observations of the issue: • Galaxy is one of the India’s leading manufacturers of surfactants and other specialty ingredients for the personal care and

home care industries. According to the management, it has a dominant market position in the industry. Its products find application in a host of consumer-centric personal care and home care products such as skin care, oral care, hair care, cosmetics, toiletries and detergent products.

• Since its incorporation in 1986, the company has significantly expanded and diversified its product profile, client base and geographical footprint. Currently, the company’s product portfolio comprises over 200 product grades, which are marketed to more than 1,700 customers in over 70 countries. As of FY17 end, it derived 35% of the gross revenue from the domestic customers, while the rest was derived from overseas markets. Around 52% of the revenue was generated from the multinational customers.

• Galaxy’s customers include some of the leading multinational, regional and local players in the home and personal care industries. The company’s customer base comprises a host of multinational, regional and local FMCG companies, which includes Cavinkare Pvt. Ltd., Colgate-Palmolive (India) Ltd., Dabur India Ltd., Henkel, Himalaya, L’ORÉAL, Procter & Gamble Home Products Pvt. Ltd., Reckitt Benckiser, Ayur Herbals (Pvt.) Ltd., Jyothy Laboratories Ltd. and Unilever. The company enjoys a long standing customer relation with almost all its customers, which demonstrates the guarantee of quality product & supply and innovation.

• Since the company’s product are the ingredients for the personal and home care products, whose demand are inelastic in nature i.e. end users demand is hardly impacted by the change in the product price. Thus the company’s products will continue to be in demand and would have minimal impact from the financial position of the end users.

• The market for personal and home care products in India is expected to grow at 7.9% and 7.2% CAGR by 2024. Further, the aggregate market for personal and home care products in Africa and the Middle East is expected to grow at 4.4% CAGR by 2024. Galaxy with its presence in these mature and emerging markets is expected to benefit from increased demands.

Peer Comparison and Valuation (Contd…): • Going forward, Galaxy is planning to focus more on specialty care products, which has higher margins as compared to

performance surfactants. Its specialty care products are used in sunscreens lotions, fairness creams and other personal care products. Going forward, with longer summer duration and increasing awareness of personal care, the strategy of the focusing on the specialty products augurs well for the company as this would assist in expanding the profitability margins.

• As on H1 FY18 end, the company had an aggregate installed capacity of around 0.35mn tonnes spread across seven strategic locations. Five manufacturing facilities are located in India and one each in the USA and Egypt. Through its facility in Egypt, Galaxy is able to address the needs of AMET, Europe and American markets. Thus its global network of manufacturing and sales activities helps it in reducing the dependence on any product and geography. Additionally, these capacities are operating at an average utilization of around 60%, thereby providing enough scope for production ramp-up.

• The manufacturing facility in Egypt was established in 2011 and enjoys a concessional tax regime for around 25 years. Pursuant to which it is exempted from all the direct and indirect taxes. Additionally, it has a manufacturing facility in the USA, which is engaged into the manufacturing of various grades of proteins for cosmetic applications. Over here also, the company would benefit from the proposed lower corporate tax rate (from 35% to 20%) by the USA government.

• Since 2002, a total of 47 patents have been granted to the company. Galaxy has also applied for an aggregate of 38 patents globally, of which 21 applications has been made in India and an aggregate of 17 applications has been made for the registration of patents in Brazil, China, the European Union, Russia and USA.

• On financial performance front, the company is consistently reporting growth, except in FY16 where the business was impacted mainly due to unprecedented fall in raw material prices. Over FY13-17, Galaxy reported an 8.1% CAGR rise in total operating revenue. Operating expenditure increased at a lowest pace of 6.7% as compared to top-line, thereby leading to a 22.3% CAGR rise in consolidated EBITDA over the period. Consequently, EBITDA margin expanded by around 5ppts during the period to 12.4% in FY17. With almost stable depreciation charge and 16.6% CAGR fall in the finance charge, reported PAT increased by 379% CAGR (from Rs. 2.8mn in FY13 to Rs. 1,463.1mn in FY17). PAT margin expanded by around 7ppts over the period to 6.8% in FY17. Pre-issue average RoIC and RoE over FY14-17 stood at 19.2% and 22.5%, respectively.

• H1 FY18 performance was mainly impacted by the implementation of GST and LBT, thereby leading to a lower EBITDA and PAT margin came at 11.8% and 6.3%, respectively as compared to FY17 levels. However, the management has indicated that all the issues related to GST and LBT has been settled and the operations are at normal levels.

• On valuation front, Galaxy is demanding a P/E valuation of 35.9x as compared to peer average of 20x. Its overseas peers are in the matured market and thus comparing with them will be inappropriate. If the demanded valuation of Galaxy is compared with the BSE FMCG index, then it is available at a discount. Thus considering the growth outlook of personal and home care products, the inelastic demand nature and the positioning of the company in the market, we strongly feel that it would create value in future.

Thus considering the above observations, we assign a “SUBSCRIBE” rating for the issue.

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Financial Statements:

7

Source: Company RHP

Consolidated Profit and Loss Statement (Rs. mn)

FY13 FY14 FY15 FY16 FY17 H1 FY18 CAGR over FY13-17 (%)

Annual Growth over FY16 (%)

Revenue from Operations (Net) 15,807.4 16,972.9 18,739.4 18,019.1 21,613.4 11,924.8 8.1% 19.9% Cost of Materials Consumed (11,048.7) (11,398.3) (12,533.0) (11,153.7) (15,144.9) (7,977.0) 8.2% 35.8% Purchase of Stock in Trade (412.9) (742.4) (751.0) (702.8) (525.5) (336.6) 6.2% -25.2% Changes in Inventories of Finished Goods, Work in Progress and Stock in Trade

(275.1) 392.3 50.2 (143.9) 417.7 (317.7) -390.2%

Employee Benefit Expenses (893.5) (1,041.8) (1,284.1) (1,446.2) (1,435.6) (751.4) 12.6% -0.7% Other Expenses (1,980.1) (2,027.6) (2,324.8) (2,245.1) (2,248.3) (1,138.8) 3.2% 0.1% EBITDA 1,197.1 2,155.2 1,896.7 2,327.5 2,676.9 1,403.3 22.3% 15.0% Depreciation and Amortization Expense (499.8) (552.6) (450.8) (452.3) (483.5) (246.5) -0.8% 6.9% EBIT 697.3 1,602.6 1,445.9 1,875.2 2,193.5 1,156.9 33.2% 17.0% Finance Costs (524.6) (415.0) (343.9) (308.8) (254.2) (147.9) -16.6% -17.7% Other Income 15.3 42.8 20.9 68.4 103.6 48.0 61.2% 51.3% PBT 188.1 1,230.4 1,122.9 1,634.9 2,042.9 1,057.0 81.5% 25.0% Tax Expenses (185.3) (470.5) (448.3) (607.7) (579.8) (305.4) 33.0% -4.6% Reported PAT 2.8 760.0 674.6 1,027.2 1,463.1 751.6 379.0% 42.4%

Consolidated Balance Sheet Statement (Rs. mn)

FY13 FY14 FY15 FY16 FY17 H1 FY18 CAGR over FY13-17 (%)

Annual Growth over FY16 (%)

Equity Share Capital 354.6 354.6 354.6 354.6 354.6 354.6 0.0% 0.0% Reserves and Surplus 2,058.6 2,868.0 3,424.3 4,123.2 5,371.6 5,995.9 27.1% 30.3% Long Term Borrowings 2,215.1 2,041.3 1,410.7 1,958.0 1,294.1 1,014.4 -12.6% -33.9% Deferred Tax Liabilities (Net) 238.7 229.9 207.6 206.9 244.4 236.6 0.6% 18.1% Other Long Term Liabilities 18.0 30.8 13.2 25.2 6.8 7.4 -21.6% -73.0% Long Term Provisions 49.8 37.9 75.9 76.7 88.2 122.2 15.3% 15.0% Short Term Borrowings 1,521.8 1,417.3 2,331.4 1,423.5 2,041.4 2,119.5 7.6% 43.4% Trade Payables 1,811.9 2,287.2 1,778.6 1,933.9 2,531.9 2,304.3 8.7% 30.9% Other Current Liabilities 1,248.0 866.2 933.1 925.0 864.4 877.3 -8.8% -6.6% Short Term Provisions 40.3 107.9 72.8 65.4 56.6 120.6 8.8% -13.4% Total Liabilities 9,556.9 10,240.8 10,602.2 11,092.3 12,853.8 13,152.7 7.7% 15.9%

Tangible Assets 4,531.4 4,577.5 4,461.9 4,249.4 4,647.4 4,538.6 0.6% 9.4% Intangible Assets 25.6 162.9 132.3 108.2 78.1 69.6 32.1% -27.8% Capital Work in Progress 269.5 61.0 65.1 507.6 103.3 161.2 -21.3% -79.7% Non Current Investments 0.1 0.1 0.1 0.1 0.1 0.1 0.0% 0.0% Deferred Tax Assets (Net) 15.2 13.7 26.1 32.2 90.8% Long Term Loans and Advances 223.4 278.2 270.2 359.2 434.6 386.6 18.1% 21.0% Other Non Current Assets 0.2 0.2 0.2 0.2 0.2 0.2 0.0% 0.0% Inventories 1,859.3 2,303.9 2,459.9 2,357.7 3,174.2 2,721.5 14.3% 34.6% Trade Receivables 1,767.1 2,044.7 2,212.7 2,501.9 3,462.8 3,826.7 18.3% 38.4% Cash and Bank Balances 138.8 209.2 188.0 159.8 254.0 318.6 16.3% 58.9% Short Term Loans and Advances 617.3 523.3 733.4 576.0 449.7 810.7 -7.6% -21.9% Other Current Assets 124.1 79.9 63.3 258.6 223.3 286.8 15.8% -13.7% Total Assets 9,556.9 10,240.8 10,602.2 11,092.3 12,853.8 13,152.7 7.7% 15.9%

Source: Company RHP

Financial Statements (Contd…):

7

Note: Pre-issue data; Source: Company RHP

Source: Company RHP

Consolidated Cash Flow Statement (Rs. mn)

Particulars (Rs. mn) FY13 FY14 FY15 FY16 FY17 H1 FY18 CAGR over FY13-17 (%)

Annual Growth over FY16 (%)

Cash Flow from Operations 761.5 1,707.9 593.6 1,841.8 1,128.6 736.3 10.3% -38.7% Cash Flow from Investing Activities (635.6) (460.3) (347.5) (648.5) (451.3) (181.8) -8.2% -30.4% Cash Flow from Financing Activities (131.8) (1,216.2) (275.0) (1,191.1) (567.0) (492.8) 44.0% -52.4%

Net Cash Flow (6.0) 31.3 (28.9) 2.2 110.3 61.7 4866.7% Opening Balance of Cash and Bank Balances 119.0 117.4 160.3 136.9 140.0 249.9 4.1% 2.2% Unrealized Gain on Foreign Currency Cash & Cash Equivalents

4.4 11.6 5.5 0.8 (0.3) 2.6 -136.7%

Closing Balance of Cash and Bank Balances 117.4 160.3 136.9 140.0 249.9 314.2 20.8% 78.6%

Consolidated Financial Ratios

Particulars (Rs. mn) FY13 FY14 FY15 FY16 FY17 H1 FY18

Revenue Growth Rate (%) 7.4% 10.4% -3.8% 19.9%

EBITDA Growth Rate (%) 80.0% -12.0% 22.7% 15.0%

EBITDA Margin (%) 7.6% 12.7% 10.1% 12.9% 12.4% 11.8%

EBIT Growth Rate (%) 129.8% -9.8% 29.7% 17.0%

EBIT Margin (%) 4.4% 9.4% 7.7% 10.4% 10.1% 9.7%

Adjusted PAT Growth Rate (%) 27237.1% -11.2% 52.3% 42.4%

Adjusted PAT Margin (%) 0.0% 4.5% 3.6% 5.7% 6.8% 6.3%

Liquidity Ratios

Current Ratio 1.0 1.1 1.1 1.3 1.4 1.5

Debt Equity Ratio 1.5 1.1 1.0 0.8 0.6 0.5

Net Debt to EBITDA 3.0 1.5 1.9 1.4 1.2 2.0

Turnover Ratios

Inventories Days 42.9 44.8 46.4 48.8 46.7

Trade Receivable Days 40.8 41.0 41.5 47.7 50.4

Accounts Payable Days (41.8) (44.1) (39.6) (37.6) (37.7)

Cash Conversion Cycle Days 41.9 41.7 48.3 58.9 59.4

Fixed Asset Turnover Ratio (x) 3.3 3.5 4.0 3.7 4.5

Total Asset Turnover Ratio (x) 1.7 1.7 1.8 1.6 1.7

Return Ratios

RoE (%) 0.1% 23.6% 17.9% 22.9% 25.6%

RoA (%) 0.0% 7.4% 6.4% 9.3% 11.4%

RoCE (%) 14.1% 28.8% 26.4% 27.8% 29.8%

Per Share Data

Restated Adjusted EPS (Rs.) 0.1 21.4 19.0 29.0 41.3 21.2

Restated DPS (Rs.) 1.0 4.0 4.0 6.0 6.0 0.0

BVPS (Rs.) 68.1 90.9 106.6 126.3 161.5 179.1

Restated Operating Cash Flow Per Share (Rs.) 21.5 48.2 16.7 51.9 31.8 20.8

Restated Free Cash Flow Per Share (Rs.) 13.3 25.5 (2.1) 29.0

11

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