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Tata Chemicals (TTCH IN) From cyclical to consumer; FY17 margins to improve INDIA | AGRI INPUTS | Company Update

22 December 2015

Based on our recent meeting with Tata Chem’s management, we infer that its overseas subsidiary’s margins could improve in FY17; to factor this, we raise our EPS estimates by 7%. Its consumer business revenues could grow 2x+ by FY20 and form ~40% of EBITDA. A rerating seems likely given bettering earnings mix (rising share of consumer), improving capital discipline, attractive valuations (10x FY17 PER, 1.5x PBR), and unvalued 2.5% holding in Tata Sons worth Rs 80bn. Given steep correction in its investment holding and marginally higher working capital, we revise PT to Rs 530 (Rs 560 earlier). Reiterate Buy.

India soda ash ops to continue delivering: Robust domestic soda ash demand continues, driven by higher demand from key industries – likely to grow 3% p.a. (medium term). Capacity additions could remain low; therefore, chances of deep price cuts are moderate. Wholesale prices in India are firm over the last six months, while retail prices have corrected by just 10%. The fall in input costs have helped a 140bps margin expansion in H1FY16 – we see this sustaining in H2FY16.

North America soda‐ash margins to expand in FY17: Global soda ash demand‐supply is favourable led by improving demand and supply tightness, as about 1.4mmt of global capacity has gone off stream (Tata Chem’s 0.8mmt in Kenya and UK, Solvay’s plant in Portugal, and Penrice plant in Australia). With a steep fall in commodity prices, soda‐ash prices could correct, albeit to a lesser extent than costs. Margins could expand led by easing input costs and weakening INR. Tata Chem has addressed technical issues in its US plant and sees the Q2 production run‐rate staying level with H2FY16. EBITDA margin of US$ 43/mt in H1FY16 is likely to improve due to easing input costs.

UK/Kenya turnaround on track: With the commissioning of the steam turbine, its UK plant is operating at full throttle; management reiterated EBITDA guidance of £ 25‐30mn or Rs 2.5‐3.0bn (collectively from European soda ash, bicarbonate, and salt businesses and third‐party power sales in FY17) vs. H1FY16 EBITDA of Rs 560mn. In order to continue manufacturing in Magadi, Kenya, TCML mothballed its premium ash plant (to reduce energy cost). Since then, Kenya’s performance has improved. While the management reiterated EBITDA guidance of US$ 15mn in FY16, it is perhaps set to over achieve (H1FY16 EBITDA was Rs 570mn). We model BMGL EBITDA of Rs 2.3/2.7bn in FY16/17 (FY17 guidance of Rs 3.5bn).

Fertilisers – inventory liquidation key near‐term overhang: The division’s current EBITDA run‐rate is Rs 3.5bn, but it has the potential to clock Rs 5.0‐5.5bn. With improved market collection and early receipt of fertiliser dues, interest outgo should fall (currently at Rs1.8‐2bn), driving PBT higher. Tata Chem has switched to NPK‐grade fertilisers (from DAP) and says this will aid P&K margins. The new investment policy for urea promises RoE (post tax) of 12%; however, as the government has withdrawn assurance to offtake (minimum eight years) and as the new policy is to be reviewed every five years, the company reiterated its commitment to not invest in this business further. Management expects inventory jump (up Rs 6bn in H1FY16 vs. FY15) to normalise in quarters ahead. It declined to comment on the sale of its fertiliser division; we infer it could be put off by the valuation.

Leap 2020 vision – set on improving capital efficiency: Tata Chem has drawn up an ambitious plan called ‘Leap 2020’ where its targets include (1) tripling market capitalisation, (2) manifold increase in revenues from consumer business (to Rs 50bn from Rs 15bn), (3) enhancing farm business (non‐subsidised, largely crop chemicals and micro‐nutrients) to Rs 80bn from Rs 25bn, and (4) improving chemical revenues to Rs 120bn from Rs 85bn. Tata Chem said there is scope to expand capacity in North America and Kenya, but it hasn’t drawn up any firm plans yet. Savings in interest would drive earnings (+20%) and returns (+250‐300 bps) with (1) no major planned capex; only annual maintenance of Rs 2bn, (2) improving free cash (Rs 1.2‐1.4bn), and (3) focus on retiring the entire standalone debt over the next three years (Rs 29bn as of H1FY16).

BUY (Maintain) CMP RS 392 TARGET RS 530 (+35%) COMPANY DATA O/S SHARES (MN) : 255MARKET CAP (RSBN) : 100MARKET CAP (USDBN) : 1.552 ‐ WK HI/LO (RS) : 523 / 363LIQUIDITY 3M (USDMN) : 3PAR VALUE (RS) : 10 SHARE HOLDING PATTERN, % Sep 15 Jun 15 Mar 15PROMOTERS : 31.0 31.0 31.0FII / NRI : 22.5 21.7 21.5FI / MF : 25.2 26.0 26.1NON PRO : 2.5 2.6 2.5PUBLIC & OTHERS : 19.4 19.3 19.5 PRICE PERFORMANCE, %

1MTH 3MTH 1YRABS ‐9.0 2.6 ‐8.4REL TO BSE ‐7.9 2.8 ‐0.8 PRICE VS. SENSEX

Source: Phillip Capital India Research KEY FINANCIALS Rs mn FY16E FY17E FY18ENet Sales 181,331 190,743 195,578EBIDTA 23,766 26,245 27,273Net Profit 8,950 10,284 11,095EPS, Rs 35.1 40.4 43.5PER, x 11.2 9.7 9.0EV/EB, x 6.9 6.0 5.4P/BV, x 1.6 1.5 1.3ROE, % 14.6 15.1 14.8Debt/Eq% 123 96 76

Source: PhillipCapital India Research Est. Gauri Anand (+ 9122 6667 9943) [email protected]

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TATA CHEMICALS COMPANY UPDATE

Soda ash – margins to expand Despite a steep fall in commodities, soda ash prices have corrected by only 5‐10%. However, the deeper correction in energy and freight costs has led to improved margins for Tata Chem’s soda ash operations in H1FY16. Soda ash prices are due for a revision from January 2016; while management hinted at a US$5‐6/mt fall in soda ash prices, it is far less than the fall in costs. Our impression is margins could expand, led by easing input costs and weakening INR. It has resolved the issues at its US operations (plant outages in Q1FY16) and BMGL operations are on track for a rebound – all these point to improved soda ash margins even in FY17. BMGL operations turning around; US production issues that marred profitability in Q1FY16 have been addressed

Soda ash prices in the US, Europe are holding firm; however, Chinese prices have dropped

Indian soda ash prices are firm despite correction in commodities and energy such as Brent/Gas

Source: Bloomberg, PhillipCapital

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India Soda ash wholesale price Index



Fertilisers – turning around the corners The fertiliser business was locked in an impasse – archaic policy regime, delayed subsidy payments (that shot up interest outgo), stiff competition from imports, volatile currency, and two failed monsoon season that dampened offtake. These events dented profitability, which was aggravated by reduced focus (as it intended to exit the business). However, now, this business seems turning around the corners as (1) Tata Chem is likely to have shelved aside its plans to hive off, (2) some of the issues )such as uniform gas prices, introduction of new urea policy, and antificated correction in LNG prices from Qatar) seem to be resolving, and (3) the company has shifted production to NPK (from DAP) in Haldi. The division’s current EBITDA run‐rate is Rs 3.5bn, but it has the potential to clock Rs 5‐5.5.0bn. With improved market collection and early receipt of fertiliser dues, the interest outgo should fall (current outgo of Rs 1.5‐2bn), driving PBT higher. While Tata Chem is positive about the new urea‐investment policy it is determined not to invest further capital into this business. It expects the recent jump in inventory (up Rs 6bn in H1FY16 over FY15) to normalise in the quarters ahead. While it declined specific comments on the sale of its fertiliser division, we infer that it is perhaps put‐off by the valuation. While government dues see faster collection, Fertiliser margins have been under pressure largely led but inventories are a cause of concern P&K fertilisers

Fertilisers PBT can potentially double in FY17/18 Rs mn Mar‐09 Mar‐12 Mar‐15 H1FY16 Mar17/18ERevenue 69,115 55,476 65,373 34,385 59,347EBITDA 7,996 6,451 3,795 2,045 5,090Depreciation 2,977 1,337 729 365 693Interest 762 792 1,359 999 1,155PBT 4,256 4,322 1,707 682 3,242

EBITDA Bridge Rs mn Trading 256 333 272 161 167UREA 3,546 3,255 2,984 1,634 3,134SSP ‐ 135 138 50.73 140IMACID 440 700 520 420 700Implied Mfg P&K (EBITDA Rs/mt) 6,144 3,856 (201) (707) 1500

Source: Bloomberg, PhillipCapital India Research

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Consumer businesses: Share improving Tata Chem’s ‘Leap 2020’ vision targets manifold increase in revenues from consumer business (to Rs 50bn from Rs 15bn). We see consumer business revenues doubling to Rs 30bn by FY20. This business has the potential to up its share in overall EBITDA to 35% from 22% at present. Pulses, spices, water purifier, and nutritional solutions revenues have compounded 69% since inception. However the bedrock of the business remains salts. After the salt capacity expansion in FY13, Tata Chem salt volumes have improved by 7.6% in FY15 over FY12. Due to new premium variants such as Tata Salt Lite (low sodium), Tata Salt Plus (iodine plus iron fortified), Tata Salt Flavoritz (flavours added), it has steadily raised its market share (accounts for 2.5% of salt volumes). As a result, cumulative blended realisations have improved 35% to Rs 13.6/kg (FY15 over FY11). Given that salt is a high margin earner (share in revenues at just 6% but 22% to overall EBITDA); premiumisation should drive profits further. India’s edible salt industry is 5.9mmt (rising by 1.5% p.a.); however, branded salts form just about a quarter of this. With rising incomes/awareness and changing tastes, the branded share is likely to rise, driving earnings and returns for Tata Chem (market share in branded salt at 68%). Share of branded salts rising in overall edible salts Consumer business revenues to double by FY20

Source: Company, PhillipCapital India Research Limited competition in premium variants to drive profits. Base variant (Tata Salt)’s prices are in line with competition

Source: Industry, PhillipCapital India Research

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Others Pulses Salt

Rs 18/kgRs 20/kg

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Rs 1500/kg

Tata Salt ‐ ‘Iodised’

Tata Salt Plus ‐‘Iron + Iodine’

Tata Salt –‘lite’

Tata Salt ‐‘Paprika’

PantanjaliRs 18/kg

Saffola less sodium Rs 28/kg

AashirwaadRs 17/kg

Hypercity IodisedSalt Rs 15/kg



Branded pulses retailing seeing better traction Tata I‐Shakti unpolished dal and besan have shown good acceptance – on a low base, revenues jumped 82% in FY15 to Rs 2.4bn. To create more consumer awarenes, the company has stepped up brand‐building activities and awareness campaigns for promoting unpolished dals – this could result in a jump in A&P expenses. Tata Chem has plans to enter other staples and spices and build on its exisiting dal/salt network; else its FY20 target of Rs 50bn in revenues will be difficult to achieve. Just like in salt, the large unbranded pulses industry (Rs 1.8tn) presents a huge opportunity for Tata Chem over the longer term. We estimate pulses revenues climbing to Rs 12bn in FY20; at 8% net margins, pulses can form ~10% of its overall profits in FY20. Rerating ahead of change in earnings mix – from cyclical to consumer – is imminent. Tata I‐Shakti unpolished dals at 13‐15% premium to private labels

Source: Industry, PhillipCapital India Research

Tata I shalkti Tur dalRs 230/kg

Tata I shalkti Masoor dalRs 135/kg

Tata I shalkti Urad dalRs 170/kg

Tata I shalkti Channa dalRs 94/kg

Hypercity Tur dalRs 195/kg

Hypercity Masoor dalRs 119/kg

Hypercity Urad dalRs 205/kg

Hypercity Channa dalRs 104/kg

Tur dal looseRs 200/kg

Masoor dal looseRs 100/kg

Urad dal looseRs 200/kg

Chana dal looseRs 85/kg



Valuation summary We believe Tata Chem has levers for an earnings surprise led by (1) improving soda ash margins (on easing input costs), (2) recent restructuring initiatives in UK/Kenya that will reverse earnings to the mean over two years (accretion to EBITDA at Rs 2.5bn in FY16/17), and (3) most fertiliser‐business headwinds seem to be receding barring the issue of timely receipt of government dues (Rs 10bn subsidy outstanding vs. normal outstanding of Rs 7bn) and marginally higher inventories. With improved cash flows, limited capex, and consequent fall in debt (Rs 20bn), dividends should rise.

We have valued Tata Chem using sum‐of‐the‐parts; we assign 7x multiple to consolidated FY17 EBITDA and assume quoted investments at 70% of market value (most of the investments are in group companies, so we assume a discount of 30%) and unquoted investments at book. We arrive at a PT of Rs 530. Reiterate Buy. Valuation table Rs mn FY17EFert & Chem business 183,713 Investments Quoted 9,496 Investments unquoted 2,278 Value of firm 195,487 Add: Cash FY16E 7,475 Less: Debt FY16E 65,083 Enterprise value 137,880 Target Price Rs. 530

Source: Company, PhillipCapital India Research Long‐term positives: We expect a tighter control on credit, fall in commodity costs (that would lower the need for debt) and repayment of debt to result in interest savings in FY17/18. Tata Chemicals is trading at 1.5x FY17 book and 10x PER and offers a 3% yield. Revision in estimates

_____________FY16E_____________ _____________FY17E_____________Rs mn Earlier Now % Chg Earlier Now % ChgRevenue 185,584 181,331 ‐2.3 190,064 190,743 0.4EBIDTA 24,173 23,766 ‐1.7 25,159 26,245 4.3PAT 8,904 8,950 0.5 9,593 10,284 7.2EPS 34.9 35 0.6 37.6 40 7.3

Source: Company, PhillipCapital India Research



TCL's overseas operational performance review Rs mn Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 YoY% QoQ% FY14 FY15 YoY%GCIP Net Sales (Rs mn) 7,370 7,930 7,190 7,080 7,780 6 10 14,250 14,860 4%EBIT (Rs mn) 1,700 2,020 1,600 1,360 1,630 ‐4 20 3,170 2,990 ‐6%EBIT % 23 25 22 19 21 ‐9 9 22 20 ‐10%PBT (Rs mn) 1,240 1,570 1,150 910 1,140 ‐8 25 2,280 2,050 ‐10%PAT (Rs mn) 670 1,000 (400) 540 720 7 33 1,250 1,260 1%Tax rate (%) 46 36 135 41 37 ‐20 ‐9 45 39 ‐15%Sales Volumes (000 Mt) 602 624 569 538 551 ‐8 2 1,169 1,089 ‐7%Realisation Rs/ Mt 12,243 12,708 12,636 13,160 14,120 15 7 12,190 13,646 12%Re/USD 60.0 62.0 63.0 63.5 64.9 8 2 60.5 64.2 6%Realisation US $/Mt 204 205 201 207 218 7 5 201 213 5%EBIT/ Mt (INR) 2,824 3,237 2,812 2,528 2,958 5 17 2,712 2,746 1%EBIT/ Mt (US$) 47 52 45 40 46 ‐3 15 45 43 ‐5% BMGL (incl British Salt) Net Sales (Rs mn) 5,900 6,110 6,000 5,870 5,950 1 1 11,990 11,820 ‐1%EBIT (Rs mn) 290 490 590 530 600 107 13 440 1,130 157%EBIT % 5 8 10 9 10 105 12 4 10 161%PBT (Rs mn) (380) (120) 180 (10) (240) ‐37 2,300 ‐670 ‐250 ‐63%PAT (Rs mn) (360) (120) 180 (20) (230) ‐36 1,050 ‐650 ‐250 ‐62%Sales Volumes (000 Mt) 221 207 214 197 225 2 14 466 422 ‐9%Realisation Rs/ Mt 26,697 29,517 28,037 29,797 26,444 ‐1 ‐11 25,730 28,009 9%Re/USD 60.0 62 63.0 63.5 64.9 8 2 60.5 64.2 6%Realisation US $/Mt 445 476 445 469 407 ‐8 ‐13 425 436 3%EBIT/ Mt (INR) 1,312 2,367 2,757 2,690 2,667 103 ‐1 944 2,678 184%EBIT/ Mt (US$) 22 38 44 42 41 88 ‐3 16 42 167% IMACID Net Sales 1,640 1,510 1,020 1,920 1,920 25 88 3,170 3,810 20%EBIT 170 130 80 200 200 43 150 310 420 35%EBIT % 10 9 8 10 10 14 33 10 11PBT 150 150 60 170 170 42 183 270 360 33%APAT 130 120 50 140 140 27 180 240 290 21%Source: Company, PhillipCapital India Research Operating margins performance (%) Sales vol. ('000 mt)

Source: Company, PhillipCapital India Research

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Salt DAP/NPK Urea Soda Ash



Financials

Income Statement Y/E Mar, Rs mn FY15 FY16E FY17E FY18ENet sales 169,126 181,331 190,743 195,578Growth, % 7 7 5 3Other Operating expenses ‐89,500 ‐101,778 ‐106,649 ‐109,014EBITDA (Core) 21,574 23,766 26,245 27,273Margin, % 12.8 13.1 13.8 13.9Depreciation ‐4,631 ‐4,530 ‐4,500 ‐4,466Interest paid ‐4,540 ‐4,770 ‐4,203 ‐3,543Other Non‐Operating Income 1,180 1,241 1,290 1,220Non‐recurring Items 1,997 0 0 0Pre‐tax profit 15,513 15,616 18,702 20,398Tax provided ‐3,511 ‐4,241 ‐5,649 ‐6,145Profit after tax 12,002 11,375 13,053 14,253Others (Minorities, Associates) ‐2,001 ‐2,424 ‐2,769 ‐3,158Net Profit 10,001 8,950 10,284 11,095Growth, % 104.4 11.8 14.9 7.9Net Profit (adjusted) 8,004 8,950 10,284 11,095Unadj. shares (m) 255 255 255 255Wtd avg shares (m) 255 255 255 255 Balance Sheet Y/E Mar, Rs mn FY15 FY16E FY17E FY18ECash & bank 14,643 11,906 7,475 9,990Debtors 34,418 37,260 36,581 32,150Inventory 26,264 23,743 22,534 20,750Loans & advances 10,926 7,926 6,926 5,926Total current assets 87,935 82,518 75,201 70,500Investments 4,429 4,429 4,429 4,429Gross fixed assets 120,147 120,147 120,147 120,147Less: Depreciation ‐76,128 ‐71,598 ‐67,097 ‐62,631Add: Capital WIP 1,893 2,500 2,500 3,000Net fixed assets 45,913 51,049 55,549 60,516Non‐current assets 69,586 69,586 69,586 69,586Total assets 208,073 207,793 204,975 205,241Current liabilities 35,038 36,261 36,055 36,889Provisions 24,536 25,853 26,179 26,831Total current liabilities 59,574 62,114 62,234 63,720Non‐current liabilities 86,247 77,286 67,354 59,354Total liabilities 145,821 139,400 129,588 123,074Paid‐up capital 2,548 2,548 2,548 2,548Reserves & surplus 52,969 58,665 65,380 72,197Shareholders’ equity 62,252 68,393 75,483 82,731Total equity & liabilities 208,073 207,793 204,975 205,241 Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY15 FY16E FY17E FY18EPre‐tax profit 15,513 15,616 18,702 20,398Depreciation 4,631 4,530 4,500 4,466Chg in working capital ‐3,586 5,220 3,007 8,702Total tax paid ‐3,359 ‐4,241 ‐5,649 ‐6,145Cash flow from operating activities 12,736 21,125 20,560 27,421Capital expenditure ‐3,024 ‐9,667 ‐9,000 ‐9,432Chg in investments ‐20 0 0 0Cash flow from investing activities ‐6,552 ‐9,591 ‐8,895 ‐9,284Free cash flow 6,184 11,534 11,665 18,137Equity raised/(repaid) 0 0 0 0Debt raised/(repaid) ‐1,583 ‐8,961 ‐9,932 ‐8,000Dividend (incl. tax) 3,631 3,195 3,486 4,067Cash flow from financing activities ‐10,873 ‐7,745 ‐8,840 ‐6,660 Valuation Ratios

FY15 FY16E FY17E FY18EPer Share data EPS (INR) 31.4 35.1 40.4 43.5Growth, % 104.4 11.8 14.9 7.9Book NAV/share (INR) 217.9 240.2 266.6 293.3FDEPS (INR) 31.4 35.1 40.4 43.5CEPS (INR) 41.7 52.9 58.0 61.1CFPS (INR) 56.7 78.4 76.1 103.2DPS (INR) 12.5 11.0 12.0 14.0Return ratios Return on assets (%) 7.3 6.9 7.6 8.0Return on equity (%) 14.4 14.6 15.1 14.8Return on capital employed (%) 8.6 8.4 9.2 9.7Turnover ratios Asset turnover (x) 2.0 2.1 2.2 2.3Sales/Total assets (x) 0.8 0.9 0.9 1.0Sales/Net FA (x) 3.6 3.7 3.6 3.4Working capital/Sales (x) 0.2 0.2 0.2 0.1Working capital days 82.6 69.1 60.6 44.1Liquidity ratios Current ratio (x) 2.5 2.3 2.1 1.9Quick ratio (x) 1.8 1.6 1.5 1.3Interest cover (x) 3.7 4.0 5.2 6.4Dividend cover (x) 2.5 3.2 3.4Total debt/Equity (%) 151.3 122.5 95.8 76.4Net debt/Equity (%) 124.9 103.1 84.8 63.0Valuation PER (x) 12.5 11.2 9.7 9.0Price/Book (x) 1.8 1.6 1.5 1.3EV/Net sales (x) 1.0 0.9 0.8 0.8EV/EBITDA (x) 7.8 6.9 6.0 5.4EV/EBIT (x) 10.0 8.5 7.2 6.4



Stock Price, Price Target and Rating History

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%.

N (TP 385)

N (TP 360)

N (TP 300) B (TP 300)

B (TP 325)

N (TP 300)

N (TP 300)

N (TP 310)

B (TP 440)

B (TP 370)

B (TP 520) B (TP 530)

B (TP 560)

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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

INDONESIA PT Phillip Securities Indonesia

ANZTower 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, OceanTower 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, VorawatBuilding, 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 TradeBuilding

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) 2300 2999

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

Research Engineering, Capital Goods Midcap

Dhawal Doshi (9122) 6667 9769 Jonas Bhutta (9122) 6667 9759 Amol Rao (9122) 6667 9952Nitesh Sharma, CFA (9122) 6667 9965 Hrishikesh Bhagat (9122) 6667 9986

Portfolio StrategyAgri Inputs Infrastructure & IT Services Anindya Bhowmik (9122) 6667 9764Gauri Anand (9122) 6667 9943 Vibhor Singhal (9122) 6667 9949

Deepan Kapadia (9122) 6667 9992 TechnicalsBanking, NBFCs Subodh Gupta, CMT (9122) 6667 9762Manish Agarwalla (9122) 6667 9962 Logistics, Transportation & MidcapPradeep Agrawal (9122) 6667 9953 Vikram Suryavanshi (9122) 6667 9951 Production ManagerParesh Jain (9122) 6667 9948 Ganesh Deorukhkar (9122) 6667 9966

MetalsConsumer, Media, Telecom Dhawal Doshi (9122) 6667 9769 Database ManagerNaveen Kulkarni, CFA, FRM (9122) 6667 9947 Yash Doshi (9122) 6667 9987 Deepak Agarwal (9122) 6667 9944Jubil Jain (9122) 6667 9766Manoj Behera (9122) 6667 9973 Oil & Gas Editor

Sabri Hazarika (9122) 6667 9756 Roshan Sony 98199 72726CementVaibhav Agarwal (9122) 6667 9967 Pharma Sr. Manager – Equities Support

Surya Patra (9122) 6667 9768 Rosie Ferns (9122) 6667 9971Economics Mehul Sheth (9122) 6667 9996Anjali Verma (9122) 6667 9969

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 9745Sidharth Agrawal (9122) 6667 9934 ExecutionBhavin Shah (9122) 6667 9974 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 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 No4 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, Marco Polo Securities Inc. ("Marco Polo"). Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 GanpatraoKadamMarg, Lower Parel West, Mumbai 400013

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