natco pharmacontent.indiainfoline.com/.../natco_091215.pdfnatco pharma 2 domestic oncology business...

Sector: Pharmaceuticals

Sector view: Positive

Sensex: 25,310

52 Week h/l (Rs): 598 / 261

Market cap (Rscr) : 8,790

6m Avg vol (‘000Nos): 382

Bloomberg code: NTCPH IN

BSE code: 524816

NSE code: NATCOPHARM

FV (Rs): 2 Price as on December 08, 2015

Company rating grid

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Natco Pharma Sensex

Share holding pattern % Mar‐15 Jun‐15 Sep‐15

Promoters 53.8 53.8 51.3

Insti 15.7 15.0 16.7

Others 30.5 31.2 32.0

Rating: BUY Target: Rs620

CMP: Rs505

Upside: 22.8%

Company Report

Research Analyst: Kushal Rughani Bhavesh Gandhi

[email protected]

Natco Pharma

This report is published by IIFL ‘India Private Clients’ research desk. IIFL has other business units with independent research teams separated by 'Chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc. The views and opinions expressed in this document may at times be contrary in terms of rating, target prices, estimates and views on sectors and markets.

December 09, 2015

Change in Estimates Rating Target

Play on lucrative US pipeline

We had an interaction with Natco Pharma management to understand the key growth drivers such as domestic oncology business, generic Sovaldi opportunity and contours of US pipeline. Natco enjoys healthy market share of domestic oncology segment and it accounted for ~51% of domestic formulations revenues in H1 FY16. Management expects gSovaldi to contribute Rs. 150‐200cr of revenues in FY16E and progressively higher in FY17E, which would drive domestic formulations growth. Company remained upbeat on the potential of US pipeline as sizable launches loom in FY17 and beyond; we believe large US pending approvals like Copaxone and Tamiflu provide robust revenue visibility along with superior margins over the next 2 to 3 years. Natco would enhance its filing rate from the current 4‐6 ANDAs to 6‐8 products and may further target 8‐10 ANDAs in the coming years. International business ex‐US contributed ~50% of export formulation revenues with major contribution from Latin America in FY15. We forecast ~39% revenue and 51% EPS cagr over FY15‐18E combined with 550bps margin expansion. We value the stock on SOTP basis incorporating PV of US opportunities beyond FY18E; upgrade to BUY and 9‐12mth target of Rs620. Delay in large FDA approvals expected over next 12‐18 months and slower domestic oncology/gSovaldi revenues constitute key risks to our positive view. US pipeline, gSovaldi and domestic oncology key drivers: BUY Large US pending approvals such as Copaxone, Tamiflu and several other smaller launches would be the key driver for Natco in the next 2‐3 years. Natco continues to remain confident about its US filings, and is anticipating a few approvals to come through in the current and next fiscal. Domestic formulations business would be driven by strong position in oncology supported by momentum in gSovaldi sales. We forecast ~90% revenue cagr in international formulations largely driven by US pipeline monetization; upgrade to BUY with revised 9‐12mth target of Rs620. Financial summary Y/e 31 Mar (Rs cr) FY15 FY16E FY17E FY18E

Revenues 825 1,034 1,732 2,233

yoy growth (%) 11.7 25.3 66.3 27.3

Operating profit 213 263 558 692

OPM (%) 25.9 25.5 32.2 31.0

Reported PAT 135 148 377 466

yoy growth (%) 30.7 10.1 152.3 22.0

EPS (Rs) 8.0 8.8 22.5 27.8

P/E (x) 62.9 57.1 22.5 18.2

P/BV (x) 10.0 6.5 5.2 4.2

EV/EBITDA (x) 40.7 32.3 15.2 11.9

Debt/Equity (x) 0.4 0.2 0.1 0.0

ROE (%) 17.1 13.8 25.6 25.4

ROCE (%) 16.5 16.1 30.7 32.7 Source: Company, India Infoline Research

Natco Pharma

2

Domestic oncology business will continue to grow at ~18% Natco is the key player in the domestic oncology segment and derived 51% of domestic formulations revenues from oncology segment in H1 FY16. The current size of oncology market in India is at ~Rs. 2,500cr, of which Natco addresses ~Rs. 800cr. Company has progressively widened its oncology products range from 6 in 2004 to 24 in 2015. Company’s product pipeline consists of drugs used for various types of cancer – blood, lung, liver, kidney, breast, brain, ovary and prostate. Some of its key products (~Rs. 10cr brands) comprise Geftinat, Erlonat, Veenat, Sorafenat and Lenalid. Natco’s several products remain leaders in their own segment/sub segments. Company expects > Rs. 200cr in FY16E revenues from domestic oncology business and would grow at an annualized 15%‐20% run rate; domestic formulations have shown 10.5% revenue cagr over FY11‐15. As on Mar 2015, company has filed 161 patents out of which 80 have been granted in domestic market. Oncology remains less crowded with few other players like Dr Reddys, Intas Pharma, Cadila Healthcare and Cipla who are the other key players. We expect company to post robust 33% cagr in domestic formulations over FY15‐18E largely led by gSovaldi. Natco does not anticipate any of its products will come under pricing policy regime in the near term.

Company has progressively widened oncology products from 6 in 2004 to 24 in 2015. Revenues to clock robust 33% cagr in domestic formulations over FY15‐18E on the back of gSovaldi contribution

Revenue break up of domestic formulations H1 FY16 revenue mix (%)

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FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Domestic Oncology Other formulations gSovaldi

%

57

4

20

13

5

Domestic formulations including gSovaldi

Exports formulations

APIs

Retail pharmacy

Others

Source: Company, India Infoline Research

Natco Pharma

3

gSovaldi to boost domestic formulations business Company has launched the first generic version of Sovaldi in India and Nepal (March 2015) under the brand HEPCINAT; the drug is used to treat chronic Hepatitis C. Company has signed a non‐exclusive licensing agreement with Gilead Sciences to manufacture and market generic versions of its Hepatitis C drug in 101 countries. Under the licensing agreement with Gilead, there are over 10 players who can manufacture and market Sofosbuvir and its combinations across 101 countries including India. Natco has also launched combination drug Harvoni (Sofosbuvir + Ledipasvir). Currently, gSovaldi and Harvoni combined contribute ~Rs. 15cr a month or annually Rs. 170‐200cr of revenues which will help boost company’s domestic revenues over the next 2‐3 years. In H1 FY16, gSovaldi already clocked Rs. 75cr revenue and management expects such numbers to be sustainable. Company expects to launch Daclatasvir (combination with Sofosbuvir) in India by Dec 2015. We believe gSovaldi demand is slowly evolving and likely to see better growth rates going forward. As part of the deal, Natco pays 7% royalty to Gilead Sciences and as per our understanding Natco enjoys net margin to the tune of 28‐30%. Currently two players Hetero and Natco are selling Hepatitis C drug; in near future there is possibility that another 1 or 2 players may enter. Natco has approval to sell Sovaldi in 101 countries though so far it has been launched only in Nepal. In the next 12 months, Natco has initiated steps to file the same and expects to launch in other countries/regions like Nigeria, Indonesia, CIS and Egypt. Apart from oncology, company has also presence in neuro‐psychiatry, gastroenterology, orthopaedic and anti‐asthmatic spaces which form ~20% of domestic formulations business. Natco has also extended into hepatology/virology therapeutic space. Moreover, it has developed a therapy basket of another three or four product, which is expected to be launched in the next two years. gSovaldi sales as a % of revenues

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Currently Hetero and Natco sell the Hepatitis C drug in domestic market Expect Rs. 150‐200cr revenues from gSovaldi in FY16E and FY17E each Natco has approval to sell gSovaldi across 101 countries Expect 3‐4 products launch in non oncology segment in the next two years

Natco Pharma

4

Significant value creation from pending US pipeline US business accounted for ~10% of revenues and ~50% of export formulations business excluding retail pharmacy in FY15. Natco posted a stellar 37% cagr in export formulations revenue over FY11‐15. Company has filed total of 37 ANDAs of which 24 under review which includes FTF opportunity gZytiga filed in H1 FY16. Natco sells drug to US markets through its partners and does not own manufacturing facilities outside India and the trend will continue in near future. In the US market, company expects about 4‐5 niche product launches lined up after Mar 2016. ANDA filings are across high value therapeutic segments such as oncology, gastroenterology, CNS (multiple sclerosis). Company is also focusing on peptides based filings like Copaxone and segment as well. More than 50% of the filings in the pipeline remain Para IV and FTF opportunities. As none of Para IV filings have got commercialized, this represents a large opportunity for the company in the next 2‐3 years. The total value of pending filings is pegged at ~ US$11bn. Some of its big launches include Copaxone (CNS) which has US market size of ~US$3bn; as per our estimate Natco can earn ~US$59mn revenues in the first year as and when it gets approval. Tamiflu remains another sizable opportunity with a market size of US$500mn; Natco has FTF on Tamiflu and is likely to garner ~US$60mn revenue in first year of launch. Natco expects two launches, gGleevec (US$1.5bn EU market size) and gTreanda (US$183mn) in Europe in mid‐FY17. We expect healthy 10‐15% market share in the two launches since it has partnered with one of the leading generic companies. Overall, we expect export formulations to post 90% cagr in FY15‐18E revenues mainly led by US pipeline. Company had an US FDA inspection of Kothur (Telangana) formulations facility in May 2014 and got approval in July 2014 while API facility at Mekaguda (Telangana) was inspected in Nov 2014 and received approval in Jan 2015; management does not anticipate any US FDA audit in the near term. Natco also operates a retail pharmacy in Pennsylvania under the subsidiary Natco Pharma Inc; the business <10% margin and contributed ~13% of revenues in H1 FY16.

24 filings under review out of 37 ANDAs

Copaxone and Tamiflu remain significant opportunities

Expect exports formulations to post strong 90% revenue cagr in FY15 driven by US business

US revenue share to rise sharply over FY16‐18E Trend in ANDA filings

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Natco Pharma

5

A deeper look at some of the key pending ANDAs Natco has filed ANDAs into niche therapeutic segments and has 14 para IV and 4 Para III filings pending with combined market size of ~US$11bn. Company is expected to reap rich benefits from an impressive pipeline in the medium term with expected 4‐5 approvals in the next 18‐24 months including Copaxone. Below we highlight some of the key pending approvals and their revenue potential for Natco. Tamiflu Tamiflu is used to treat influenza and has market size of US$500mn. Natco already has tentative approval for the drug. Though there is no specific time line for launch but we expect it to be limited competition product with 180 day exclusivity. Conservatively it can be ~US$50‐60mn revenue opportunity for Natco. Copaxone Copaxone is used for treatment of Multiple Sclerosis with estimated market size of Copaxone 20 and 40mg cumulatively at ~US$3bn. as per our estimate Natco can earn ~US$59mn revenues in the first year as and when it gets approval. There is not specific target action date on Copaxone launch. Company has answered all FDA queries in August 2015 and is awaiting approval for the launch. Management did not indicate any time line on the Copaxone approval. Revlimid Revlimid is used to treat multiple myeloma; its estimated market size is US$4bn. Since it is opportunity beyond FY18E, we have not factored it into our estimates. Company expects trials may begin in 2016 and hopefully in the next 12 months some clarity will emerge. Revlimid remains a significant drug in Natco’s portfolio which is likely to get launched in 2019‐20E. Prevacid and Fosrenol Natco has already completed all necessary actions on Prevacid (gastrointestinal) 15mg and Fosrenol (renal disease), company is awaiting approval for both of these products. Both the filings have been pending for 3‐4 years though these are not as big opportunity as some of the above launches. Other smaller opportunities Other smaller launches over the next 12‐24 months could be Entocort (Crohns disease), Treanda (Leukemia), Vidaza (Myelodysplastic syndrome) and Tracleer (Hypertension). Natco has received a target action date of Mar 2016 for gBudesonide (Crohns disease); management expects it to be a FY17E launch and market size is estimated at ~US$490mn

Overall pending filings market size is pegged at ~ US$11bn

Tamiflu can add ~US$60mn to Natco revenues

Copaxone market size at~US$3bn

Revlimid market size pegged at ~US$4bn

gBudesonide to be a FY17E launch, as per management

Natco Pharma

6

US pipeline and potential market size for key ANDAs Innovator brand name

Product Name

Therapy Marketing partner

FTF Size US$m

Exp launch

Copaxone 20 Glatiramer 20mg

Multiple Sclerosis

Mylan No ~1,000 NA

Copaxone 40 Glatiramer 40mg

Multiple Sclerosis

Mylan No ~1,900 NA

Gilenya Fingolimod Multiple Sclerosis

NA Yes 1,247 NA

Tamiflu Oseltamivir capsules

Influenza Alvogen Yes 821 2017

Treanda Bendamustine Leukemia Breckenridge Yes 681 2017

Revlimid Lenalidomide Multiple myloma

Actavis Yes ~4,000 2019

Jevtana Cabazitaxel Prostate Cancer Breckenridge Yes 119 2018

Nuvugil Armodafinil Antidepressants Breckenridge No 448 NA

Fosrenol Lanthanum Carbonate

End stage renal disease

Lupin Yes 115 2016

Gleevec Imatinib Chronic Myleoid Leukemia

NA No 2,500 NA

Nexavar Tosylate Anti cancer Mylan Yes 50 NA

Tykerb Lapatinib Anti cancer Lupin Yes ~125 NA

Tracleer Bosentan Hypertension Lupin NA 47 2016

Entocort Budesonide Crohns disease NA NA 493 2016

Vidaza Azacitidine Myeldysplastic syndrome

Breckenridge NA 282 2016


Estimated Natco revenue potential for key filings Drug name

Timeline Size US$m Estimated revenues potential

for Natco (US$ m) Copaxone 20mg NA ~1,000 12

Copaxone 40mg NA ~1,900 47

Tamiflu NA 500 60

Treanda 2017 681 17

Fosrenol 2016 115 3

Tracleer 2016 47 4

Entocort 2016 493 22

Vidaza 2016 282 5 Source: Company, India Infoline Research

Natco Pharma

7

International business ex-US contributed 50% of export formulations International formulations ex‐US contributed 11% of FY15 revenues; Natco derives Rs. 50‐60cr or ~8% of net revenues from Latin America region. In the last four years, company continued to get recurring government contract from the Venezuela market; management remains confident that Venezuelan tender contract would continue for the next few years. Though there are issues in the Latin America region i.e. fall in crude prices, local currency depreciation, volatile macro environment, company does not expect to face any payment issues on ongoing orders. As on Mar 2015, Natco has filed 298 patents out of which 77 are granted in the international market. Company has a step down subsidiary in Brazil called Natco Farma Do Brazil; it has approval from ANVISA (Brazil's health regulator) for its injectables and oral facility. Since Brazilian authority takes 3‐4 years for approval, we believe meaningful approvals may take another 1‐2 years. However, we expect performance to improve once the approvals pick up pace. It has filed 9 products in Brazil and targets to file another 6‐7 in FY16E. Hepatitis C brand would also be launched in RoW which would add to growth momentum. Apart from Lat Am business, Natco has two other subsidiaries in Asia and Australia which has initiated product registrations which would add to revenues in the medium term. It has also submitted applications to 11 provincial formularies in Canada. Brazil and Canada contributed ~3% of FY15 consolidated sales and company Natco incurred a cumulative loss of Rs. 19cr in all its subsidiaries Company expects at least about couple of years to breakeven for these subsidiaries. RoW formulations revenues share to decline over FY16‐18E

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Latin America contributes ~8% to overall revenues Targets to file 6‐7 new products in Brazilian market

Cumulative loss for all subsidiaries stood Rs. 19cr in FY15

Natco Pharma

8

API contribution to decline FY16E onwards APIs accounted for 30% of FY15 revenues with 63% of API revenues derived from exports. APIs exports are focused on the US, EU, Canada, Latin America and South‐East Asia markets. It develops APIs for captive consumption of its FDF portfolio as well as third party sales. Natco has a total of 20 APIs across seven therapeutic areas. Company focuses on complex molecules and 65% of the DMFs are in oncology and CNS segments. Other therapeutic area of focus includes anti‐asthmatic, anti‐depressant, anti‐migraine, anti‐osteoporosis and gastroenterology. More than 60% of the products exported to US are backed by own APIs while Natco has a portfolio of 31 US DMFs with over 15 DMFs under development. Company has demonstrated robust 25% revenue cagr over FY11‐15; however, based on management indications, we expect steady 5‐7% API revenue growth over FY15‐18E as most of the APIs would be used for in house consumption. Natco spends around 5‐7% of revenues on R&D and we expect it to ramp up to 6‐8% in the next 2‐3 years. APIs sales as a % of revenues

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~65% of DMFs in high margin oncology and CNS segment

Natco spends 5‐7% of revenues on R&D and expect it to ramp up to 6‐8% in the next 2‐3 years.

FY15 R&D spending vis‐à‐vis peers R&D expenditure at 5‐7% of revenues

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Natco Pharma

9

Expect stellar ~39% revenue cagr over FY15-18E Natco has posted revenue and PAT cagr of 17% and 25% respectively over FY11‐15 driven by impressive 37% cagr in international formulations over the same period. We expect international formulations to clock stellar ~90% revenue cagr in FY15‐18E largely led by monetization of US pipeline; company has lined up key launches in high margin oncology segment which would drive growth in the medium term. Management has guided for Rs. 1,050‐1,100cr revenues with net profit of Rs. 150‐155cr in FY16E; however guidance does not include any US launches. Overall Natco enjoys operating margin to the tune of ~25% in domestic oncology and exports formulation operate with >25% margin while APIs is expectedly a low margin business in the range of 10‐15%. We forecast 39% revenue cagr over FY15‐18E led by gSovaldi and US pipeline monetization. We expect margins to ramp up on the back of operating leverage tailwinds; we factor in a robust ~550bps margin expansion which in turn would drive 51% EPS cagr over FY15‐18E. Lack of sufficiently large FDA approvals over next 12‐18 months would lead to lower than expected US growth.

Revenue forecast Rs cr FY13 FY14 FY15 FY16E FY17E FY18E Domestic formulations 166 194 252 288 341 403

gSovaldi ‐ ‐ ‐ 165 195 191

US formulations 62 105 84 117 691 1,089

RoW 65 88 93 98 107 119

Formulations 293 387 429 667 1,334 1,803

APIs 224 167 257 218 234 255

Pharmacy 104 116 109 111 121 128

Others 41 36 45 37 42 47

Total revenues 661 706 840 1,034 1,732 2,233 Source: Company, India Infoline Research

Expect 39% revenue cagr over FY15‐18E Expect 550bps margin expansion over FY15‐18E

Margins to accelerate next fiscal on key launches Return ratios to witness sharp uptick in FY17E

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Natco Pharma

10

Recent fund raising to augment capacity expansion Natco had raised Rs. 340cr in Sep 2015 through QIP which is likely to be deployed for working capital and capital expenditures plans. As part of the expansion plan, Natco is setting up a formulations facility at Visakhapatnam which is expected to be operational by end FY17E. In addition, company would also expand research and development facility, chemical manufacturing facilities in Telangana and Chennai. Visakhapatnam facility would require ~Rs. 120cr while chemical division and formulations facility in Hyderabad may absorb ~Rs. 100cr and ~Rs. 50cr respectively. Formulations facility at Guwahati got commissioned in June 2015 and is eligible for tax and excise benefits. Niche domestic franchise and robust US pipeline key +ves: BUY We expect international formulations revenues to grow at robust 90% cagr over FY15‐18E led by stellar growth in US formulations business. Domestic business would be driven by oncology and Hepatitis C sales. We expect revenue and EPS cagr of ~39% and 51% respectively over FY15‐18E along with robust 550bps margin expansion, which would be on the back of large expected launches in FY17E and FY18E. We value the stock on SOTP basis incorporating PV of opportunities beyond FY18E; stock trades at ~18x FY18E EPS and we upgrade to BUY with revised 9‐12mth target of Rs620. Delay in large expected FDA approvals over next 12‐18 months and slower domestic oncology/gSovaldi revenues constitute key risks to our positive view. Peer comparison

Company CMP Target Reco Upside/

Downside (%) EPS cagr FY15‐18E

FY18E PE

FY18E RoCE

Torrent Pharma

1,477 1,690 BUY 15.8 19.3 19.3 29.5

Alembic Pharma

694 600 SELL (13.5) 28.7 21.5 32.0

Natco Pharma

505 620 BUY 22.8 51 18.2 32.7

Source: Company, India Infoline Research Natco 1‐yr fwd PE bands

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800

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Aug‐09

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Apr‐12

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Dec‐12

Apr‐13

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Aug‐15

Dec‐15

Px 3 17 31 44 58

Rs


Visakhapatnam facility will be operational in 2017 Expect revenue and EPS cagr of 39% and 51% over FY15‐18E

Natco Pharma

11

Financials Income statement Y/e 31 Mar (Rs cr) FY15 FY16E FY17E FY18E

Revenue 825 1,034 1,732 2,233

Operating profit 213 263 558 692

Depreciation (47) (57) (62) (70)

Interest expense (32) (21) (14) (7)

Other income 15 11 15 17

Profit before tax 149 197 497 632

Taxes (4) (53) (124) (171)

Exceptional items (15) ‐ ‐ ‐

Minority int 4 4 4 4

Net profit 135 148 377 466

Balance sheet Y/e 31 Mar (Rs cr) FY15 FY16E FY17E FY18E

Equity capital 33 34 34 34

Reserves 813 1,273 1,601 1,998

Net worth 846 1,304 1,630 2,018

Minority Interest 5 5 5 5

Debt 310 210 140 70

Def.tax lia 12 12 12 12

Total liabilities 1,173 1,534 1,792 2,119

Fixed assets 839 942 939 948

Investments 5 5 5 5

Net working capital 329 585 843 1,152

Inventories 220 276 461 595

Sundry debtors 192 241 404 521

Cash 10 164 148 270

Other current assets 118 160 265 335

Sundry creditors (125) (157) (263) (339)

Other current liabilities (86) (97) (168) (217)

Total assets 1,173 1,534 1,792 2,119

Cash flow statement Y/e 31 Mar (Rs cr) FY15 FY16E FY17E FY18E

Profit before tax 149 197 497 632

Depreciation 47 57 62 70

Def.tax lia (31) ‐ ‐ ‐

Tax paid (4) (53) (124) (171)

Working capital ∆ (86) (104) (276) (196)

Other operating items (15) ‐ ‐ ‐

Operating cashflow 60 97 159 336

Capital expenditure (118) (159) (59) (79)

Free cash flow (57) (39) 99 256

Equity raised 10 342 ‐ ‐

Minority interest (2) ‐ ‐ ‐

Investments (0) ‐ ‐ ‐

Debt financing/disposal 72 (100) (70) (70)

Dividends (20) (27) (49) (69)

Net ∆ in cash 2 154 (16) 122

Key ratios Y/e 31 Mar FY15 FY16E FY17E FY18E

Growth matrix (%)

Revenue growth 19.0 23.1 67.4 29.0

Op profit growth 18.9 23.4 111.7 24.1

EBIT growth 9.2 20.3 134.4 25.2

Net profit growth 30.7 10.1 154.2 23.6

Profitability ratios (%)

OPM 25.4 25.5 32.2 31.0

EBIT margin 21.6 21.1 29.5 28.6

Net profit margin 17.3 13.9 21.5 20.7

RoCE 16.5 16.1 30.7 32.7

RoNW 17.1 13.8 25.6 25.4

RoA 11.3 9.1 18.5 18.9

Per share ratios

EPS 8.0 8.8 22.5 27.8

Dividend per share 1.0 1.4 2.5 3.5

Cash EPS 11.5 12.0 25.9 31.7

Book value per share 50.4 77.9 97.3 121.1

Valuation ratios (x)

P/E 62.9 57.1 22.5 18.2

P/BV 10.0 6.5 5.2 4.2

M Cap/Sales 10.0 8.1 4.9 3.8

EV/EBIDTA 40.2 32.0 15.0 11.8

Payout (%)

Tax payout 2.6 27.0 25.0 27.0

Dividend payout 14.9 18.5 13.0 14.7

Liquidity ratios

Debtor days 85 85 85 85

Inventory days 97 97 97 97

Creditor days 55 55 55 55

Leverage ratios

Interest coverage 5.7 10.6 36.8 90.7

Net debt / equity 0.4 0.0 (0.0) (0.1)

Net debt / op. profit 1.4 0.1 (0.1) (0.4)

Du‐Pont Analysis Y/e 31 Mar FY15 FY16E FY17E FY18E

Tax burden (x) 0.90 0.75 0.76 0.74

Interest burden (x) 0.83 0.91 0.97 0.99

EBIT margin (x) 0.22 0.21 0.29 0.29

Asset turnover (x) 0.65 0.65 0.86 0.91

Financial leverage (x) 1.64 1.47 1.36 1.34

RoE (%) 17.1 13.8 25.6 25.4

12

‘Best Broker of the Year’ – by Zee Business for contribution to brokingNirmal Jain, Chairman, IIFL, received the award for The Best Broker of the Year (for contribution to broking in India) at India's Best Market Analyst Awards 2014 organised by the Zee Business in Mumbai. The award was presented by the guest of Honour Amit Shah, president of the Bharatiya Janata Party and Piyush Goel, Minister of state with independent charge for power, coal new and renewable energy.

'Best Equity Broker of the Year' – Bloomberg UTV, 2011IIFL was awarded the 'Best Equity Broker of the Year' at the recently held Bloomberg UTV Financial Leadership Award, 2011. The award presented by the Hon'ble Finance Minister of India, Shri Pranab Mukherjee. The Bloomberg UTV Financial Leadership Awards acknowledge the extraordinary contribution of India's financial leaders and visionaries from January 2010 to January 2011.

'Best Broker in India' – Finance Asia, 2011IIFL has been awarded the 'Best Broker in India' by Finance Asia. The award is the result of Finance Asia's annual quest for the best financial services firms across Asia, which culminated in the Country Awards 2011

Other awards

2012BEST BROKING HOUSE WITH

GLOBAL PRESENCE

2009, 2012 & 2013BEST MARKET

ANALYSTBEST BROKERAGE,

INDIAMOST IMPROVED,

INDIABEST BROKER,

INDIA

2009FASTEST GROWING

LARGE BROKING HOUSE

Recommendation parameters for fundamental reports:

Buy – Absolute return of over +15%

Accumulate – Absolute return between 0% to +15%

Reduce – Absolute return between 0% to ‐10%

Sell – Absolute return below ‐10%

Call Failure ‐ In case of a Buy report, if the stock falls 20% below the recommended price on a closing basis, unless otherwise specified by the analyst; or, in case of a Sell report, if the stock rises 20% above the recommended price on a closing basis, unless otherwise specified by the analyst

India Infoline Group (hereinafter referred as IIFL) is engaged in diversified financial services business including equity broking, DP services, merchant banking, portfolio management services, distribution of Mutual Fund, insurance products and other investment products and also loans and finance business. India Infoline Ltd (“hereinafter referred as IIL”) is a part of the IIFL and is a member of the National Stock Exchange of India Limited (“NSE”) and the BSE Limited (“BSE”). IIL is also a Depository Participant registered with NSDL & CDSL, a SEBI registered merchant banker and a SEBI registered portfolio manager. IIL is a large broking house catering to retail, HNI and institutional clients. It operates through its branches and authorised persons and sub‐brokers spread across the country and the clients are provided online trading through internet and offline trading through branches and Customer Care. Terms & Conditions and Other Disclosures:‐ a) This research report (“Report”) is for the personal information of the authorised recipient(s) and is not for public distribution and should not be

reproduced or redistributed to any other person or in any form without IIL’s prior permission. The information provided in the Report is from publicly available data, which we believe, are reliable. While reasonable endeavors have been made to present reliable data in the Report so far as it relates to current and historical information, but IIL does not guarantee the accuracy or completeness of the data in the Report. Accordingly, IIL or any of its connected persons including its directors or subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained, views and opinions expressed in this publication.

b) Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is

made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment of its original date of publication by IIFL and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments.

c) The Report also includes analysis and views of our research team. The Report is purely for information purposes and does not construe to be

investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities. The opinions expressed in the Report are our current opinions as of the date of the Report and may be subject to change from time to time without notice. IIL or any persons connected with it do not accept any liability arising from the use of this document.

d) Investors should not solely rely on the information contained in this Report and must make investment decisions based on their own investment

objectives, judgment, risk profile and financial position. The recipients of this Report may take professional advice before acting on this information.

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e) IIL has other business segments / divisions with independent research teams separated by 'chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc and therefore, may at times have, different and contrary views on stocks, sectors and markets.

f) This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state,

country or other jurisdiction, where such distribution, publication, availability or use would be contrary to local law, regulation or which would subject IIL and its affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this Report may come are required to inform themselves of and to observe such restrictions.

g) As IIL along with its associates, are engaged in various financial services business and so might have financial, business or other interests in other

entities including the subject company/ies mentioned in this Report. However, IIL encourages independence in preparation of research report and strives to minimize conflict in preparation of research report. IIL and its associates did not receive any compensation or other benefits from the subject company/ies mentioned in the Report or from a third party in connection with preparation of the Report. Accordingly, IIL and its associates do not have any material conflict of interest at the time of publication of this Report.

h) As IIL and its associates are engaged in various financial services business, it might have:‐

(a) received any compensation (except in connection with the preparation of this Report) from the subject company in the past twelve months; (b) managed or co‐managed public offering of securities for the subject company in the past twelve months; (c) received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) engaged in market making activity for the subject company.

i) IIL and its associates collectively do not own (in their proprietary position) 1% or more of the equity securities of the subject company/ies mentioned in the report as of the last day of the month preceding the publication of the research report.

j) The Research Analyst/s engaged in preparation of this Report or his/her relative

(a) does not have any financial interests in the subject company/ies mentioned in this report; (b) does not own 1% or more of the equity securities of the subject company mentioned in the report as of the last day of the month preceding the publication of the research report; (c) does not have any other material conflict of interest at the time of publication of the research report.

k) The Research Analyst/s engaged in preparation of this Report:‐ (a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co‐managed public offering of securities for the subject company in the past twelve months; (c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the research report; (f) has not served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company.

We submit that no material disciplinary action has been taken on IIL by any regulatory authority impacting Equity Research Analysis. A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp, www.bseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock‐quotes. (Choose a company from the list on the browser and select the “three years” period in the price chart).

Published in 2015. © India Infoline Ltd 2015 India Infoline Limited (Formerly “India Infoline Distribution Company Limited”), CIN No.: U99999MH1996PLC132983, Corporate Office – IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai – 400013 Tel: (91‐22) 4249 9000 .Fax: (91‐22) 40609049, Regd. Office – IIFL House, Sun Infotech Park, Road No. 16V, Plot No. B‐23, MIDC, Thane Industrial Area, Wagle Estate, Thane – 400604 Tel: (91‐22) 25806650. Fax: (91‐22) 25806654 E‐mail: [email protected] Website: www.indiainfoline.com, Refer www.indiainfoline.com for detail of Associates. National Stock Exchange of India Ltd. SEBI Regn. No. : INB231097537/ INF231097537/ INE231097537, Bombay Stock Exchange Ltd. SEBI Regn. No.:INB011097533/ INF011097533/ BSE‐Currency, MCX Stock Exchange Ltd. SEBI Regn. No.: INB261097530/ INF261097530/ INE261097537, United Stock Exchange Ltd. SEBI Regn. No.: INE271097532, PMS SEBI Regn. No. INP000002213, IA SEBI Regn. No. INA000000623, SEBI RA Regn.:‐ INH000000248.

For Research related queries, write to: Amar Ambani, Head of Research at [email protected] For Sales and Account related information, write to customer care: [email protected] or call on 91‐22 4007 1000

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