strategy - ambitwebambit.ambit.co/reports/ambit_strategy_thematic_tenbaggers4_05...strategy january...

Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.

Strategy

THEMATIC January 05, 2015

Exhibit A: Ten baggers 4.0

Ticker Company Mcap (US$ mn)

Attractive valuations* TCS IN TCS# 79,809

ITC IN ITC 46,515

TTMT IN Tata Motors 24,365

HCLT IN HCL Tech# 17,795

IDEA IN Idea Cellular# 9,087

IPCA IN Ipca Labs. 1,448

ECLX IN eClerx Services 634

Moderate valuations**

COAL IN Coal India# 38,089

BATA IN Bata India 1,340

Rich valuations***

LPC IN Lupin 10,163

EIM IN Eicher Motors 6,457

SKB IN GlaxoSmith CHL 3,920

BRIT IN Britannia Inds.# 3,558

TRP IN Torrent Pharma. 3,187

MRF IN MRF 2,559

BRGR IN Berger Paints# 2,478

PAG IN Page Industries 2,188

TVSL IN TVS Motor Co.# 2,007

MTCL IN Mindtree# 1,718

WIL IN WABCO India# 1,397

SI IN Supreme Inds. 1,192

PI IN P I Inds. 1,186

PSYS IN Persistent Sys 1,184

MCHM IN Monsanto India# 798

KJC IN Kajaria Ceramics 776

ASTRA IN Astral Poly# 723

FNXC IN Finolex Cables# 649

SF IN Sundram Fasten.# 647

GDPL IN Gateway Distr.# 602

VST IN VST Inds. 472Source: Ambit Capital research

* Trading below five-year P/E, P/B, EV/EBITDA (on at least two of these three measures) ** Trading below either five-year P/E, five-year P/B or five-year EV/EBITDA (on one of these three measures) *** Trading above five-year P/E, P/B, EV/EBITDA # denotes new entrant to our ten baggers portfolio

Analyst Details

Gaurav Mehta, CFA +91 22 3043 3255 [email protected]

Karan Khanna +91 22 3043 3251 [email protected]

Saurabh Mukherjea, CFA +91 22 3043 3174 [email protected]

Ten baggers 4.0 Over the past four years, we have used our ‘greatness’ framework to identify structurally strong businesses in India. These companies were identified based on their relentless improvement in financial performance over long periods (usually, six years). Using FY14 annual reports, we now refresh our annual list of ten baggers. The first three iterations (for FY11, FY12 and FY13) have cumulatively delivered ~33% CAGR returns (over the past three years). The sub-BSE500 tenbaggers list has delivered ~71% CAGR returns over the last two years.

Our relentless focus on franchises that keep improving Whilst ‘Good & Clean’ remains our preferred tactical way of playing Indian equities (click here for the 25 July 2014 G&C portfolio), in a country like India the robustness of the economy ensures that well-managed companies that are focused on building cash-generative franchises have a high chance of doing well. Structural plays, like the ones we aim to identify in our ten-bagger portfolios, are financially strong firms (with credible management teams) that remain consistent performers on a cross-cyclical basis. Both in live portfolios and back-tests, the approach delivers impressive alpha in most years whilst investing in high-quality franchises.

A back-test of the ‘greatness’ framework has yielded impressive returns

Source: Ambit Capital research. Note: The backtest is based on annual rebalancing with forward-looking returns being calculated from December 31 of year X to December 31 of year X+1; for example, for the most recent year, the framework included numbers till FY13 and returns have been calculated from 31 December 2013 to 31 December 2014.

The ‘greatness’ philosophy works Consistent improvements in corporate performance are more important than ’great leaps’—this has been the guiding philosophy of our ’greatness‘ framework, which lies at the core of our process of identifying structurally sound businesses. Not only do the great firms perform significantly better than an average firm on a variety of measures, more importantly, they show a more consistent and calibrated approach to growth over long periods. In this note, we update our ’greatness‘ framework to include FY14 numbers.

As shown over the past four years, our framework uses the following attributes to measure consistent financial improvements: judicious capex, conversion of capex to sales, pricing discipline, balance sheet discipline, cash generation and net profit improvement, and return ratio improvement.

This year’s winners on the framework We find that 83 firms from the BSE500 pass more than two-thirds of the tests in our greatness framework. Of these, the best 30 firms that clear our accounting quality and corporate governance filters make it to this year’s list. Of these 30 firms, we have bottom-up coverage with BUYs on: IPCA, Tata Motors, HCL Tech, TCS, Bata, Coal India, Lupin, PI Inds, Page Inds, Persistent Systems, Supreme Inds, Eicher Motors, Torrent Pharma, Mindtree and TVS Motor.

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http://webambit.ambit.co/reports/Ambit_Strategy_Thematic_Good&Clean8_25Jul2014.pdf

Strategy

January 05, 2015 Ambit Capital Pvt. Ltd.

CONTENTS Philosophy and framework……………………………………………………………………3

Quantifying greatness…………………………………………………………………………5

Does this approach work?.......................................................................................6

Ten baggers 4.0………………………………..………………………………………………8

Greatness framework on sub-BSE500 firms……………………………………………….13

Performance check: Nov 2013 ten-bagger list…………………………………………... 14

Performance check: Nov 2013’s sub-BSE500 firms……………………………………… 15

Valuations - A long-term perspective!..................................................................... 16

Appendix – January 2015 ten-baggers’ business activity description………….………18

Strategy


Philosophy and framework ‘’Greatness is not in where we stand, but in what direction we are moving….’’

- Oliver Wendell Holmes

This quote appropriately captures the driving philosophy behind our ’greatness‘ framework that lies at the core of our process of identifying potential ten baggers. We had unveiled this framework on 19 January 2012 with the first iteration of the ’Tomorrow’s ten baggers‘ note. This framework studies a firm’s structural strengths by focusing not on absolutes but rather on improvements over a period of time and the consistency of those improvements.

A basic sketch of the underlying process behind the making of a great firm has been recaptured in Exhibit 1 below.

Exhibit 1: The ’greatness‘ framework

Source: Ambit Capital research

We rank the BSE500 universe of firms (excluding financial services firms and excluding firms with insufficient data) on our ’greatness‘ score, which consists of six equally weighted headings—investments, conversion to sales, pricing discipline, balance sheet discipline, cash generation and EPS improvement, and return ratio improvement. Under each of these six headings, we further look at two kinds of improvements:

Percentage improvements in performance over FY12-14 vs FY09-11; and

Consistency in performance over FY09-14 i.e. improvements adjusted for underlying volatility in financial data

A complete list of factors that are considered whilst quantifying greatness has been provided in Exhibit 2 on the next page.

b. Conversion of investment to sales (asset turnover, sales)

c. Pricing discipline (PBIT margin)

d. Balance sheet discipline (D/E, cash ratio)

a. Investment (gross block)

e. Cash generation (CFO)

The ’greatness‘ framework

The framework essentially hinges on using publicly available historical data to assess which firms have, over a sustained period of time (FY09-14), been able to relentlessly and consistently:

(a) Invest capital; (b) Turn investment into

sales; (c) Turn sales into profit; (d) Turn profit into

balance sheet strength; (e) Turn all of that into

free cash flow; and (f) Invest free cash flows

again.

Clearly, this approach will have limited value if there is a structural break in the sector or in the company, which makes past performance a meaningless guide to future performance. (For identifying structural breaks of this sort, for example in the Indian boiler-turbine-generator sector or in the Indian utilities sector, we look to our sector leads for help.)

However, to the extent that such structural breaks tend to be the exception than the rule, the greatness model helps in creating a shortlist of stocks that investors can then analyse in greater detail.

Put simply, the greatness model separates the wheat from the chaff. Yet, it does not cook the whole meal for you!

Strategy


Exhibit 2: Factors used for quantifying greatness

Head Criteria

1 Investments a. Above median gross block increase (FY12-14 over FY09-11)*

b. Above median gross block increase to standard deviation

2 Conversion to sales a. Improvement in asset turnover (FY12-14 over FY09-11)*

b. Positive improvement in asset turnover adjusted for standard deviation

c. Above median sales increase (FY12-14 over FY09-11)*

d. Above median sales increase to standard deviation

3 Pricing discipline a. Above median PBIT margin increase (FY12-14 over FY09-11)*

b. Above median PBIT margin increase to standard deviation

4 Balance sheet discipline a. Below median debt-equity decline (FY12-14 over FY09-11)*

b. Below median debt-equity decline to standard deviation

c. Above median cash ratio increase (FY12-14 over FY09-11)*

d. Above median cash ratio increase to standard deviation

5 Cash generation and PAT improvement a. Above median CFO increase (FY12-14 over FY09-11)*

b. Above median CFO increase to standard deviation

c. Above median adj. PAT increase (FY12-14 over FY09-11)*

d. Above median adj. PAT increase to standard deviation

6 Return ratio improvement a. Improvement in RoE (FY12-14 over FY09-11)*

b. Positive improvement in RoE adjusted for standard deviation

c. Improvement in RoCE (FY12-14 over FY09-11)*

d. Positive improvement in RoCE adjusted for standard deviation

Source: Ambit Capital research. Note: * Rather than comparing one annual endpoint to another annual endpoint (say, FY09 to FY14), we prefer to average the data out over FY09- 11 and compare that to the averaged data from FY12-14. This gives a more consistent picture of performance (as opposed to simply comparing FY09 to FY14).

We rank the BSE500 universe of firms (excluding financial services firms) on this score to arrive at this year’s rankings on this measure of structural strength. After removing financial services firms and firms with insufficient data, 384 firms from the BSE500 were ranked based on this measure. The highlights from the distribution of these firms on our ’greatness‘ score are displayed on the next page.

On page 6, we show a back-test of this framework over 2004-2014 and find that it does work. On pages 14-15, we show the real world performance of these sets of portfolios over the last year and demonstrate that the construct works in the real world as well. The lists from the BSE500 universe have cumulatively delivered ~33.3% CAGR returns (over the past three years) vs 20.7% CAGR returns for the BSE500 Index. The lists from the sub-BSE500 universe that we had published in our previous two iterations have cumulatively delivered ~71% CAGR returns (over the past two years) vs ~23% CAGR returns for the BSE Small-cap Index.

On pages 8-12, we delve into this year’s list of 30 firms that constitute our ten baggers 4.0. This is followed by a list of 17 firms from the sub-BSE500 universe that do well on the framework.

Both improvement and the consistency of those improvements are important

Strategy


Quantifying greatness From the universe of BSE500 firms, after removing financial services firms and firms with insufficient data, 384 firms were scored on the six headings highlighted on the previous page. The cut-off for greatness was placed at 67%* and only 83 firms (22% of the total population of 384 firms) could manage a score above this cut-off.

Exhibit 3: Distribution of firms on the greatness score (total population: 384 firms)

Source: Ambit Capital research

In the next exhibit, we present key financial data on the three zones defined above: Mediocrity (210 firms), Good but not great (91 firms), and Great (83 firms).

Exhibit 4: Zones of greatness - Financial summary

Mediocre Good but not great Great

Number of firms 210 91 83

Mcap (US$ mn)* 639 758 1,394

Share price (3-year CAGR)# 16% 28% 49%

Gross block (3-year CAGR) 12% 18% 16%

Sales (3-year CAGR) 11% 17% 20%

Adj PAT (3-year CAGR) -10% 14% 24%

CFO (3-year CAGR) 9% 19% 35%

PBIT Margin (3-year average) 11% 13% 15%

RoE (3-year average) 10% 16% 24%

RoCE (3-year average) 12% 16% 26%

Net debt equity 0.40 0.28 0.20

FY15 P/E 20.4 25.5 23.9

FY15 P/B 2.2 3.5 5.6

Source: Capitaline, Ambit Capital research; Note: All figures are based on median values of the firms analysed *Mcap as of 1 January 2015. # indicates share price performance from 1 January 2012 to 1 January 2015.

With regard to fundamentals, the superiority of the great firms compared with the other two groups is evident in Exhibit 4 above. Further, what we also note is that since we started this exercise three years ago, we have seen the median market-cap differential between Great and the other two buckets widen, suggesting that the continuing downturn of the last few years has proved to be much more brutal for mediocre firms.

Of these 83 great firms, we identify the ones that perform the best on our accounting and corporate governance filters, and this leads to our final list of 30 great companies. Before we move onto these 30 potential ten baggers, we shall discuss a back-test of the ‘greatness’ framework in the next section to see whether ‘great’ firms have indeed managed to deliver superior returns historically.

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Good, not Great

*The greatness score is calculated by assigning equal weightages to the six factors outlined in Exhibit 2 on page 4.

Thus, each of these six factors carries a weightage of 16.7%. The scoring on sub-criteria within each of these factors is binary, with a firm getting either 1 or 0 based on whether it has done better than the respective threshold or not.

These scores are then cumulated to arrive at a final greatness score on 100 for the firm.

Zone of greatness Zone of mediocrity

Strategy


Does this approach work? The ‘greatness’ approach has served us well in live portfolios, both in the ten-baggers format and as a tool for stock selection in the Good & Clean portfolios. That this approach works on a cross-cyclical basis is supported by a back-test of the framework.

Our back-test of the ‘greatness’ framework in India, going back to 2003 (which implies using data since 1997-98), shows that ‘great’ firms have historically delivered superior results. Using average returns as a measure to gauge the performance of ‘great’ firms, we note that they have managed to outperform the universe by 5.4% (on average returns) and the BSE500 Index by 6.8% (in CAGR terms; over an 11-year period from 2004 to 2014).

‘Great’ firms are firms that score more than 67% on our framework. We rebalance these buckets once a year (on 31 December), taking into account the preceding six years of financial data (FY09-14 in the case of ten baggers 4.0). The performance over the subsequent year is measured on a calendar year basis.

Exhibit 5: Average performance of ‘Great’ firms vs the Universe and BSE500 Index (2004-2014)

Source: Ambit Capital research; Note: The backtest is based on annual rebalancing with forward-looking returns being calculated from December 31 of year X to December 31 of year X+1; for example, for the most recent year, the framework included numbers till FY13 and returns have been calculated from 31 December 2013 to 31 December 2014.

Outperformance was also seen on a median basis. A median firm in the universe has delivered 5.3% CAGR returns (over 2004-2014). In contrast, a median ‘great’ firm has managed to deliver 9.8% CAGR returns, thus resulting in an outperformance of ~4.5% (on a CAGR basis) for ‘great’ firms vs the universe.

Exhibit 6: Median performance of ‘Great’ firms vs the Universe (2004-2014)

Source: Ambit Capital research; Note: The backtest is based on annual rebalancing with forward-looking returns being calculated from December 31 of year X to December 31 of year X+1; for example, for the most recent year, the framework included numbers till FY13 and returns have been calculated from 31 December 2013 to 31 December 2014.

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Greatnessmodel

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16.1% CAGR

14.7% CAGR

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Greatnessmodel

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‘Great’ firms have outperformed the universe by 5.4% points historically (on average returns) and the BSE500 Index by 6.8% points

Outperformance was also seen on a median basis

Strategy


Note that this back-test does not consider accounting or management quality, which we believe are factors that should improve the performance of our live portfolios. That’s what the next section of this note focuses on.

Before we delve into this year’s list of 30 firms that constitute our ten baggers 4.0, the following two exhibits show the performance of the live ten-baggers portfolio since January 2012 when we first unveiled this framework. Whilst the BSE500 ten baggers have managed to outperform the BSE500 Index by ~43% points (on a cumulative basis) over the last three years, the ten baggers from the sub-BSE500 universe that we highlighted in the previous two iterations have managed to outperform the BSE Small-cap Index by a whopping 92% points (on a cumulative basis). Outperformance for all our live tenbaggers from the BSE500 and the sub-BSE500 universe demonstrates that the construct works in the real world as well.

Exhibit 7: Performance of the first three BSE500 ten-bagger portfolios (since 19 January 2012)

Source: Bloomberg, Ambit Capital research

Exhibit 8: Performance of the first two sub-BSE500 ten-bagger portfolios (since 14 January 2013)


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The live performance of our ten-bagger portfolios has been impressive too

Strategy


Ten baggers 4.0 In the latest iteration of the ten-bagger exercise, from the 83 firms that clear more than two-thirds of our cut-off, we reach a shortlist of 30 firms after following a process of elimination. This involves removing firms:

that fall in the ‘Zone of Trouble’ in our accounting model (i.e. the bottom 4 deciles on accounting quality; for a full exposition of our accounting filter, please refer to our 22 December 2014 note which explains how our forensic accounting model works);

firms with suspect corporate governance; and

firms with structural issues around the underlying business (i.e. businesses where a great past is not likely to translate into a great future).

There are 14 changes (~47% of the list) with respect to last year’s list (refer to our November 2013 note). A summary of these changes is as follows:

Exits: Cadila Healthcare, Cummins India, DB Corp, McLeod Russel, Shoppers Stop, Torrent Power, Bayer CropScience, Bosch, Carborundum Universal, TTK Prestige, Asian Paints and Castrol India drop out on account of deterioration in their greatness scores whilst Bajaj Auto and Kaveri Seed Company have been removed on account of forward-looking concerns.

Exhibit 9: Reasons behind the stocks exiting our ten-bagger portfolio

Company name Metrics in our ‘Greatness’ model no longer met by the company

Cadila Health. Pricing discipline, improvement in return ratios

Cummins India Investment in gross block, sales improvement, cash flows improvement, balance sheet discipline, improvement in return ratios

D B Corp Sales improvement, pricing discipline, balance sheet discipline, improvement in return ratios

Mcleod Russel Investment in gross block, pricing discipline, cash flows improvement, balance sheet discipline

Shoppers St. Pricing discipline, PAT and cash flows improvement, balance sheet discipline, improvement in return ratios

Torrent Power Sales improvement, pricing discipline, PAT and cash flows improvement, balance sheet discipline, improvement in return ratios

Bayer Crop Sci. Investment in gross block, improvement in return ratios

Bosch Balance sheet discipline, improvement in return ratios, cash flows improvement

Carborundum Uni. PAT and cash flows improvement, improvement in return ratios

TTK Prestige Balance sheet discipline, improvement in return ratios, improvement in asset turnover

Asian Paints Pricing discipline, improvement in return ratios

Castrol India Pricing discipline, improvement in return ratios, PAT and cash flows improvement

Source: Ace Equity, Capitaline, Ambit Capital research

Entrants: Astral Poly, Gateway Distriparks, Berger Paints, Sundram Fasteners, HCL Technologies, Britannia Inds, TCS, Coal India, Mindtree, TVS Motors, Finolex Cables, Wabco India, Idea and Monsanto India are the 14 names that are added using FY14 data (implying that these firms’ greatness scores improved when FY14 data was added to the model and FY08 data was taken out of the model).

Having identified the 30 great firms that exhibit the ingredients required to be tomorrow’s winners, we run a valuation check to ascertain if they are currently trading at reasonable prices for outright investments. In our view, whilst valuations do matter on a tactical basis, how the underlying fundamentals evolve for the firm over long periods plays a more important role in determining returns than the beginning-of-the-period valuation itself. Further, even the performance of the previous iteration of our ten-bagger portfolio corroborates our finding that beginning of the period valuations do not play a significant role in shaping subsequent investment returns. We discuss this in detail in the final section of this note.

An overlay of accounting, corporate governance and subjective checks to the greatness framework is the last but critical step

http://webambit.ambit.co/reports/Ambit_Strategy_Thematic_Forensicaccounting_22Dec2014.pdf

http://webambit.ambit.co/reports/Ambit_Strategy_Thematic_TenBagger3_26Nov2013.pdf

Strategy


To determine whether a particular stock is cheap or not, we categorise these stocks into three buckets based on their relative attractiveness on valuations with respect to their own history. We compare these firms with respect to their five-year average valuations on three metrics—P/B, P/E and EV/EBITDA. We find seven firms to be inexpensive (on at least two of the three metrics): IPCA Labs, Tata Motors, HCL Technologies, ITC, Idea, eClerx and TCS. However, for the long term, all 30 stocks remain candidates to be ten baggers from our perspective (as we have reiterated time and again that today’s valuations do not have a significant effect on long-term returns! Please see pages 17-18).

We have bottom-up coverage with BUYs on 15 of these names. These are: IPCA Labs, Tata Motors, HCL Technologies, TCS, Bata India, Coal India, Lupin, PI Inds, Page Inds, Persistent Systems, Supreme Inds, Eicher Motors, Torrent Pharma, Mindtree and TVS Motor.

For the long-term investor, beginning-of-period valuations do not have a significant impact on returns

Strategy


Exhibit 10: January 2015 ten baggers - Valuation perspective

FY15 valuations Cheap w.r.t. history? (1 for "yes") Overall cheap on how many counts?

Sr. No. Ticker Company Mcap (US$ mn) P/E P/B EV/EBITDA P/E P/B EV/EBITDA

Attractive valuations* 1 TCS IN TCS 79,809 23.4 8.3 17.6 1.0 1.0 - 2.0

2 ITC IN ITC 46,515 28.6 9.5 18.9 1.0 1.0 1.0 3.0

3 TTMT IN Tata Motors 24,365 8.9 2.0 4.0 1.0 1.0 1.0 3.0

4 HCLT IN HCL Technologies 17,795 15.5 4.5 11.4 1.0 1.0 1.0 3.0

5 IDEA IN Idea Cellular 9,087 19.4 2.5 6.6 1.0 - 1.0 2.0

6 IPCA IN Ipca Labs. 1,448 20.1 3.9 13.2 1.0 1.0 1.0 3.0

7 ECLX IN eClerx Services# 634 15.7 5.7 10.6 - 1.0 1.0 2.0

Moderate valuations** 8 COAL IN Coal India 38,089 15.4 5.1 10.0 - 1.0 - 1.0

9 BATA IN Bata India 1,340 40.0 8.6 23.1 - 1.0 - 1.0

Rich valuations*** 10 LPC IN Lupin 10,163 27.2 7.2 16.8 - - - -

11 EIM IN Eicher Motors 6,457 62.7 15.9 35.8 - - - -

12 SKB IN GlaxoSmith CHL# 3,920 41.2 11.6 32.8 - - - -

13 BRIT IN Britannia Inds.# 3,558 42.2 19.4 27.8 - - - -

14 TRP IN Torrent Pharma. 3,187 26.7 8.2 17.7 - - - -

15 MRF IN MRF 2,559 15.1 2.9 7.3 - - - -

16 BRGR IN Berger Paints# 2,478 52.0 11.9 30.1 - - - -

17 PAG IN Page Industries 2,188 69.1 35.8 43.9 - - - -

18 TVSL IN TVS Motor Co. 2,007 42.8 8.6 20.3 - - - -

19 MTCL IN Mindtree 1,718 20.2 5.3 14.0 - - - -

20 WIL IN WABCO India 1,397 62.4 10.1 39.1 - - - -

21 SI IN Supreme Inds. 1,192 23.9 6.0 12.5 - - - -

22 PI IN P I Inds. 1,186 31.8 8.4 21.1 - - - -

23 PSYS IN Persistent Sys 1,184 25.1 5.2 16.4 - - - -

24 MCHM IN Monsanto India 798 32.6 10.4 28.3 - - - -

25 KJC IN Kajaria Ceramics 776 29.5 6.8 14.7 - - - -

26 ASTRA IN Astral Poly 723 38.7 9.2 24.1 - - - -

27 FNXC IN Finolex Cables 649 18.7 3.2 13.2 - - - -

28 SF IN Sundram Fasten. 647 22.2 4.3 13.2 - - - -

29 GDPL IN Gateway Distr. 602 22.6 3.6 13.3 - - - -

30 VST IN VST Inds. 472 18.9 7.5 10.6 - - - -

Source: Bloomberg, Capitaline, Ambit Capital research.

* Trading below five-year average P/E, P/B, EV/EBITDA (on at least two of these three measures)

** Trading below either five-year average P/E, five-year P/B or five-year EV/EBITDA (on one of these three measures)

*** Trading above five-year average P/E, P/B and EV/EBITDA

# denotes that the relevant Ambit sector lead has a bottom-up SELL in the name

Note: There are a few stocks that cleared both the greatness and accounting filters but did not make it to the final list of 30 stocks based on our lack of conviction on the names. These are: Kaveri Seed Company, GMDC, Arvind Ltd, Eros International, Pidilite Inds, Cipla, Hatsun Agro, Dr Reddy's Labs, Jubilant Foodworks, Amara Raja Batteries, HUL, Titan, Just Dial, Cyient, Hexaware Technologies, Bajaj Auto, Gujarat Pipavav Port, The Byke Hospitality, Power Grid Corporation, Accelya Kale, CESC, Havells, Sun Pharma, Gujarat Gas, BPCL, Cairn India, DCM Shriram, Mahindra CIE, Ajanta Pharma and Atul Ltd.

Strategy


Exhibit 11: January 2015 ten baggers’ financial snapshot

Sr. No. Ticker Company Mcap

(US$ mn)

6M ADV (US$ mn)

3-yr share price CAGR

3-yr Net

Sales CAGR

3-yr adj. PAT

CAGR

3-yr CFO

CAGR

3-yr avg PBIT

margin

3-yr avg RoE

3-yr avg

RoCE

FY14 Net Debt/Equity

FY15 P/E

FY15 P/B

Attractive valuations* 1 TCS IN TCS 79,809 43.3 29% 30% 28% 31% 28% 41% 53% (0.4) 23.4 8.3

2 ITC IN ITC 46,515 37.7 23% 16% 20% 10% 33% 34% 51% (0.4) 28.6 9.5

3 TTMT IN Tata Motors 24,365 44.6 39% 24% 17% 48% 9% 37% 22% 0.3 8.9 2.0

4 HCLT IN HCL Technologies 17,795 24.9 60% 27% 58% 54% 19% 34% 39% (0.4) 15.5 4.5

5 IDEA IN Idea Cellular 9,087 17.8 24% 20% 30% 17% 12% 9% 10% 1.2 19.4 2.5

6 IPCA IN Ipca Labs. 1,448 3.5 38% 20% 22% 36% 17% 25% 25% 0.3 20.1 3.9

7 ECLX IN eClerx Services 634 0.8 23% 35% 25% 24% 35% 50% 61% (0.6) 15.7 5.7

Moderate valuations** 8 COAL IN Coal India 38,089 19.7 7% 12% 12% 19% 17% 37% 53% (1.3) 15.4 5.1

9 BATA IN Bata India 1,340 3.5 35% 17% 32% 46% 13% 29% 50% (0.3) 40.0 8.6

Rich valuations*** 10 LPC IN Lupin 10,163 11.5 48% 25% 29% 36% 21% 28% 32% (0.0) 27.2 7.2

11 EIM IN Eicher Motors 6,457 10.6 117% 16% 29% 29% 8% 20% 26% (0.7) 62.7 15.9

12 SKB IN GlaxoSmith C H L 3,920 0.9 33% 19% 22% 16% 17% 34% 51% (1.0) 41.2 11.6

13 BRIT IN Britannia Inds. 3,558 3.3 60% 14% 47% 31% 6% 52% 44% (0.2) 42.2 19.4

14 TRP IN Torrent Pharma. 3,187 1.4 62% 24% 36% 15% 18% 35% 32% 0.1 26.7 8.2

15 MRF IN MRF 2,559 8.1 76% 18% 32% 108% 8% 22% 23% 0.1 15.1 2.9

16 BRGR IN Berger Paints 2,478 2.2 68% 18% 19% 35% 9% 24% 25% 0.3 52.0 11.9

17 PAG IN Page Industries 2,188 1.9 73% 34% 38% N/A# 20% 61% 63% 0.6 69.1 35.8

18 TVSL IN TVS Motor Co. 2,007 12.5 79% 9% 10% 21% 4% 17% 17% 0.2 42.8 8.6

19 MTCL IN Mindtree 1,718 3.5 88% 26% 63% 95% 15% 28% 34% (0.4) 20.2 5.3

20 WIL IN WABCO India 1,397 0.5 56% 8% -3% 43% 16% 24% 33% (0.3) 62.4 10.1

21 SI IN Supreme Inds. 1,192 0.9 49% 17% 13% 24% 13% 35% 38% 0.4 23.9 6.0

22 PI IN P I Inds. 1,186 1.2 76% 31% 43% 118% 14% 28% 29% 0.1 31.8 8.4

23 PSYS IN Persistent Sys 1,184 1.3 75% 29% 21% 21% 18% 20% 28% (0.5) 25.1 5.2

24 MCHM IN Monsanto India 798 2.6 65% 17% 34% 20% 16% 21% 25% (0.8) 32.6 10.4

25 KJC IN Kajaria Ceramics 776 1.2 84% 25% 26% 1% 13% 31% 32% 0.4 29.5 6.8

26 ASTRA IN Astral Poly 723 0.8 146% 38% 34% 10% 12% 27% 32% 0.4 38.7 9.2

27 FNXC IN Finolex Cables 649 1.5 105% 5% 19% 87% 8% 18% 19% (0.2) 18.7 3.2

28 SF IN Sundram Fasten. 647 0.9 59% 6% 2% 147% 7% 15% 14% 0.9 22.2 4.3

29 GDPL IN Gateway Distr. 602 1.9 40% 19% 12% 84% 19% 13% 15% 0.2 22.6 3.6

30 VST IN VST Inds. 472 0.5 22% 11% 18% 15% 25% 45% 70% (0.7) 18.9 7.5

Source: Bloomberg, Ambit Capital research; #N/A due to negative Cash from Operating Activities in FY11




Strategy


Exhibit 12: January 2015 ten baggers - Forward-looking data using consensus estimates

Sr. No. Ticker Company Mcap (US$ mn)

6M ADV (US$ mn)

FY14-FY17E EPS CAGR

FY14-FY17E BVPS CAGR

Attractive valuations* 1 TCS IN TCS 79,809 43.3 14% 23%

2 ITC IN ITC 46,515 37.7 16% 13%

3 TTMT IN Tata Motors 24,365 44.6 23% 25%

4 HCLT IN HCL Technologies 17,795 24.9 12% 24%

5 IDEA IN Idea Cellular 9,087 17.8 18% 16%

6 IPCA IN Ipca Labs. 1,448 3.5 11% 19%

7 ECLX IN eClerx Services 634 0.8 8% 19%

Moderate valuations** 8 COAL IN Coal India 38,089 19.7 9% 14%

9 BATA IN Bata India 1,340 3.5 11% 13%

Rich valuations*** 10 LPC IN Lupin 10,163 11.5 21% 27%

11 EIM IN Eicher Motors 6,457 10.6 60% 34%

12 SKB IN GlaxoSmith C H L 3,920 0.9 17% 18%

13 BRIT IN Britannia Inds. 3,558 3.3 25% 33%

14 TRP IN Torrent Pharma. 3,187 1.4 17% 27%

15 MRF IN MRF# 2,559 8.1 23% 24%

16 BRGR IN Berger Paints 2,478 2.2 25% 20%

17 PAG IN Page Industries 2,188 1.9 30% 35%

18 TVSL IN TVS Motor Co. 2,007 12.5 39% 24%

19 MTCL IN Mindtree 1,718 3.5 16% 23%

20 WIL IN WABCO India 1,397 0.5 40% 22%

21 SI IN Supreme Inds. 1,192 0.9 19% 19%

22 PI IN P I Inds. 1,186 1.2 26% 28%

23 PSYS IN Persistent Sys 1,184 1.3 18% 18%

24 MCHM IN Monsanto India 798 2.6 23% 20%

25 KJC IN Kajaria Ceramics 776 1.2 27% 26%

26 ASTRA IN Astral Poly 723 0.8 42% 36%

27 FNXC IN Finolex Cables 649 1.5 16% 18%

28 SF IN Sundram Fasten. 647 0.9 39% 23%

29 GDPL IN Gateway Distr. 602 1.9 19% 15%

30 VST IN VST Inds. 472 0.5 -7% 3%

Source: Bloomberg, Ambit Capital research; Note: # indicates FY14-16E CAGR




Strategy


Greatness framework on sub-BSE500 firms In our January 2013 ten baggers 2.0 note, based on client feedback, we had inserted a list of sub-BSE500 firms that did well on our framework primarily in the hope that given the inefficient price discovery in the smaller-cap names, running the screen on relatively lesser-known names should work even better. The results surely have been very encouraging. The sub-BSE500 list from our ten baggers 2.0 portfolio delivered 22.4% in absolute terms and 41.2% points of alpha relative to the BSE Small-cap Index from January 2013 to November 2013. Likewise, the sub-BSE500 list from our ten baggers 3.0 portfolio delivered a staggering 137.3% returns in absolute terms and 50.5% points of alpha relative to the BSE Small-cap Index (please see page 15 for performance details).

Continuing with this initiative, we present below a list of select small-caps from outside the BSE500 but above a market cap of Rs1,000mn that fare well on this year’s iteration of our greatness framework (after updating FY14 numbers). Based on client feedback, we have extended our forensic accounting model to all firms with a market cap of Rs1,000mn and above. Whilst these stocks have cleared our accounting screen, we may not have sufficient information on the quality of their corporate governance.

Exhibit 13: January 2015 greatness framework on smaller caps outside BSE500

Sr. No. Ticker Company Mcap (US$ mn)

6M ADV (US$ mn) FY15 P/E FY15 P/B

1 SVLS IN Suven Life Scie. 427 3.8 21.9 6.8

2 LOG IN La Opala RG 391 0.5 58.0 13.2

3 PLM IN Poly Medicure 315 0.4 45.2 10.0

4 MUNI IN Mayur Uniquote 289 0.4 27.8 7.2

5 GRAN IN Granules India 267 3.1 17.6 3.8

6 SEL IN Suprajit Engg. 262 0.1 26.0 6.5

7 ATA IN Atul Auto 235 2.2 36.7 12.3

8 AVNT IN Avanti Feeds 230 0.5 12.7 6.7

9 KPR IN K P R Mill Ltd 225 0.7 8.2 1.5

10 HPPL IN Huhtamaki PPL 213 0.3 21.3 3.0

11 FIEM IN Fiem Inds. 165 0.7 22.5 4.6

12 HSS IN Himatsing. Seide 147 0.7 10.6 1.1

13 WMP IN Wim Plast 143 0.1 24.4 5.0

14 SIYA IN Siyaram Silk 141 0.2 11.1 2.0

15 IDR IN Indag Rubber 77 0.0 15.5 3.8

16 ADFI IN Adi Finechem 73 0.1 21.8 6.6

17 FDM IN Fluidomat 16 0.0 17.5 3.8

Source: Bloomberg, Ambit Capital research; Note: Stocks that passed the two models but were omitted are: Nandan Denim, Suryalak. Cott., AVT Natural Prod, Loyal Textile, Essel Propack, Alkyl Amines, Welspun India, Munjal Showa, Arcotech Ltd, Heritage Foods, Benares Hotels, Flex Foods, Shivam Autotech, Cheviot Company, Suprem.Tex Mart, AksharChem (I), Nelcast and Narmada Gelatines

Note that unlike the ten-baggers list for the BSE500 universe (where we only consider firms that meet the greatness score cut-off of 67% whilst being in the top 6 deciles of our forensic accounting model), the criteria used to screen for ten baggers from the sub-BSE500 universe has been made much more stringent. Only firms with a greatness score above 80% that also fall in the top three deciles on accounting quality in the sub-BSE500 universe have been included in this list.

On a separate note, if you haven’t already contacted your Ambit sales representative, for a forensic check on your portfolio, you might want to do so now. Our forensic model, refined and tested over four years, is very powerful.

The framework should work better in the less-discovered sub-BSE500 universe

http://webambit.ambit.co/reports/Ambit_Strategy_Thematic_14Jan2013.pdf

Strategy


Performance check: Nov 2013 ten-bagger list Exhibit 14: The ten-bagger list published on 26 November 2013 (click here for the 26 November 2013 note, ‘Ten baggers 3.0’)

Ticker Company Mcap (US$ mn) Price Performance Attractive valuations 25-Nov-13 02-Jan-15 BJAUT IN Bajaj Auto 11,200 1,939 2,452 26% CDH IN Cadila Health. 5,261 743 1,628 119% KKC IN Cummins India 4,023 427 919 115% DBCL IN D B Corp 1,165 266 402 51% MCLR IN Mcleod Russel 404 282 234 -17% SHOP IN Shoppers St. 641 330 487 48% TTMT IN Tata Motors 24,372 386 512 33% TPW IN Torrent Power 1,208 102 162 58%

Average for this bucket 54% Moderate valuations BYRCS IN Bayer Crop Sci. 2,018 1,630 3,490 114% BOS IN Bosch 9,686 8,560 19,540 128%

CU IN Carborundum Uni. 541 118 182 55%

ITC IN ITC 46,488 316 368 16% KSCL IN Kaveri Seed Co. 844 317 776 145% LPC IN Lupin 10,157 851 1,432 68% MRF IN MRF 2,557 17,155 38,192 123% TTKPT IN TTK Prestige 668 3,290 3,636 11% Average for this bucket 83% Rich valuations APNT IN Asian Paints 11,736 516 775 50% BATA IN Bata India 1,339 1,053 1,320 25% CSTRL IN Castrol India 3,912 288 501 74% ECLX IN eClerx Services 634 1,110 1,324 19% EIM IN Eicher Motors 6,454 4,203 15,082 259% SKB IN GlaxoSmith C H L 3,917 4,401 5,900 34% IPCA IN Ipca Labs. 1,447 685 727 6% KJC IN Kajaria Ceramics 776 249 618 148% PI IN P I Inds. 1,185 223 550 146% PAG IN Page Industries 2,187 4,924 12,420 152% PSYS IN Persistent Sys 1,184 889 1,874 111% SI IN Supreme Inds. 1,198 394 597 51% TRP IN Torrent Pharma. 3,186 462 1,193 158% VST IN VST Inds. 473 1,639 1,940 18%

Average for this bucket 90% Overall average 78.2% BSE500 Index 7,516 10,866 44.6% Outperformance 33.7%


Last year’s iteration of ten baggers published on 26 November 2013 has clocked 78% returns in absolute terms and 34% points relative to the BSE500 over the year. This compares with cumulative absolute returns of 31% and relative returns (to BSE500) of 10% points delivered by the first two iterations (click here for the 19 January 2012 note on ten baggers 1.0 and click here for the 14 January 2013 note on ten baggers 2.0). Moreover, the above exhibit also highlights that beginning-of-the-period valuations have not made much difference to investment returns, with the stocks categorised as attractively valued, based on initial valuations, underperforming those classified as richly valued or moderately valued on average. This finding also emerged from ten baggers 1.0 and ten baggers 2.0. In effect, what our models have shown time and again is that once you screen rigorously for high quality, there is little value add in further screening through a demanding valuation filter.


http://webambit.ambit.co/reports/Ambit_Strategy_Thematic_Tomorrow%E2%80%99stenbaggers_19Jan2012.pdf

http://webambit.ambit.co/reports/Ambit_Strategy_Thematic_14Jan2013.pdf

Strategy


Performance check: Nov 2013’s sub-BSE500 ten baggers Exhibit 15: Superior firms on ‘greatness’ from sub-BSE500 published on 26 November 2013 (click here for the 26 November 2013 note, ‘Ten baggers 3.0’)

Ticker Company Mcap (US$ mn) Price Performance

25-Nov-13 02-Jan-15 MUNI IN Mayur Uniquote 289 169 423 150.1%

SEL IN Suprajit Engineering 261 39 138 250.7%

PLM IN Poly Medicure 315 340 904 166.2%

GWN IN Grindwell Norton 537 255 614 140.8%

ASTM IN Astra Microwave 158 46 123 166.2%

SDB IN Som Distilleries 92 303 211 -30.2%

HTSMF IN Hatsun Agro Products 549 198 320 61.6%

SPPT IN Supreme Petrochem 112 58 73 25.8%

LOG IN La Opala RG 391 112 447 298.6%

SVLS IN Suven Life Sciences 428 72 213 195.6%

ASTRA IN Astral Poly 723 125 387 209.0%

WHL IN Wheels India 176 416 928 123.2%

HMVL IN Hindustan Media 246 110 212 93.6%

KALE IN Accelya Kale 237 613 1,007 64.4%

CRS IN Cera Sanitary. 363 594 1,820 206.4%

KEKC IN Kewal Kiran Clothing 379 1,111 1,950 75.6%

Overall average 137.3%

BSE Smallcap Index 6,052 11,308 86.8%

Outperformance 50.5%


The sub-BSE500 list of firms published on 26 November 2013 too has shown a stellar performance over the year. These stocks are up 137% on average over the year (vs 87% for the BSE Small-cap Index), resulting in a staggering ~51% points of outperformance since publication. An absolute return of 22% (and relative returns of 41%) for the first iteration of the sub-BSE500 ten baggers (published on 14 January 2013) and a whopping 51% outperformance for the November 2013 iteration suggest that the framework indeed does a reasonably good job in the sub-BSE500 universe as well.


Strategy


Valuations - A long-term perspective! Over long periods, it is how the underlying fundamentals evolve for the firm that plays a more important role in determining returns rather than the beginning-period valuation itself. Put another way, over long periods how a business fundamentally performs is overwhelmingly the most important driver of investment returns (so much so that the price at the time of entering the stock becomes almost irrelevant). This point can be understood better with the following exhibits that plot ten-year returns over FY04-14 vs FY04 valuations as measured by P/B and P/E at the beginning of the period (in 2004).

Exhibit 16: Valuation impact on long-term returns - P/B

Source: Ambit Capital research; Note: FY04-14 returns here are stock returns relative to Sensex

The value of the R-squared makes the story self-explanatory. A zero for this value indicates that the beginning-period valuations do not play any meaningful role in explaining stock returns over the next ten years. This holds true for both P/B and P/E as measures of valuation.

Exhibit 17: Valuation impact on long-term returns - P/E

Source: Ambit Capital research; Note: FY04-14 returns here are stock returns relative to Sensex. Trailing P/E has been restricted to 100.

Further, that valuations do not play an overwhelming role in shaping investment returns is also evidenced by the performance of the latest iteration of our ten-bagger portfolio.

The following exhibits plot the returns since publication for the 30 stocks published as a part of the ten-bagger portfolio on 26 November 2013 vs their trailing valuations as measured by P/B and P/E at the beginning of the period.

R² = 0.0009

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

- 5.0 10.0 15.0 20.0 25.0 30.0 35.0

FY0

4-F

Y14

sh

are

pri

ce C

AG

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FY04 price to book

R² = 0.0025

-50%

-40%

-30%

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0%

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- 20.0 40.0 60.0 80.0 100.0

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FY04 price to earnings

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Exhibit 18: Tenbaggers’ 3.0 - Beginning-period P/B and stock returns


Here again, an R-squared of close to zero indicates that the beginning-period P/B does not influence stock returns in any major way. This holds true for P/E as a measure of valuation as well.

Exhibit 19: Tenbaggers’ 3.0: beginning-period P/E and stock returns


R² = 2E-05

-50%

0%

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300%

- 5.0 10.0 15.0 20.0 25.0

Sha

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Trailing Price to book

R² = 0.0033

-50%

0%

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- 20.0 40.0 60.0 80.0 100.0 120.0 140.0

Sha

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Trailing Price to earnings

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Appendix - January 2014 ten baggers’ business activity description BSE500 ten baggers’ business description

Sr. No. Ticker Company Business description

1 TCS IN TCS

Tata Consultancy Services, a division of Tata Sons Limited, is a global IT services organization that provides a comprehensive range of IT services to its clients in diverse industries. The Company, caters to finance and banking, insurance, telecommunication, transportation, retail, manufacturing, pharmaceutical, and utility industries.

2 ITC IN ITC ITC Limited, a member of BAT Group of UK, is a holding company, which has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri Business, Packaged Foods & Confectionery, Branded Apparel, Greeting Cards and other FMCG products.

3 TTMT IN Tata Motors

Tata Motors Limited manufactures cars and commercial automotive vehicles in India. The Company designs, manufactures and sells heavy commercial, medium commercial and small commercial vehicles including trucks, tankers, vans, buses, ambulances and minibuses. Tata also manufactures small cars and sports utility vehicles.

4 HCLT IN HCL Technologies

HCL Technologies Limited provides software development and related engineering services. The Group's technologies utilize a variety of technologies, including Internet and e-commerce, networking, internet telephony, embedded software, ASIC/VLSI design and testing, satellite and wireless communications, and component based object technologies, including COM, DCOM and COBRA.

5 IDEA IN Idea Cellular Idea Cellular Limited offers cellular services, SMS services, and mobile communication devices.

6 IPCA IN Ipca Labs. Ipca Laboratories Limited operates a pharmaceutical company, which distributes products to over 75 countries worldwide. The Group's products include finished dosage forms, drug delivery systems, bulk drugs and intermediates.

7 ECLX IN eClerx Services eClerx Services Limited provides data analytics and solutions to global enterprise clients in the financial services, retail and manufacturing industries. The Company offers data analytics, operations management, data audits, metrics management and reporting services.

8 COAL IN Coal India Coal India Limited produces and markets coal and coal products, as well as provides related consulting services.

9 BATA IN Bata India

Bata India Limited manufactures a wide range of leather, rubber/canvas and plastic footwear products. The Company also manufactures sports apparel and leather accessories. Bata India sells its products through its chain of company owned retail stores in India, as well as to businesses in the USA, United Kingdom, Europe, the Middle East and the Far East.

10 LPC IN Lupin

Lupin Limited manufactures bulk actives and formulations. The principal bulk actives manufactured by it include Rifampicin, Pyrazinamide, Ethambutol (anti-TB), Cephalosporins (anti-infectives) and cardiovasculars. The company also possesses competencies in phytomedicines, in which medicines are made out of plant and herbal resources supported by the discipline of modern medicine.

11 EIM IN Eicher Motors Eicher Motors Ltd. manufactures light commercial vehicles which are sold domestically and are also exported to other countries. Eicher Motors also manufactures tractors, two-wheelers and automotive gears.

12 SKB IN GlaxoSmith C H L Glaxo SmithKline Consumer Healthcare Limited manufactures and sells malted milk food products. The Group's products, which include energy & protein products, cereals, baby foods, ghee & butter, are sold under the "Horlicks", "Boost", "Viva", "Brylcream", "Eno", "Maltova" and "Gopika" brand names.

13 BRIT IN Britannia Inds. Britannia Industries Limited manufactures bakery products such as biscuits, bread, cakes and rusks. The Company also manufactures and exports soybean products, cashew kernels, marine products, and general merchandise items.

14 TRP IN Torrent Pharma.

Torrent Pharmaceuticals Ltd. manufactures bulk drugs and pharmaceutical formulations. The Company's formulations include cardio-vascular, psychotropic and anti-biotic drugs while its bulk drugs include atenolol, ciprofloxacin and norfloxacin. Torrent Pharmaceuticals has wholly owned subsidiaries in several regulated and less regulated international markets.

15 MRF IN MRF MRF Limited manufactures and distributes tyres and tubes for automobiles, aircrafts, motorcycles and cycles. The Company also manufactures conveyor belts, paint and coats, and hoses. Every MRF tyre designed is the result of a special acid test on the race and rally tracks.

16 BRGR IN Berger Paints Berger Paints India Limited manufactures and distributes paints, enamels, varnishes, and synthetic resins. The Company's products are used in home, office, factory, interiors, exteriors, metal, wood, plastic, and others.

17 PAG IN Page Industries Page Industries Limited develops, produces, and distributes branded underwear for men, women, and children in India and Sri Lanka.

Strategy



18 TVSL IN TVS Motor Co.

TVS Motor Company Limited manufactures motorcycles, mopeds and scooters. The Company also manufactures spark ignition operated outboard motors, combustion spark ignition engines, critical engines and transmission parts. TVS Motor Co. also owns a subsidiary that manufactures rubber molded and plastic molded auto components, air brake hoses and molds.

19 MTCL IN Mindtree

Mindtree Limited is an international IT company. The Company delivers business and technology solutions through global software development. Mindtree develops applications to help companies enhance their enterprise operations. The Company also delivers product-development services and designs reusable building blocks for high-tech companies.

20 WIL IN WABCO India WABCO India Ltd. manufactures automotive parts. The Company produces electronic braking, stability, and suspension and transmission control systems for heavy-duty commercial trucks, trailers and buses.

21 SI IN Supreme Inds.

Supreme Industries Limited manufactures industrial and engineered molded products and storage and material handling crates. The Company also manufactures chemicals, multilayer sheets, multilayer films, packaging films and expanded polyethylene foam, PVC pipes and fittings, molded furniture and disposable EPS containers.

22 PI IN P I Inds. PI Industries Limited manufactures agricultural and fine chemicals, and polymers. The Company produces fine chemicals, crop protection, plant nutrients, and seeds, and engineering plastics for use in the automobile, electrical, and home appliances industries.

23 PSYS IN Persistent Sys Persistent Systems Limited offers outsourced software product development. The Company offer services that include testing, support, and professional services.

24 MCHM IN Monsanto India

Monsanto India Limited manufactures a wide variety of agricultural chemicals and other specialty chemicals. The Company develops high yield crop varieties and hybrid crops such as corn, sunflower, and cotton. Monsanto also sells specialty chemicals, animal health and agricultural products as an indenting agent for Monsanto Company Inc.

25 KJC IN Kajaria Ceramics Kajaria Ceramics Limited manufactures glazed and unglazed ceramic tiles. The Company sells its products in India and it also exports them to other countries.

26 ASTRA IN Astral Poly Astral Polytechnik Limited manufactures and markets CPVC plumbing systems for residential and industrial applications. The Company also manufactures ASTM solvent weld lead free PVC plumbing systems.

27 FNXC IN Finolex Cables

Finolex Cables Ltd. manufactures a wide range of telecommunication and electrical cables. The Company's products include flexible cables for appliances and industrial use electrification, winding wires, automobile cables, welding cables, and cables for submersible pumps. The Company also manufactures jelly filled phone cables, high frequency/radio frequency cables and PVC Sheets.

28 SF IN Sundram Fasten. Sundram Fasteners Limited manufactures a wide range of nuts, bolts and related fastener equipment. Products include high-tensile fasteners and equipment for the automotive industry, such as cold extruded parts, radiator caps and gear shifters. The Company also manufactures water pumps and fuel pumps.

29 GDPL IN Gateway Distr. Gateway Distriparks Limited provides integrated logistics services both in domestic and international areas. The Company offers cargo loading and unloading, transportation, and cargo storage management services to shipping lines, freight forwarders, and buying houses.

30 VST IN VST Inds. VST Industries Ltd. manufactures and distributes cigarettes and tobacco products. The Company's cigarette brands include "Charminar Specials," "Shah-I- Deccan," "Charms Virginia Filter Kings," "Vazir," "Qila" and "Ambassador." VST Industries sells its products in India and abroad.

Source: Bloomberg

Strategy


Sub-BSE500 ten baggers’ business description


1 SVLS IN Suven Life Scie. Suven Life Sciences Ltd., manufactures, designs, and exports pharmaceutical products. The Company supplies bulk actives, drug intermediates, and fine chemicals to the global life science industry.

2 LOG IN La Opala RG La Opala RG Limited manufactures glass and glass products.

3 PLM IN Poly Medicure Poly Medicure Limited manufactures disposable healthcare products. The Company offers a wide range of products for infusion therapy, anesthesia, urology, gastroenterology, blood management, surgery and drainage, and catheters.

4 MUNI IN Mayur Uniquote Mayur Uniquoters Ltd manufactures and exports various types of PU leather, PVC leather and synthetic leather. The Company's consumers consist of the furniture, automotive industries, footwear, apparel, luggage, sports goods, upholstery and leather goods industry.

5 GRAN IN Granules India Granules India Limited is one of the leading manufacturer and exporter of active pharmaceutical ingredients, directly compressible granules, intermediates and modified drug delivery systems. The company has a presence in over 27 countries.

6 SEL IN Suprajit Engg. Suprajit Engineering Limited manufactures a complete range of liner, non-liner, and push pull cables for two wheelers, cars as well as light and heavy commercial vehicles and a range of automotive and non automotive applications.

7 ATA IN Atul Auto Atul Auto Ltd. manufactures three-wheeled commercial diesel vehicles.

8 AVNT IN Avanti Feeds Avanti Feeds Ltd. manufactures and distributes shrimp feed. The Company also processes, packages, and exports shrimp throughout the world.

9 KPR IN K P R Mill Ltd KPR Mill Limited manufactures apparel products. The Company's products include carded and combed cotton and knitted fabrics.

10 HPPL IN Huhtamaki PPL Huhtamaki PPL Limited makes paper products and packages, including a range of cartons and packing systems. The Company also makes cellulose, polyethylene and plastic films and metal foils.

11 FIEM IN Fiem Inds. FIEM Industries Limited manufactures automotive lighting and signaling equipment and rear view mirrors.

12 HSS IN Himatsing. Seide Himatsingka Seide Limited manufactures home textile products. The Company produces decorative fabrics, spun silk, blended fabrics, bridal wear, fashion wear and other related textile products. Himatsingka Seide offers its products to distributors across the United States and Europe.

13 WMP IN Wim Plast Wim Plast Ltd. manufactures and distributes plastic moulded furniture. The Company markets these goods worldwide.

14 SIYA IN Siyaram Silk Siyaram Silk Mills Limited manufactures fabrics, texturised and dyed yarn, and readymade garments.

15 IDR IN Indag Rubber Indag Rubber Limited, manufactures and market precured tire retreads. The Company also manufactures allied products such as cushion gum and repair gum.

16 ADFI IN Adi Finechem ADI Finechem Ltd. manufactures fine chemicals. The Company produces primarily oleo chemicals and products for the nutraceutical industry from soybean, sunflower and cottonseed oils.

17 FDM IN Fluidomat Fluidmat Ltd. manufactures fluid coupling, turbo couplings, flexible coupling, and mechanical power transmission equipment.

Source: Bloomberg

Strategy


Institutional Equities Team Saurabh Mukherjea, CFA CEO, Institutional Equities (022) 30433174 [email protected]

Research

Analysts Industry Sectors Desk-Phone E-mail

Nitin Bhasin - Head of Research E&C / Infra / Cement / Industrials (022) 30433241 [email protected]

Aadesh Mehta, CFA Banking / Financial Services (022) 30433239 [email protected]

Achint Bhagat Cement / Infrastructure (022) 30433178 [email protected]

Aditya Bagul Consumer (022) 30433264 [email protected]

Aditya Khemka Healthcare (022) 30433272 [email protected]

Ashvin Shetty, CFA Automobile (022) 30433285 [email protected]

Bhargav Buddhadev Power Utilities / Capital Goods (022) 30433252 [email protected]

Dayanand Mittal, CFA Oil & Gas / Metals & Mining (022) 30433202 [email protected]

Deepesh Agarwal Power Utilities / Capital Goods (022) 30433275 [email protected] Gaurav Mehta, CFA Strategy / Derivatives Research (022) 30433255 [email protected]

Karan Khanna Strategy (022) 30433251 [email protected]

Krishnan ASV Real Estate (022) 30433205 [email protected]

Pankaj Agarwal, CFA Banking / Financial Services (022) 30433206 [email protected]

Paresh Dave, CFA Healthcare (022) 30433212 [email protected]

Parita Ashar Metals & Mining / Oil & Gas (022) 30433223 [email protected]

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Ravi Singh Banking / Financial Services (022) 30433181 [email protected]

Ritesh Gupta, CFA Midcaps – Chemical / Retail (022) 30433242 [email protected]

Ritesh Vaidya Consumer (022) 30433246 [email protected] Ritika Mankar Mukherjee, CFA Economy / Strategy (022) 30433175 [email protected]

Ritu Modi Automobile (022) 30433292 [email protected]

Sagar Rastogi Technology (022) 30433291 [email protected]

Sumit Shekhar Economy / Strategy (022) 30433229 [email protected]

Sandeep Gupta Media / Midcaps (022) 30433211 [email protected]

Tanuj Mukhija, CFA E&C / Infra / Industrials (022) 30433203 [email protected]

Utsav Mehta Technology (022) 30433209 [email protected]

Sales

Name Regions Desk-Phone E-mail

Sarojini Ramachandran - Head of Sales UK +44 (0) 20 7614 8374 [email protected]

Deepak Sawhney India / Asia (022) 30433295 [email protected]

Dharmen Shah India / Asia (022) 30433289 [email protected]

Dipti Mehta India / USA (022) 30433053 [email protected]

Hitakshi Mehra India (022) 30433204 [email protected]

Nityam Shah, CFA USA / Europe (022) 30433259 [email protected]

Parees Purohit, CFA UK / USA (022) 30433169 [email protected]

Praveena Pattabiraman India / Asia (022) 30433268 [email protected]

Production

Sajid Merchant Production (022) 30433247 [email protected]

Sharoz G Hussain Production (022) 30433183 [email protected]

Joel Pereira Editor (022) 30433284 [email protected]

Nikhil Pillai Database (022) 30433265 [email protected]

E&C = Engineering & Construction

Strategy


Ipca Laboratories Ltd (IPCA IN, BUY)


Tata Motors Ltd (TTMT IN, BUY)


ITC LTD (ITC IN, NOT RATED)


Idea Cellular Ltd (IDEA IN, NOT RATED)


Bata India Ltd (BATA IN, BUY)


Coal India Ltd (COAL IN, BUY)


0

200

400

600

800

1,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

IPCA LABORATORIES LTD

0

100

200

300

400

500

600

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

TATA MOTORS LTD

050

100150200250300350400450

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

ITC LTD

0

50

100

150

200Ja

n-12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

IDEA CELLULAR LTD

0200400600800

1,0001,2001,4001,600

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

BATA INDIA LTD

050

100150200250300350400450

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

COAL INDIA LTD

Strategy


Exhibit 20: Glaxosmithkline Consumer (SKB IN, SELL)


Exhibit 21: MRF LTD (MRF IN, NOT RATED)


Astral Poly Technik Ltd (ASTRA IN, NOT RATED)


Lupin Ltd (LPC IN, BUY)


PI Industries Ltd (PI IN, BUY)


Supreme Industries Ltd (SI IN, BUY)


01,0002,000

3,0004,0005,0006,000

7,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

GLAXOSMITHKLINE CONSUMER HEA

05,000

10,00015,00020,00025,00030,00035,00040,00045,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

MRF LTD

0

100

200

300

400

500

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

ASTRAL POLY TECHNIK LTD

0200400600800

1,0001,2001,4001,600

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

LUPIN LTD

0

100

200

300

400

500

600

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

PI INDUSTRIES LTD

0100200300400500600700800

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

SUPREME INDUSTRIES LTD

Strategy


Eicher Motors Ltd (EIM IN, BUY)


Sundram Fasteners Ltd (SF IN, NOT RATED)


Torrent Pharmaceuticals Ltd (TRP IN, BUY)


Mindtree Ltd (MTCL IN, BUY)


TVS Motor Co Ltd (TVSL IN, BUY)


Kajaria Ceramics Ltd (KJC IN, NOT RATED)


02,0004,0006,0008,000

10,00012,00014,00016,00018,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

EICHER MOTORS LTD

0

50

100

150

200

250

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

SUNDRAM FASTENERS LTD

0200400

600800

1,0001,200

1,400

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

TORRENT PHARMACEUTICALS LTD

0200400

600800

1,0001,200

1,400Ja

n-12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

MINDTREE LTD

0

50

100

150

200

250

300

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

TVS MOTOR CO LTD

0100200300400500600700800

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

KAJARIA CERAMICS LTD

Strategy


Finolex Cables Ltd (FNXC IN, UNDER REVIEW)


Gateway Distriparks Ltd (GDPL IN, NOT RATED)


Wabco India Ltd (WL IN, NOT RATED)


Monsanto India Ltd (MCHM IN, NOT RATED)


VST Industries Ltd (VST IN, NOT RATED)


Page Industries Ltd (PAG IN, BUY)


0

50

100

150

200

250

300

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

FINOLEX CABLES LTD

050

100150200250300350400

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

GATEWAY DISTRIPARKS LTD

0

1,000

2,000

3,000

4,000

5,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

WABCO INDIA LTD

0500

1,0001,5002,0002,5003,0003,5004,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

MONSANTO INDIA LTD

0

500

1,000

1,500

2,000

2,500

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

VST INDUSTRIES LTD

0

2,0004,0006,0008,000

10,00012,00014,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

PAGE INDUSTRIES LTD

Strategy


Berger Paints India Ltd (BRGR IN, SELL)


Britannia Industries Ltd (BRIT IN, SELL)


Poly Medicure Ltd (PLM IN, NOT RATED)


Avanti Feeds Ltd (AVNT IN, NOT RATED)


KPR Mill Ltd (KPR IN, NOT RATED)


Fiem Industries Ltd (FIEM IN, NOT RATED)


0

100

200

300

400

500

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

BERGER PAINTS INDIA LTD

0

500

1,000

1,500

2,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

BRITANNIA INDUSTRIES LTD

0

200

400

600

800

1,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

POLY MEDICURE LTD

0

500

1,000

1,500

2,000

2,500Ja

n-12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

AVANTI FEEDS LTD

050

100150200250300350400

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

KPR MILL LTD

0

200

400

600

800

1,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

FIEM INDUSTRIES LTD

Strategy


Adi Finechem Ltd (ADFI IN, NOT RATED)


La Opala Rg Ltd (LOG IN, NOT RATED)


Indag Rubber Ltd (IDR IN, NOT RATED)


Suprajit Engineering Ltd (SEL IN, NOT RATED)


Siyaram Silk Mills Ltd (SIYA IN, NOT RATED)


Suven Life Sciences Ltd (SVLS IN, NOT RATED)


050

100150200250300350400

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

ADI FINECHEM LTD

0

100

200

300

400

500

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

LA OPALA RG LTD

0

200

400

600

800

1,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

INDAG RUBBER LTD

020406080

100120140160

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

SUPRAJIT ENGINEERING LTD

0

200

400

600

800

1,000

1,200

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

SIYARAM SILK MILLS LTD

0

50

100

150

200

250

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

SUVEN LIFE SCIENCES LTD

Strategy


Mayur Uniquoters Ltd (MUNI IN, NOT RATED)


Granules India Ltd (GRAN IN, NOT RATED)


Huhtamaki Ppl Ltd (HPPL IN, NOT RATED)


Himatsingka Seide Ltd (HSS IN, NOT RATED)


WIM PLAST LTD (WMP IN, NOT RATED)


Atul Auto Ltd (ATA IN, NOT RATED)


0

100

200

300

400

500

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

MAYUR UNIQUOTERS LTD

0

200

400

600

800

1,000

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

GRANULES INDIA LTD

0

50

100

150

200

250

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

HUHTAMAKI PPL LTD

0

20

40

60

80

100

120Ja

n-12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

HIMATSINGKA SEIDE LTD

0200400600800

1,0001,2001,4001,6001,800

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

WIM PLAST LTD

0100200300400500600700800

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

ATUL AUTO LTD

Strategy


Fluidomat Ltd (FDM IN, NOT RATED)


0

50

100

150

200

250

300

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

FLUIDOMAT LTD

Strategy


Explanation of Investment Rating

Investment Rating Expected return (over 12-month)

BUY >5%

SELL <5%

NO STANCE We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NOT RATED We do not have any forward looking estimates, valuation or recommendation for the stock

Disclaimer This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Ambit Capital. AMBIT Capital Research is disseminated and available primarily electronically, and, in some cases, in printed form.

Additional information on recommended securities is available on request.

Disclaimer

1. AMBIT Capital Private Limited (“AMBIT Capital”) and its affiliates are a full service, integrated investment banking, investment advisory and brokerage group. AMBIT Capital is a Stock Broker, Portfolio Manager and Depository Participant registered with Securities and Exchange Board of India Limited (SEBI) and is regulated by SEBI

2. AMBIT Capital makes best endeavours to ensure that the research analyst(s) use current, reliable, comprehensive information and obtain such information from sources which the analyst(s) believes to be reliable. However, such information has not been independently verified by AMBIT Capital and/or the analyst(s) and no representation or warranty, express or implied, is made as to the accuracy or completeness of any information obtained from third parties. The information, opinions, views expressed in this Research Report are those of the research analyst as at the date of this Research Report which are subject to change and do not represent to be an authority on the subject. AMBIT Capital may or may not subscribe to any and/ or all the views expressed herein.

3. This Research Report should be read and relied upon at the sole discretion and risk of the recipient. If you are dissatisfied with the contents of this complimentary Research Report or with the terms of this Disclaimer, your sole and exclusive remedy is to stop using this Research Report and AMBIT Capital or its affiliates shall not be responsible and/ or liable for any direct/consequential loss howsoever directly or indirectly, from any use of this Research Report.

4. If this Research Report is received by any client of AMBIT Capital or its affiliate, the relationship of AMBIT Capital/its affiliate with such client will continue to be governed by the terms and conditions in place between AMBIT Capital/ such affiliate and the client.

5. This Research Report is issued for information only and the 'Buy', 'Sell', or ‘Other Recommendation’ made in this Research Report such should not be construed as an investment advice to any recipient to acquire, subscribe, purchase, sell, dispose of, retain any securities and should not be intended or treated as a substitute for necessary review or validation or any professional advice. Recipients should consider this Research Report as only a single factor in making any investment decisions. This Research Report is not an offer to sell or the solicitation of an offer to purchase or subscribe for any investment or as an official endorsement of any investment.

6. This Research Report is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied in whole or in part, for any purpose. Neither this Research Report nor any copy of it may be taken or transmitted or distributed, directly or indirectly within India or into any other country including United States (to US Persons), Canada or Japan or to any resident thereof. The distribution of this Research Report in other jurisdictions may be strictly restricted and/ or prohibited by law or contract, and persons into whose possession this Research Report comes should inform themselves about such restriction and/ or prohibition, and observe any such restrictions and/ or prohibition.

7. AMBIT Capital Private Limited plans to register itself as a Research Entity under the SEBI (Research Analysts) Regulations, 2014.

Conflict of Interests

8. In the normal course of AMBIT Capital’s business circumstances may arise that could result in the interests of AMBIT Capital conflicting with the interests of clients or one client’s interests conflicting with the interest of another client. AMBIT Capital makes best efforts to ensure that conflicts are identified and managed and that clients’ interests are protected. AMBIT Capital has policies and procedures in place to control the flow and use of non-public, price sensitive information and employees’ personal account trading. Where appropriate and reasonably achievable, AMBIT Capital segregates the activities of staff working in areas where conflicts of interest may arise. However, clients/potential clients of AMBIT Capital should be aware of these possible conflicts of interests and should make informed decisions in relation to AMBIT Capital’s services.

9. AMBIT Capital and/or its affiliates may from time to time have or solicit investment banking, investment advisory and other business relationships with companies covered in this Research Report and may receive compensation for the same.

Additional Disclaimer for U.S. Persons

10. The research report is solely a product of AMBIT Capital 11. AMBIT Capital is the employer of the research analyst(s) who has prepared the research report 12. Any subsequent transactions in securities discussed in the research reports should be effected through Enclave Capital LLC. (“Enclave”). 13. Enclave does not accept or receive any compensation of any kind for the dissemination of the AMBIT Capital research reports. 14. The research analyst(s) preparing the email / Research Report/ attachment is resident outside the United States and is/are not associated persons of any U.S. regulated broker-dealer and that

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.

15. This report is prepared, approved, published and distributed by the Ambit Capital located outside of the United States (a non-US Group Company”). This report is distributed in the U.S.by Enclave Capital LLC, a U.S. registered broker dealer, on behalf of Ambit Capital only to major U.S. institutional investors (as defined in Rule 15a-6 under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”)) pursuant to the exemption in Rule 15a-6 and any transaction effected by a U.S. customer in the securities described in this report must be effected through Enclave Capital LLC (19 West 44th Street, suite 1700, New York, NY 10036).

16. As of the publication of this report Enclave Capital LLC, does not make a market in the subject securities. 17. This document does not constitute an offer of, or an invitation by or on behalf of Ambit Capital or its affiliates or any other company to any person, to buy or sell any security. The information

contained herein has been obtained from published information and other sources, which Ambit Capital or its Affiliates consider to be reliable. None of Ambit Capital accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.

Additional Disclaimer for Canadian Persons

18. AMBIT Capital is not registered in the Province of Ontario and /or Province of Québec to trade in securities and/or to provide advice with respect to securities. 19. AMBIT Capital's head office or principal place of business is located in India. 20. All or substantially all of AMBIT Capital's assets may be situated outside of Canada. 21. It may be difficult for enforcing legal rights against AMBIT Capital because of the above. 22. Name and address of AMBIT Capital's agent for service of process in the Province of Ontario is: Torys LLP, 79 Wellington St. W., 30th Floor, Box 270, TD South Tower, Toronto, Ontario M5K 1N2

Canada. 23. Name and address of AMBIT Capital's agent for service of process in the Province of Montréal is Torys Law Firm LLP, 1 Place Ville Marie, Suite 1919 Montréal, Québec H3B 2C3 Canada.

Disclosure 24. Ambit & its associate have financial interest in HCL, ITC, TCS, Coal India, Lupin & TVS Motors 25. The Analyst(s) and their dependent relatives have financial interest in Indag Rubber and Coal India, stocks discussed in this research report. Analyst Certification Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. © Copyright 2014 AMBIT Capital Private Limited. All rights reserved.

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