Emkay Your success is our success

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1 Emkay Your success is our success September 03, 2012 Rating Buy CMP Rs544 EPS Chg FY13E/FY14E (%) Target Price change (%) Previous Reco Buy Target Price Rs600 NA NA Nifty 5,259 Sensex 17,542 Price Performance (%) 1M 3M 6M 12M Absolute Rel. to Nifty Source: Bloomberg Relative price chart Rs % Sep-11 Nov-11 Jan-12 Mar-12 Apr-12 Jun-12 Aug-12 Source: Bloomberg Havells India (LHS) Rel to Nifty (RHS) Stock Details Sector Engineering & Capital Goods Bloomberg HAVL IB Equity Capital (Rs mn) 624 Face Value(Rs) 5 No of shares o/s (mn) Week H/L 616/ 330 Market Cap (Rs bn/usd mn) 68/ 1,219 Daily Avg Volume (No of sh) 303,317 Daily Avg Turnover (US$mn) 3.1 Shareholding Pattern (%) Jun12 Mar12 Dec11 Promoters FII/NRI Institutions Private Corp Public Source: Bloomberg Havells India Why "Havells is Havells" Our channel checks with Electrical Equipment (EE) dealers across India have brought to our notice several interesting facts on Havells as a brand as well as functioning of the EE market Why Havells is Havells - Channel checks reveal dealers prefer Havells due to i) Strong brand & positioning, ii) Product basket & iii) Lucrative dealer incentive Few myths broken i) preferred as consumer brand, ii) premium pricing despite strong growth & iii) no/low product differentiation in the market Current state of EE market i) growth in industrial segment has been slow ii) EE market getting more competitive & iii) consumer products gaining traction due to festive season Enthused by dealer feedback. Focus on branding, rising distribution network & new product launches to generate sustained growth. Maintain positive bias. Retain BUY We interacted with sole Havells distributors, multi-brand dealers, Havells Galaxy owners, retailers, etc., in key electrical equipment markets across India to understand factors responsible for growth of Havells as a brand. During the course of our interaction, few facts on Havells and the industry were an eye-opener, while some preconceived myths about Havells and the industry were also broken. Over the years, Havells has transformed itself from an electrical equipment manufacturer to a household name, which very few companies in the industry have done. Also, Havells has been both consumer and dealer centric, which has resulted in sustained growth. Why Havells is Havells Extremely successful brand: Highest recall in the industry Dealers commented that aggressive branding & promotion has been the key factor that has differentiated Havells from its peers. Havells portrayal of unique concepts through its ad campaigns like Mere Fans hamesha mere saath rahenge featuring yesteryear superstar Rajesh Khanna, Wires that don t catch fire, Shock Laga Kya, Flower like Idlis, etc. has managed to create strong product and brand recall in consumer s mind. Havells has doubled its ad spend from 1.5% of sales in FY05 (Rs 109mn) to 3.1% of sales in FY12 (Rs 1122mn), which is higher as compared to most peers. Presence across the entire electrical equipment product gamut Dealers cited that one of the key strengths of Havells is its wide product range from Switchgear, Switches, Cables & Wires, CFL, Luminaries, Fans, Water Heaters and Kitchen appliances. Havells is better placed as compared to competition as it can target the entire distribution channel with its product range, which almost covers the electrical equipment market. It holds a market share ranging from 10-25% and is among the top 5 players in most product categories, which has resulted in sustainable growth of 15-20% CAGR in last 5 years in most of these products. Company Update Financial Snapshot (Consolidated) (Rsmn) YE- Net EBITDA EPS EPS RoE EV/ Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV FY11A 56,126 5, , FY12A 65,182 6, , FY13E 74,053 7, , FY14E 82,678 8, , Emkay Global Financial Services Ltd. 1

2 Exhibit 1: Aggressive branding has been the key to Havells success Exhibit 2: has led to market share improvement in most products 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 4.8% 4.8% 2.3% 2.2% 1.1% 3.5% 2.6% 1.6% 3.8% 3.8% 2.5% 2.2% 0.6% 0.7% FY09 Crompton Greaves FY10 Bajaj FY11Electricals FY12 Havells V Guard Industries 3.1% 2.8% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Domestic Switchgear Modular Switches LV Ind Switchgear Cables & Wires Lighting - CFL Lighting - Luminaries Fans - ECD Source: Emkay Research, Company Source: Emkay Research, Company Exhibit 3: Havells is present in most product categories Products Presence Domestic SWG Industrial SWG Switch Anchor Cables & Wires Lighting Luminaries Fans Water Heaters Kitchen App Bajaj Electrical Crompton Greaves Le-grand L&T Osram Philips Polycab V-Guard Havells Source: Company, Emkay Research Apt positioning & strong distributor reach expect network to expand further Dealers stated that Havells has positioned its products well across markets with regular use products like CFL, fans and appliances focused on end consumers, and switchgear, cables & wires and luminaries targeted at industries, builders, architects, etc. In addition, a strong distribution network, exclusive outlets like Havells Galaxy and Havells World has enabled it to reach a larger audience. Exhibit 4: Havells has a strong & rising distributor network Expect this trend to continue Company Distributors/Dealers Retailers Other formats Havells India Havells Galaxy Bajaj Electrical Bajaj World V Guard Orient Source: Company, Emkay Research Known for high service standards in the industry Dealers appreciated high customer service standards set by Havells, which has also been a key factor for Havells scoring over competition. Service benefits like free installation, courtesy call after product purchase, customer hotline number have attracted customers to the Havells brand. Unorganised players moving out of the system benefiting Havells Dealers cited that the number of unorganized players in the electrical equipment market has been gradually reducing over the years. Segments like Fans, Wires, Lighting and Domestic appliances, which are highly fragmented in nature, have seen rapid increase in the share of organised players in the past 3-5 years. This is led by shift in consumer preference towards branded products due to product quality, brand awareness, better Emkay Research September 03,

3 customer service and competitive pricing. Players like Havells have directly benefited from this shift as they have eaten into the market share of these unorganized players. This is evident in the growth rates recorded by Havells. Wherein most segments in the EE industry have grown at an average of 10-12% over FY08-FY12, Havells has outperformed by posting a growth of 16% CAGR over the same period. Exhibit 5: Havells has grown at a much faster pace than the industry in most product segments (in Rs bn) Product Market %CAGR Segment Growth - Havells FY08 FY09 FY10 FY11 FY12 %CAGR Domestic Switchgear % Switchgear % Modular Switches % Cables & Wires % LV Ind Switchgear % Lighting & Fixtures % Cables & Wires % Electrical Consumer Durables % Lighting - CFL % Others % Lighting - Luminaries % Total % Fans - ECD % Water Heaters Domestic appliances Source: Company, Emkay Research Lucrative incentives have kept the dealer lured to Havells Since this business is more of a push model rather than pull, the EE companies need to constantly innovate and come up with lucrative incentive schemes to attract dealers. Few incentives given by Havells to its dealers are as under: Dealer financing (DF): In DF, there is a tripartite agreement between company, bank and dealer, which is insured with partial (5%) recourse to Havells. This scheme is beneficial for the dealer as it gets 3% cash discount from Havells for immediate payment, while in most cases, the dealer repays the bank soon (within days against days credit period) in order to avail the benefit of cash discount. Havells has capitalized well on this scheme and currently about 70% of its business is done through dealer financing. Few other schemes include Mutual fund scheme, where 1% of the dealer s revenue is invested in a Mutual fund by the company with a 3-year lock-in and at the end of 3 years, the money invested along with returns is given back to the dealer. Another scheme is a point system scheme, wherein 0.3% of a dealer s revenues are saved as points with a lock-in of 3 years and at the end of the period, the points accumulated are utilized for vacation and leisure trips for the dealers. These actions have triggered strong and sustainable growth momentum for Havells. Few preconceived myths on Havells were broken Our interaction with the dealers broke few of our preconceived notions about Havells and revealed the ground realities. I. Myth: Havells is a strong national brand both in industrial as well as consumer segment Reality: Havells is preferred as a consumer brand. Below are few reasons cited by the dealers, which made us believe that Havells is more accepted as a consumer brand. Increased spending towards branding and promotion of Havells as a consumer brand Introduction of consumer driven products in the portfolio like Fans, water heaters, domestic appliances, etc. Not a preferred brand in the industrial segment. Faces fierce competition from MNCs and other local players in the industrial segment Fall in industrial products market share has been compensated by rise in share of consumer products. Emkay Research September 03,

4 This image transformation is good for Havells as aggressive branding and positioning of its consumer products is making Havells more prominent as a consumer brand in the market II. Myth: Aggressive pricing given the high growth posted by Havells in a highly competitive market Reality: Priced at a premium over peers despite high growth. Our interaction with dealers suggested that despite the strong & sustainable growth posted by Havells in the past few years, it has managed to maintain its premium pricing over competition. In a highly price competitive market, this does impact sales in few sections of the market. But as per dealers, Havells strong brand has more than compensated for the revenue loss in these sections. Although there is high competition, consumers connect with brands and are ready to pay an extra price for the product. III. Myth: Variety of product features separates leaders from the competition Reality: No/Minor product differentiation, branding is the key. The dealers mentioned that there is hardly any differentiation in product features among the branded players. This includes products like cables & wires, domestic switchgears, CFL, luminaries, non-decorative fans, water heaters, etc. wherein competitor product features are almost similar. However, sustained focus on brand creation coupled with dealer push has differentiated the leaders from the competition. Caveat/Risk: One of the key differentiator that Havells possesses over competition is the aggressive branding it has done in the past few years, which has led to strong and sustainable growth of 19% CAGR over the past 5 years. In order to continue this level of growth, Havells would have to continuously invest in branding and promotion. Reduced focus towards branding may have a material impact on its business. Dealer views on business: It s a mixed Bag!!! The dealers indicated that the industry is going through a moderation phase, which has impacted the entire Electrical Equipment (EE) industry. The industrial segment has witnessed deceleration, but demand for consumer products like fans, CFL and domestic appliances remain healthy. The dealer spelled out reasons that have impacted the industry, which are as follows: Industrial segment is witnessing a slowdown due to low project orderings, reduction in capex by corporates, regulatory interventions and general sluggishness in economy Construction activity in real estate sector has been slow due to cash crunch of builders, delay in building project approvals, severe correction in housing demand, etc. Severe power shortage in most parts of the country has led to reduction in sale of lighting and other consumer electrical products. On the flipside, power cuts have increased demand for products like Stabilizers and UPS batteries Products like Lighting, Fans and domestic appliances are seasonal in nature; April-July period is generally weak as compared to August-December period. Dealers have started witnessing higher enquiries and orders in customer products from August owing to festive season Increasing competition, with even MNC players entering this market in a big way, has led to crowding of this market, thereby making it difficult for existing players as well as new players to survive in an already competitive market. Sharp rise in dollar vs the rupee has increased procurement cost of companies for imported raw materials and products. This has increased product prices, but dealers are finding it difficult to pass on this increase. In the end, the dealers agreed that there has been 4-5% impact on business across the industry owing to the above mentioned factors. Emkay Research September 03,

5 Domestic appliances (DA) new growth engine; what s the strategy now? Dealers stated that Havells is gradually expanding its new vertical Domestic Appliance (DA) across all the markets in India. Havells entered the domestic appliances market in October 11. It sells a wide range of appliances starting from Iron Steam & Dry, Tea/Coffee Maker, Toaster, Induction Cooker, juicer-mixer grinder, Food processor, etc. Havells is gradually penetrating in this market with the help of its strong brand and distribution reach. However, this market is highly fragmented and Havells faces cut-throat competition from organised (Bajaj, Kenstar, TTK Prestige, Philips) as well as un-organised players. Exhibit 6: Havells product range in DA is in-line with competition Company Iron Juicer-Mixergrinder Rice Cooker Electric Oven Toaster Kettle/Coffee Maker Food Processor Pressure Cooker Bajaj Electrical/Morphy Richards Philips TTK Prestige Kenstar Panasonic India Maharaja Whiteline Butterfly Kanchan International Preethi Inalsa Havells Source: Company, Emkay Research Hob Room Cooler We interacted with few dealers & Havells Galaxy owners to understand the penetration level and demand for its domestic appliances. Not yet a prominent player in this space, but have launched a good product range Smart display of products helping in visibility; has witnessed high enquiries on Irons, Mixer-grinder, Toaster, etc. Bajaj, Philips and TTK Prestige are strong players in the market. Positioned as a premium priced product compared to competition Will have to brand and position this product separately as it is a domestic appliance product and not electrical equipment. Strategy for Havells in Domestic Appliances Havells venture into domestic appliances is unlike its other segments, which were related to electrical equipment industry. Havells plans to penetrate into this segment through its existing fans & water heater distribution network, exclusive stores (Havells Galaxy & Havells World) and departmental stores ( More retail chain). Havells strong positioning as a consumer brand would be a key driver to achieve the desired growth in this segment. Havells is targeting revenues of Rs 5bn from this segment over the next few years. Our Take on Havells i) Takeaways from dealer interaction: Dealers harped on the growing importance of brand, distribution network and product portfolio in this industry. The success behind the sustained growth of Havells is its consumer centric and dealer centric approach. ii) Havells action plan: Domestic revenues have grown at 15% CAGR over FY08- FY12. To sustain this growth, Havells plans to focus on a 3-pronged strategy a) Sustained investing in branding, b) increasing distribution reach to ensure deeper product penetration & c) profitable product extensions and new products. iii) Our Forecasts: Post the dealer interactions, we continue to maintain our positive stance and remain confident that Havells can deliver our assumptions, provided it continues to remain focused on brand spend. We expect Havells domestic business to deliver strong growth of 17% CAGR over FY12-FY14E. We remain positive on Havells with a BUY rating and target price of Rs 600. Emkay Research September 03,

6 I. Domestic Switchgear Segment Dominated by few organised players, hence low competition About 50% of the business is institutional, while the balance 50% is trade business (i.e. through dealers) Consumers prefer branded products due to safety features and high technology involved Target segment architects, contractors, engineers, builders, etc. No case of price under-cutting, thus ensuring healthy margins for dealers Market size (in bn) 16 5 year CAGR (%) 7.5% Havells Market share 28% Legrand Anchor Schneider Is the market leader, share has increased from ~15% in 2006 to ~28% in 2012 No product differentiation vs competition Positioned as a 3 brand strategy with Crabtree (recently launched) focused on very high-end premium MCB segment, Havells brand focused on premium market and Standard brand in the mid-premium segment. Havells is a virtual leader in the trade business (dealer), while it has low presence in the institutional segment Enjoys healthy margin in this segment (SWG contribution margins 35-36%) Is a dominant player in the North, East and South Offers lower discount (30-40%) to dealers as compared to competition (40-55%) MCB RCCB Changeover Switch Distribution Board Despite offering huge discount (30-55%) on MRP, dealers enjoy healthy margins (5-8%) Havells products are priced at a premium to competition, but still enjoys a market leadership in this segment due to the brand Low/No presence of local/chinese products Havells is not a dominant player in the West as it is in other regions i.e. North, South and East. Players like Legrand & Anchor are much stronger in the West MNC players are penetrating into the market in a big way Ad Campaigns ( Shock Laga Kya ) Emkay Research September 03,

7 II. Modular Switches Organised players dominate, but high presence of local players High presence of local/chinese products About 50% of the business is institutional, while the balance 50% is trade business (i.e. through dealers) Organised brands are priced much higher than local products Target segment architects, contractors, engineers, builders, etc. Strong player, share has increased from ~5% in 2006 to ~15% in 2012 No product differentiation vs competition; 2 brand strategy with Crabtree focused on high-end premium segment and Havells focused on premium segment Crabtree & Havells both enjoy strong brand presence across the country Enjoys healthy margin in this segment (SWG contribution margins 35-36%) Launching the Piano switch series in Sep-Oct 12, a section which is largely dominated by Anchor Market size (in bn) 14 5 year CAGR (%) 8.8% Havells/Crabtree Market share 15% Matsushita/Roma/Anchor Legrand Despite offering huge discount (30-55%) on MRP, dealers enjoy healthy margins (5-7%) Crabtree switches are more prominent than Havells switches Pearlz Oro Aura Havells is not a dominant player in the West as it is in other regions i.e. North, South and East. Players like Legrand & Anchor are much stronger in the West Shift from un-organised players to organised players occurring at a much faster pace. Customer getting more brand conscious and focusing on product aesthetics. Ad Campaigns (Crabtree Switch A switch is a switch ) Emkay Research September 03,

8 III. Industrial Switchgears Dominated by few organised players, hence low competition Consumers prefer branded products due to safety features and high technology involved Target segment industries, commercial properties, etc No case of price under-cutting, thus ensuring healthy margins for dealers Going through a lean period due to unavailability of projects & low capex by corporates Weakest product link, market share has dipped from ~7% in 2006 to ~6% in 2012 Competition (MNC & branded players) has higher product range and recall as compared to Havells Product positioning not strong as compared to peers. Enjoys healthy margin in this segment (SWG contribution margins 35-36%) Market size (in bn) 30 5 year CAGR (%) 13.60% Havells Market share 6.0% L&T Schneider Siemens ABB Havells lacks the flair for technical products vs consumer products Low/No presence of local/chinese products ECB Circuit Breaker Loadbank PBS Havells perceived as a consumer brand; penetration of industrial switchgear segment not very prominent among industrial segment MNC players are penetrating into the market in a big way Emkay Research September 03,

9 IV. Cable & Wires Highly fragmented market Cables volume driven, dealers not brand conscious; Wires dealers prefer brands Cables largely driven by institutional players; In wires, about 50% of the business is institutional, while the balance 50% is trade business (i.e. through dealers) Market is highly regional in nature, difficult for players to penetrate from one region to another Pricing is very volatile, linked to Copper and Aluminium Margins are skewed. Hence, dealers prefer regional brands Target segment - architects, contractors, engineers, builders Strong regional presence; cables market share has increased from ~6% in 2006 to ~9% in More prominent in Wires as consumers prefer brands Sells only underground cables to clients like OEMs, Construction companies and Small sized industries. Wires is sold largely through trade business (dealer) Lowest margins among its product basket (C&W contribution margins 7-8%) Growth is largely from volumes, Copper & Aluminium prices dictate the pricing scenario Havells markets wire more than cables; wires have become more of a consumer product. Market size (in bn) year CAGR (%) 24.8% Havells Market share (Cables/Wires) 9.0%/12% Polycab KEI Finolex V-guard Dealers keeps stock of only 1 or 2 brands (regional) Largely wholesale market, retail presence is low in cables, but consumers getting more brand conscious in wires Heavy price undercutting prevails in the market Control cable Power cables Aluminium Copper Flexible cable As cables market is highly unorganized and dominated by regional players, they have prominent presence in their respective regions. Ad Campaigns ( Wires that don t catch Fire ) Emkay Research September 03,

10 V. Lighting & CFL Highly competitive market; slowly moving from unorganized / local products to branded products Chinese products are a major threat for branded players No product differentiation in consumer lighting pricing and brand is the key Market prone to constant innovation from lamps to tubes to CFL to LED Dealer margins at 4-7% depending on products Customers prefer product guarantees/warranty, thus product returns very high (2-5% for branded and 10-15% for local/chinese products) Strong player, but competition also high; thus market share has just increased from ~10% in 2006 to ~11% in 2012 Enjoys steady margins (Lighting contribution margins 17-18%) Is strong in consumer lighting due to its aggressive branding and product positioning In Industrial lighting, it competes with organised players. Havells scores well on customer service, but product range and recall of competitors is higher Market size (in bn) 20 5 year CAGR (%) 18.9% Havells Market share 11.0% Philips Osram Bajaj Electricals Product returns have reduced considerably for branded players from 5-7% earlier to 2-5% All organised players are present in the entire product range, hence no product differentiation Consumer Industrial Home Décor CFL Service plays an important role in the buying decision; Havells scores high on this front Despite high competition from local brands in the West region, it is a significant player in this region Ad Campaigns (CFL Bright. Truly Bright ) Emkay Research September 03,

11 VI. Luminaries Highly competitive market; slowly moving from unorganized / local products to branded products Chinese products are a major threat for branded players No product differentiation pricing and brand is the key Dealer margins at 4-7% depending on products Customers prefer product guarantees/warranty, thus product returns very high (2-5% for branded and 10-15% for local/chinese products) Despite competition, emerged as a strong player; market share has risen from ~3% in 2006 to ~12% in 2012 Enjoys steady margins (Lighting & fixtures contribution margins 17-18%) Havells is known for its prompt and efficient service standards, which is a key differentiator. Strong in consumer luminaries, but relatively weak in industrial luminaries. Market size (in bn) 25 5 year CAGR (%) 8.6% Havells Market share 12.0% Philips Bajaj Electricals Crompton Greaves Wipro Havells product quality is lower as compared to market leaders in industrial lighting. Commercial Area lighting Road lighting Luminance Service plays an important role in the buying decision; Havells scores high on this front Despite high competition from local brands in the West region, it is a significant player in this region Ad Campaigns ( Energy efficient Lighting solutions ) Emkay Research September 03,

12 VII. Fans Equal mix of organised as well as unorganized players; organised brands have increased share in last 5 years High demand for non-decorative fans, but decorative fans is slowly gaining popularity Price range is mostly similar among peers in non decorative, but varies in decorative/premium fans Dealer margins range from 3-5% depending on high-end and low-end fans Customers prefer product guarantees/warranty. Thus prefer branded products over local. Product return for local brands is as high as 4-6% Emerged as a strong player in last 5 years; market share has risen from 6% in 2006 to 15% in 2012 Gained significant share due to brand positioning, product variety (metallic range, dual colour, antique finish, etc) and service levels Caters to premium segment of market, enjoys contribution margins of 24-26% Priced higher as compared to competition, but still dealers prefer due to product range, aggressive promotional campaigns and prompt customer service. Market size (in bn) 38 5 year CAGR (%) 17.4% Havells Market share 15.0% Crompton Greaves Orient Bajaj Electricals Usha Heavy price undercutting prevails among local players, thus dealers prefer branded products Despite placed in the higher price range, Havells has gained significant interest among dealers due to its product range and service levels Ceiling fans Table fans High speed Air circulator Despite high competition from local brands in the West region, it is a significant player in this region Havells premium pricing is well accepted in the market due to its exquisite product range in decorative fans Ad Campaigns ( Mere Fans hamesha mere saath rahenge, Bijli ko Bachao ) Emkay Research September 03,

13 VII. Domestic appliances Highly competitive market; faster shift from unorganized/local products to branded products Huge variety of products and brands prevalent in the market, difficult for customers to choose from a large choice. Highly price sensitive along with quality consciousness. Rupee depreciation has also impacted product pricing for the whole industry. Customers prefer brands with a large product offering and prompt service level. Dealer margins range from 2-5% depending from product to product Customers prefer product guarantees/warranty, thus prefer branded products over local. Is a new player and entered into Domestic appliances with Water heaters Positioned at the mid to high premium segment Has tasted initial success with strong traction in water heaters; has extended its product range to kitchen appliances Is marketed well in the North, South & East due to strong brand image, but its presence in West is negligible Markets kitchen appliances through its existing fans distribution network, malls and departmental stores Since domestic appliances are imported vs fans (manufactured), DA margins are slightly lower than fans segment. (ECD segment margins are at 24-26%) Market size (in bn) 50 5 year CAGR% NA Havells Market share Bajaj electricals Philips TTK Prestige Kenstar New Organised players face severe competition from Chinese players Appliances targeted in the West region in a small way only, due to intense competition and segment being in nascent stages Water Heater Food processor Cooking Garment Care Fastest shift from unorganized/local products to branded products happening in this segment. Ad Campaigns (Geysers Bijli Bachaani Hai, KA Best Enjoyed Fresh, Mixer Flower like Idlis ) Emkay Research September 03,

14 Key Financials (Consolidated) Income Statement Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E Net Sales 56,126 65,182 74,053 82,678 Growth (%) Expenditure 50,484 58,222 66,612 74,011 Raw Materials 31,925 36,272 41,863 47,148 Employee Cost 6,405 7,904 7,857 8,372 Other Exp 12,155 14,046 16,891 18,491 EBITDA 5,642 6,960 7,442 8,667 Growth (%) EBITDA margin (%) Depreciation ,042 1,093 EBIT 4,838 6,011 6,400 7,574 EBIT margin (%) Other Income Interest expenses 902 1,281 1,222 1,054 PBT 4,173 4,932 5,397 6,773 Tax 1,031 1,058 1,254 1,693 Effective tax rate (%) Adjusted PAT 3,142 3,874 4,143 5,080 Growth (%) Net Margin (%) (Profit)/loss from JVs/Ass/MI Adj. PAT After JVs/Ass/MI 3,139 3,874 4,143 5,080 E/O items Reported PAT 3,107 3,874 4,143 5,080 PAT after MI 3,139 3,874 4,143 5,080 Growth (%) Cash Flow Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E PBT (Ex-Other income) 3,936 4,730 5,178 6,520 Depreciation ,042 1,093 Interest Provided 902 1,281 1,222 1,054 Other Non-Cash items 509 1, Chg in working cap Tax paid -1,031-1,058-1,254-1,693 Operating Cashflow 2,530 4,617 5,664 6,101 Capital expenditure -1,941-1,961-1,350-1,350 Free Cash Flow 589 2,656 4,314 4,751 Other income Investments Investing Cashflow -1,762-1,053-1,350-1,350 Equity Capital Raised Loans Taken / (Repaid) -1, Interest Paid ,281-1,222-1,054 Dividend paid (incl tax) ,101 Income from investments Others 1, ,222 1,054 Financing Cashflow ,568-1,163-2,082 Net chg in cash ,150 2,669 Opening cash position 1,481 1,779 2,336 5,487 Closing cash position 1,779 2,336 5,487 8,156 Balance Sheet Y/E Mar (Rsmn) FY11A FY12A FY13E FY14E Equity share capital Reserves & surplus 5,914 8,932 12,161 16,141 Net worth 6,537 9,556 12,785 16,765 Minority Interest Secured Loans 8,329 7,343 7,093 6,112 Unsecured Loans 1,240 1,342 1,342 1,342 Loan Funds 9,569 8,685 8,435 7,454 Net deferred tax liability Total Liabilities 16,671 18,798 21,778 24,776 Gross Block 31,808 31,201 32,551 33,901 Less: Depreciation 18,499 17,293 18,335 19,428 Net block 13,309 13,908 14,216 14,474 Capital work in progress Investment Current Assets 22,077 27,183 32,026 37,050 Inventories 10,860 13,678 14,673 16,172 Sundry debtors 7,724 8,909 9,293 9,856 Cash & bank balance 1,779 2,336 5,487 8,156 Loans & advances Other current assets 1,595 2,144 2,416 2,680 Current lia & Prov 18,965 22,956 25,128 27,410 Current liabilities 15,061 17,860 20,579 22,642 Provisions 3,904 5,096 4,549 4,768 Net current assets 3,113 4,227 6,899 9,640 Misc. exp Total Assets 16,671 18,798 21,778 24,776 Key Ratios Y/E Mar FY11A FY12A FY13E FY14E Profitability (%) EBITDA Margin Net Margin ROCE ROE RoIC Per Share Data (Rs) EPS CEPS BVPS DPS Valuations (x) PER P/CEPS P/BV EV / Sales EV / EBITDA Dividend Yield (%) Gearing Ratio (x) Net Debt/ Equity Net Debt/EBIDTA Working Cap Cycle (days) Emkay Research September 03,

15 Emkay Global Financial Services Ltd. 7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai India Tel: Fax: Web: DISCLAIMER: Emkay Global Financial Services Limited and its affiliates are a full-service, brokerage, investment banking, investment management, and financing group. We along with our affiliates are participants in virtually all securities trading markets in India. Our research professionals provide important input into our investment banking and other business selection processes. Investors may assume that Emkay Global Financial Services Limited and/or its affiliates may seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This report is not directed to, 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 law or regulation or which would subject Emkay Global Financial Limited or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S. person unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may be distributed in Canada or used by private customers in United Kingdom. All material presented in this report, unless specifically indicated otherwise, is under copyright to Emkay. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Emkay. All trademarks, service marks and logos used in this report are trademarks or registered trademarks of Emkay or its Group Companies. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read Risk Disclosure Document for Capital Market and Derivatives Segments as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Emkay Research September 03,