CRISIL IERIndependentEquityResearch

Enhancing investment decisions

Alok Industries Ltd
Q6FY13 Results Update



CRISIL IERIndependentEquityResearch
Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-
point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL
Fundamental Grade Assessment
CRISIL
Valuation Grade Assessment
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)


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Last updated: May, 2013

Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.

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purpose.




Alok Industries Ltd
Working capital cycle still remains high

Fundamental Grade 2/5 (Moderate fundamentals)
Valuation Grade 3/5 (CMP is aligned)
Industry Textiles, Apparels and Luxury Goods
1
December 31, 2013

Fair Value 9
CMP 8
For detailed initiating coverage report please visit: www.ier.co.in
CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

Alok Industries Ltds (Aloks) standalone Q6FY13* results were higher than CRISIL
Researchs expectations. Revenues increased 12.5% y-o-y driven by the fabric and home
textile business. Working capital remains under pressure despite improvement during the
quarter. Alok is focusing on exports to improve its working capital cycle. Given its large
integrated scale of operations, we remain positive on growth in exports. However, its stressed
working capital and delay in cash collections from the sale of non-core assets may lead to
liquidity constraints and delay the debt reduction plans. Working capital cycle and high debt
remain monitorables for us. For now, we maintain our fundamental grade of 2/5.
Export drives top line growth
Revenues grew by 12.5% y-o-y to 37.4 bn driven by home textile (up by 52% to
5.21 bn) and fabrics (up by 8.7% to21.2 bn). Polyester business was flat y-o-y at
8.9 bn.
Domestic business revenues increased 6.7% y-o-y to 26.5 bn (71% of total revenues).
Exports grew by 30% y-o-y due to home textiles, garments, terry towel and polyester
segment revenues.
EBITDA margin declined by 448 bps y-o-y to 23.1% due to higher raw material cost. Raw
material cost as a % of revenues grew 527 bps y-o-y to 60.1% due to increase in prices
of raw material - cotton, PTA and MEG. Other expenses increased 9% y-o-y to 5.5 bn.
Adj PAT margin contracted by 211 bps y-o-y to 4.6% due to lower operating profitability
and higher finance cost.
Debt and working capital at alarming levels: key concern
Aloks gross debt, receivable days and inventory days have increased significantly in FY13
from FY12 levels. Receivables days increased from 78 days in FY12 to 130 days (last quarter
182 days) in FY13. Inventory days went up to 224 days from 204 days during the same
period. Consequently, working capital days increased from 218 days to 278 days. As a result,
the companys gross debt increased to 1,978 bn with debt-equity ratio of 5.1x in FY13.
Earnings estimates revised downwards
Revenue estimates have been increased by 3% for FY14 and by 2% for FY15. EBITDA
margin estimates have been increased to 24.8% and 25.2%, respectively, to factor in benefits
from savings in power cost and reduction in losses in its retail chain business. We have also
built in the benefits of savings in power cost for the explicit period and expect improvement in
working capital cycle with company focussing more on exports where debtor days are lower.
However, we remove the benefit of land bank monetisation; Alok has not been able to
monetise as the macro environment remained challenging. We factor in higher interest and
depreciation as actual capex in FY13 has been much higher than our expectation. Overall,
PAT estimates has been lowered to 3,415 mn for FY14 and 7,723 mn for FY15 on account
of higher finance cost and depreciation.
Fair value revised
We continue to use the DCF method to value Alok. We revise our fair value to 9 from 8 per
share. At current market price of 8 per share, our valuation grade is 3/5.

KEY FORECAST
( mn) FY11 FY12 18MFY13 6MFY14E FY15E
Operating income 66,114 97,909 213,808 74,485 155,877
EBITDA 18,094 23,978 52,634 18,498 39,203
Adj net income 3,267 1,785 9,124 3,415 7,723
Adj EPS () 4.1 2.2 6.6 2.5 5.6
EPS growth (%) 40.8 (47.9) NM NM NM
Dividend yield (%) 1.3 4.1 3.5 1.2 3.5
RoCE (%) 9.4 9.9 12.2 12.0 13.5
RoE (%) 11.8 6.6 19.2 17.8 17.6
PE (x) 5.4 3.9 1.3 3.4 1.5
P/BV (x) 0.6 0.3 0.3 0.3 0.2
EV/EBITDA (x) 7.0 6.3 3.8 10.1 4.3
NM: Not meaningful; CMP: Current market price
*(Q6=Jul-Sep, as accounting year has been extended from Jun to Sep, 2013)
Source: Company, CRISIL Research estimates

CFV MATRIX

KEY STOCK STATISTICS
NIFTY/SENSEX 6304/21170
NSE/BSE ticker
ALOKTEXT/
ALOKIND
Face value ( per share) 10
Shares outstanding (mn) 1,377
Market cap ( mn)/(US$ mn) 11,705/189
Enterprise value ( mn)/(US$ mn) 202/3
52-week range ()/(H/L) 13/6
Beta 1.5
Free float (%) 61.8%
Avg daily volumes (30-days) 4,232,403
Avg daily value (30-days) ( mn) 33.8

SHAREHOLDING PATTERN

PERFORMANCE VIS--VIS MARKET

Returns
1-m 3-m 6-m 12-m
Alok 10% 7% 22% -23%
CNX 500 3% 12% 9% 4%

ANALYTICAL CONTACT
Mohit Modi (Director) mohit.modi@crisil.com
Gaurav Samota gaurav.samota@crisil.com
Vishal Rampuria vishal.rampuria@crisil.com
Client servicing desk
+91 22 3342 3561 clientservicing@crisil.com
1 2 3 4 5
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34.2% 34.2%
36.4% 38.2%
4.1% 3.9%
3.2%
3.9%
10.9% 12.1% 9.3%
9.4%
50.8% 49.9% 51.1%
48.5%
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Dec-12 Mar-13 Jun-13 Sep-13
Promoter FII DII Others



CRISIL IERIndependentEquityResearch
2
Q6FY13 Results Summary (Standalone)
( mn) Q6FY13 Q5FY13* Q2FY13 q-o-q (%) y-o-y (%) 18MFY13 12MFY12 y-o-y (%)
Net sales 37,407 29,952 33,248 24.9 12.5 199,178 89,009 NM
Raw materials cost 22,488 16,358 18,235 37.5 23.3 113,997 43,931 NM
Raw materials cost (% of net sales) 60.1% 54.6% 54.8% 550 bps 527 bps 57.2% 49.4% NM
Employees cost 702 764 729 (8.1) (3.6) 4,370 2,673 NM
Other expenses 5,572 3,086 5,112 80.6 9.0 26,584 16,813 NM
EBITDA 8,645 9,744 9,172 (11.3) (5.8) 54,226 25,592 NM
EBITDA margin 23.1% 32.5% 27.6% -942 bps -448 bps 27.2% 28.8% NM
Depreciation 2,449 2,361 2,183 3.8 12.2 13,608 7,134 NM
EBIT 6,196 7,384 6,989 (16) (11) 40,619 18,457 NM
Interest and finance charges 4,180 4,153 3,230 0.6 29.4 22,607 11,496 NM
Operating PBT 2,016 3,230 3,759 (37.6) (46.4) 18,012 6,962 NM
Other income 153 99 44 53.8 244.4 624 656 NM
Extraordinary Income/(expense) (746) (2,831) 671 NM NM (4,637) (1,213) NM
PBT 1,423 499 4,474 185.4 (68.2) 13,999 6,405 NM
Tax 453 170 1,578 167.4 (71.3) 4,797 2,600 NM
Reported PAT 970 329 2,896 194.7 (66.5) 9,202 3,805 NM
Adjusted PAT 1,715 3,160 2,226 (45.7) (22.9) 13,839 5,018 NM
Adjusted PAT margin 4.6% 10.6% 6.7% -596 bps -211 bps 6.9% 5.6% NM
No of equity shares (mn) 1,377.1 1,377.1 826.3 - - 1,377.1 787.8 NM
Adjusted EPS () 1.2 2.3 2.7 (45.7) (53.8) 10.0 6.4 NM
* For the period April to June 2013
Source: Company, CRISIL Research

Consolidated results summary
( mn) 18MFY13 12MFY12
Operating income 213,884 97,909
EBITDA 52,012 23,978
EBITDA margin 24.3% 24.5%
PBT 7,790 3,809
Tax provision 4,843 3,004
PAT (Reported) 2,967 805
Less: Exceptionals (6,344) (980)
Adjusted PAT 9,311 1,785
Source: Company, CRISIL Research

Higher raw material cost led to decline in margins PAT fell y-o-y due to lower EBITDA and high finance cost
Source: Company, CRISIL Research Source: Company, CRISIL Research

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28.1%
30.9%
26.7%
27.1%
24.6%
32.5%
23.1%
16%
18%
20%
22%
24%
26%
28%
30%
32%
34%
0
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( mn)
Sales EBITDA margin (RHS)
559 1,930 1,897 2,611 2,006 3,160 1,715
2.2%
8.0%
5.7%
7.4%
5.1%
10.6%
4.6%
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( mn)
Adj PAT Adj PAT margin (RHS)



Alok Industries Ltd
3
Share of exports increased y-o-y Share of apparel fabric and home textiles increased y-o-y
Source: Company, CRISIL Research Source: Company, CRISIL Research

Share price movement Fair value movement since initiation

-Indexed to 100

Source: NSE, CRISIL Research Source: NSE, BSE, CRISIL Research


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31%
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( mn)
Total sales Export % (RHS)
4.7 2.3 1.6 1.1 0.9 1.1 1.3
11.8 14.8
12.1
9.2 10.6 9.2
13.9
51.3
46.9
59.7 66.9
71.7
65.5
60.9
32.1
36.1
26.6
22.8
16.8
24.2 24.0
0%
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Cotton yarn Home textiles Apparel fabric Polyester yarn
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Alok CNX500
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('000) ()
Total Traded Quantity (RHS) CRISIL Fair Value Alok



CRISIL IERIndependentEquityResearch
4
Key Developments
Delay in monetisation of non-core assets to affect liquidity and
gearing levels
Alok has sold 18 floors (out of the 20 floors) of its real estate venture Peninsula Business Park
(PSB); of the eight floors of Ashford Centre, three floors have been sold and four have been
leased out. The estimated deal size of these two projects is 9.6 bn (PSB: 9 bn and Ashford:
600 mn). The company has received only 6.9 bn of the total payment. Alok has used the
proceeds from PSB to repay debt of 7.5 bn in the books of its subsidiary, Alok Realtors Pvt.
Ltd, and the remaining 1.5 bn to repay the debt of the parent company. Any further delay in
receiving the payment will lead to higher leverage and interest cost. Also, a monetisation plan
of its land in Silvassa and Vapi has not been successful due to a weak macro environment.
Hence we have not factored the same in our projections.

Alok has decided to limit its capital expenditure up to 6,000 mn per year for the next few
years, beginning FY14; we have factored in the same in our projections until FY20.

Domestic revenues and debtors Export revenues and debtors
Source: Company, CRISIL Research Source: Company, CRISIL Research

Working capital movement
Sep-13 Mar-13 Sep-12 Mar-12
Debtor days 138 161 86 88
Inventory days 158 116 109 139
Creditor days 27 61 41 21
Working capital days 269 216 154 206

Retail business performance FY13
mn Turnover PAT
Grabal Alok (UK) Limited 11,857 (2,102)
Mileta 2,102 204
Alok Singapore Pte. Ltd. 8,910 25
Alok International, Inc 3,321 83

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Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q5FY13 Q6FY13
( mn)
Revenues Debtors
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Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q5FY13 Q6FY13
( mn)
Revenues Debtors



Alok Industries Ltd
5
Earnings Estimates Revised Downwards
Particulars Unit
6MFY14E FY15E
Old New % change Old New % change
Revenues ( mn) 72,577 74,485 3% 152,509 155,877 2%
EBITDA ( mn) 17,743 18,498 4% 36,671 39,203 7%
EBITDA margin % 24.4 24.8 39 bps 24.0 25.2 110 bps
Interest ( mn) 8,990 11,066 23% 17,405 20,829 20%
PAT ( mn) 3,829 3,415 -11% 8,379 7,723 -8%
PAT margin % 5.3 4.6 -69 bps 5.5 5.0 -54 bps
EPS 2.8 2.5 -11% 6.1 5.6 -8%
Source: CRISIL Research estimates

Reasons for changes in estimates
Line item FY14E FY15E
Revenues Higher than expected revenues from export business owing to
rupee depreciation
Higher revenues from export business owing to rupee
depreciation
EBITDA margins Increased to factor in savings in power cost and reduction in
losses of its retail chain business
Increased to factor in savings in power and reduction in losses
of its retail chain business
PAT margins Lowered due to higher finance cost and depreciation Lowered due to higher finance cost and depreciation








CRISIL IERIndependentEquityResearch
6
Valuation Grade: 3/5
We continue to use the DCF method to value Alok. We have revised our fair value to 9 from
8 per share as we expect improvement in margins due to savings in power cost and also
working capital with the companys increased focus on exports where debtor days are lower.
At the current market price of 8, the valuation grade is 3/5.

One-year forward P/E band One-year forward EV/EBITDA band
Source: NSE, CRISIL Research Source: NSE, CRISIL Research

P/E premium / discount to CNX 500 P/E movement
Source: NSE, CRISIL Research Source: NSE, CRISIL Research








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()
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( mn)
EV 2x 4x 6x 8x
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
J
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0
9
A
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9
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9
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9
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9
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1
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1
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1
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Premium/Discount to CNX 500
Median premium/discount to CNX 500
0
5
10
15
20
25
J
a
n
-
0
9
A
p
r
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0
9
J
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9
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9
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1
1
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1
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1
1
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1
1
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1
3
(Times)
1yr Fwd PE (x) Median PE
+1 std dev
-1 std dev
We revise our fair value to 9
from 8 per share



Alok Industries Ltd
7
CRISIL IER reports released on Alok Industries Ltd
Date Nature of report
Fundamental
grade Fair value
Valuation
grade
CMP
(on the date of report)
26-Jul-11 Initiating coverage 3/5 31 4/5 26
04-Aug-11 Q1FY12 result update 3/5 31 5/5 24
15-Nov-11 Q2FY12 result update 3/5 29 5/5 19
05-Mar-12 Q3FY12 result update 3/5 29 5/5 21
08-Jun-12 Q4FY12 result update 3/5 29 5/5 19
11-Jul-12 Detailed Report 3/5 29 5/5 18
21-Aug-12 Q1FY13 result update 3/5 29 5/5 16
12-Sept-12 Event Update 2/5 21 5/5 12
19-Nov-12 Q2FY13 result update 2/5 21 5/5 11
26-Feb-13 Q3FY13 result update 2/5 18 5/5 9
15-July-13 Q4FY13 result update 2/5 9 5/5 7
05-Sept-13 Q5FY13 result update 2/5 8 5/5 6
31-Dec-13 Q6FY13 result update 2/5 9 3/5 8





CRISIL IERIndependentEquityResearch
8
Annexure: Financials (Consolidated)

Source: CRISIL Research
Income statement Balance Sheet
( mn) FY11 FY12 18MFY13 6MFY14E FY15E ( mn) FY11 FY12 18MFY13 6MFY14E FY15E
Operating income 66,114 97,909 213,808 74,485 155,877 Liabilities
EBITDA 18,094 23,978 52,634 18,498 39,203 Equity share capital 7,878 8,263 13,771 13,771 13,771
EBITDA margin 27.4% 24.5% 24.6% 24.8% 25.2% Reserves 20,045 17,756 23,497 25,586 34,859
Depreciation 5,310 7,491 14,182 4,810 9,905 Minorities 46 46 - - -
EBIT 12,784 16,487 38,452 13,689 29,298 Net worth 27,969 26,065 37,268 39,358 48,630
Interest 10,413 15,183 29,965 11,066 20,829 Convertible debt - -
Operating PBT 2,371 1,303 8,487 2,622 8,468 Other debt 121,243 158,786 197,800 180,079 167,079
Other income 2,682 3,486 5,548 2,552 3,232 Total debt 121,243 158,786 197,800 180,079 167,079
Exceptional inc/(exp)* (148) (980) (5,748) (1,165) 639 Deferred tax liability (net) 5,003 6,181 6,531 6,883 7,678
PBT 4,905 3,809 8,287 4,009 12,339 Total liabilities 154,215 191,032 241,600 226,319 223,387
Tax provision 1,786 3,004 4,911 1,759 3,977 Assets
Minority interest - - - - - Net fixed assets 75,060 88,112 95,542 93,710 89,007
PAT (Reported) 3,119 805 3,377 2,250 8,362 Capital WIP 22,636 11,471 9,786 10,286 11,536
Less: Exceptionals (148) (980) (5,748) (1,165) 639 Total fixed assets 97,695 99,583 105,327 103,996 100,542
Adjusted PAT 3,267 1,785 9,124 3,415 7,723 Investments 4,532 15,505 17,279 15,323 15,323
4.9% 1.8% 4.3% 4.6% 5.0% Current assets
Ratios Inventory 21,499 36,971 60,385 55,250 54,237
FY11 FY12 18MFY13 6MFY14E FY15E Sundry debtors 18,471 21,425 51,802 53,325 53,510
Growth Loans and advances 7,880 16,937 16,960 11,918 12,470
Operating income (%) 49.6 48.1 NM NM NM Cash & bank balance 12,023 6,730 7,993 5,799 8,361
EBITDA (%) 42.4 32.5 NM NM NM Marketable securities 395 7,713 12 - -
Adj PAT (%) 40.8 (45.4) NM NM NM Total current assets 60,267 89,777 137,152 126,291 128,578
Adj EPS (%) 40.8 (47.9) NM NM NM Total current liabilities 10,299 15,808 20,266 19,569 21,335
Net current assets 49,968 73,969 116,886 106,722 107,243
Profitability Intangibles/Misc. expenditure 2,000 1,974 2,108 279 279
EBITDA margin (%) 27.4 24.5 24.6 24.8 25.2 Total assets 154,195 191,032 241,600 226,320 223,387
Adj PAT Margin (%) 4.9 1.8 4.3 4.6 5.0
RoE (%) 11.8 6.6 19.2 17.8 17.6 Cash flow
RoCE (%) 9.4 9.9 12.2 12.0 13.5 ( mn) FY11 FY12 18MFY13 6MFY14E FY15E
RoIC (%) 13.7 13.9 16.0 16.7 16.3 Pre-tax profit 5,053 4,789 14,035 5,174 11,700
Total tax paid (813) (1,827) (4,560) (1,407) (3,182)
Valuations Depreciation 5,310 7,491 14,182 4,810 9,905
Price-earnings (x) 5.4 3.9 1.3 3.4 1.5 Working capital changes (9,484) (21,976) (49,355) 7,957 2,042
Price-book (x) 0.6 0.3 0.3 0.3 0.2 Net cash from operations 66 (11,522) (25,698) 16,534 20,466
EV/EBITDA (x) 7.0 6.3 3.8 10.1 4.3 Cash from investments
EV/Sales (x) 2.0 1.6 0.9 2.5 1.1 Capital expenditure (23,335) (9,354) (20,059) (1,649) (6,452)
Dividend payout ratio (%) 7.4 35.8 12.2 6.1 4.9 Investments and others (655) (18,291) 180 803 -
Dividend yield (%) 1.3 4.1 3.5 1.2 3.5 Net cash from investments (23,990) (27,645) (19,880) (846) (6,452)
Cash from financing
B/S ratios Equity raised/(repaid) - 1,518 5,509 (0) -
Inventory days 179 204 224 201 192 Debt raised/(repaid) 24,517 37,543 39,014 (17,721) (13,000)
Creditors days 72 71 58 53 56 Dividend (incl. tax) (230) (288) (493) (161) (483)
Debtor days 103 78 130 128 123 Others (incl extraordinaries) (2,427) (4,919) (2,937) (1,165) 2,032
Working capital days 208 218 274 242 228 Net cash from financing 21,860 33,854 41,093 (19,047) (11,451)
Gross asset turnover (x) 0.8 1.0 1.1 1.1 1.1 Change in cash position (2,064) (5,313) (4,484) (3,360) 2,563
Net asset turnover (x) 1.0 1.2 1.6 1.6 1.7 Closing cash 12,023 6,730 7,993 5,799 8,361
Sales/operating assets (x) 0.7 1.0 1.4 1.4 1.5
Current ratio (x) 5.9 5.7 6.8 6.5 6.0
Debt-equity (x) 4.3 6.1 5.3 4.6 3.4 ( mn) Q2FY13 Q3FY13 Q4FY13 Q5FY13 Q6FY13
Net debt/equity (x) 3.9 5.5 5.1 4.4 3.3 Net sales 33,292 35,208 39,135 29,952 37,407
Interest coverage (EBIT/Interest) 1.2 1.1 1.3 1.2 1.4 Change (q-o-q) 37% 6% 11% -23% 25%
Interest coverage (EBITDA/Interest) 1.7 1.6 1.8 1.7 1.9 EBITDA 8,888 9,556 9,617 9,744 8,645
Per share Change (q-o-q) 19% 8% 1% 1% -11%
FY11 FY12 18MFY13 6MFY14E FY15E EBITDA margin 26.7% 27.1% 24.6% 32.5% 23.1%
Adj EPS () 4.1 2.2 6.6 2.5 5.6 PAT 2,896 2,398 2,307 329 970
CEPS 10.9 11.2 16.9 6.0 12.8 Adj PAT 1,897 2,611 2,006 3,160 1,715
Book value 35.5 31.5 27.1 28.6 35.3 Change (q-o-q) -7% 38% -26% 58% -46%
Dividend () 0.3 0.3 0.3 0.1 0.3 Reported PAT margin 8.7% 7.4% 5.9% 1.1% 2.6%
Actual o/s shares (mn) 787.8 826.3 1,377.1 1,377.1 1,377.1 Reported EPS 3.5 2.9 2.8 0.2 0.7
Quarterly financials (Standalone)


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