First Call Feb 10 - 2015-EDEL PDF

DAILY
FIRST CALL
India Equity Research
February 10, 2015

CONTENTS
India
Latest Research
Change in %
9-Feb-15
1-d
8,526
(1.6)
28,227
(1.7)
6,922
(1.5)
1-mo
2.9
2.8
2.1
3-mo
2.2
1.3
2.9
9-Feb-15
17,729
4,726
24,452
17,601
1-d
(0.5)
(0.4)
(0.3)
(0.6)
1-mo
(0.0)
0.5
2.2
2.3
3-mo
0.7
1.6
3.0
4.9
Net Inv (INR Bn)

6-Feb-15
FII Cash
FII F&O
MF Cash
Buy
41.5
220.5
7.0
Sell
41.9
235.4
6.1
Net
(0.4)
(14.9)
0.9
Value Traded - India (INR Bn)

9-Feb-15
BSE Cash
29.6
NSE Cash
152.8
NSE F&O
1,912.1
Change in %
1-d
1-mo
(7.4)
(10.0)
(11.8)
(20.2)
(30.5)
3-mo
(25.1)
(31.3)
Forex/Money Market
9-Feb-15
INR/USD
62.2
USD/EUR
1.1
USD/YEN
0.0
10 Yr G-Sec
7.8
Change in %
1-d
1-mo
(0.8)
0.3
0.0
(4.3)
(0.2)
0.0
(2.9)
Chambal Fertilisers and Chemicals - Delivering on expectations; Hold
Nifty
Sensex
CNX 500
Ipca Laboratories - Big miss, recovery to take time; Hold
Global Indices
Jet Airways - Turnaround plan in progress; Buy
Kalpataru Power - Matches expectations; Bright prospects; Buy
'BRAVEHEART SERIES' Larsen & Toubro - Profitability takes a breather;

domestic recovery holds key; Buy
VA Tech Wabag - One offs pinch, but growth drivers in place; Buy
Tata Steel
Brigade Enterprises - Firing on all cylinders; company update; Buy
IT - Best time to buy; sector update
GDP - Growth recovery puzzle continues
Securities Lending Borrowing (SLB) Daily
Bond Vector - Gilts hold steady; Auction cutoffs in line
DJIA
NASDAQ
Hang Seng
Nikkei 225
Commodities (USD/Mt ton)

Change in %
9-Feb-15
1-d
1-mo
Copper
5,688
0.3
(7.8)
Aluminium
1,859
0.1
3.9
*Gold
1,241.4
0.2
1.5
*Silver
17.1
0.3
3.4
**NYMEX
53
2.3
9.3
*USD/Troy Ounce
**USD/bbl
Sectoral Movements
Ticker
Banking
IT
Pharmaceuticals
Oil
Power
Auto
Metals
Real Estate
FMCG
Capital Goods
9-Feb-15
21093
12249
15180
9986
2071
18620
9901
1699
8192
16002
1
1D
-2.1
-0.2
-0.3
-1.0
-1.6
-2.3
-2.5
-2.7
-1.2
-4.3
1M
-1.2
7.5
3.3
1.5
0.5
-1.1
-5.6
10.9
4.5
3.5
3M
6.8
6.8
1.5
-8.5
-3.8
1.9
-12.6
3.6
5.8
1.4
% Change
1Y
80.6
27.3
46.0
19.1
34.1
57.4
7.1
39.3
26.0
69.2
Volume
Futures
Call
Put
Total
9-Feb-15
949,564
686,521
539,014
2,175,098
Put Call Ratios

Volume
9-Feb-15
PCR
0.7
WPCR
0.7
OI PCR
0.8
Total OI/
1.1
Nifty IVs at 19 - 20% levels.
FII Activity* (INR Mn) (6-Feb)
3-mo
(1.1)
(8.8)
3.1
(6.4)
3-mo
(16.2)
(9.7)
7.8
9.3
(32.8)
8-Feb-15
962,747
662,510
518,335
2,143,592
% Change
(1.4)
3.6
4.0
1.5
8-Feb-15
0.7
0.7
0.8
1.2
% Change
(0.1)
0.3
0.9
(2.5)
Edelweiss Securities Limited
First Call
Regular Features
Sales Traders Commentary
Insider Trades & Bulk Deals
Technical Updates
Eye catchers
STOCKS IN NEWS
MRPL to raise stake in ONGC Mangalore petrochemicals (MINT)
Adani Enterprises signs solar deal (MINT)
DoTpanel on net-neutrality likely to meet on Feb 12 (DNA)
Cipla UK arm forms JV with two Moroccan cos (ET)
RESULTS FOR THE DAY

PAT
Name of company
Q3FY15E
Q3FY14
Y-o-Y
Q2FY15
Cadilla Healthcare
3,100
2,174
42.6
2779
12
172
171
0.6
220
(22)
262
207
26.6
239
10
2,774
2,228
24.5
3278
(15)
Zuari Agro Chemicals

Triveni Turbines
Motherson Sumi Systems
Q-o-Q
Jain Irrigation
246
158
55.7
-31
(894)
Hexaware
965
1,032
(6.5)
860
12
ABB
685
586
16.8
450
52
CARE
336
280
19.9
524
(36)
First Call
SALES TRADERS COMMENTARY
Indian equities settled lower on Monday led by losses in capital goods, realty, metal and auto
stocks.
While the Sensex lost 490 points to 28227, Nifty fell 134 points to 8526.
Major gainers were Dr Reddy's Laboratories (2.01%), Bajaj Auto (1.76%), Oil & Natural Gas
Corporation (1.51%), Sun Pharmaceutical (1.37%), Wipro (1.06%) and Infosys (0.94%).
Major losers were Larsen & Toubro (6.61%), Tata Steel (5.79%), Sesa Sterlite (4.53%), G A I L
(India) (4.52%), Cipla (3.90%) and State Bank of India (3.65%).
The BSE mid and small caps larger counterparts declining 1.41% and 1.50%, respectively.
The Capital Goods index was down 4.31% Major losers were L&T (6.61%), BEML (5.01%), FAG
Bearing (3.12%), BEL (2.98%) and Wabag (2.79%).
The Realty Index fell 2.73%. Major losers were NBCC (12.24%), Unitech (6.23%), HDIL (4.71%)
and DLF (4.00%).
The Metal Index fell 2.54% Major losers were Tata Steel (5.79%), SSLT (4.53%), SAIL (3.61%) and
JSW Steel (2.57%).
Globally, Asia was trading mixed - while the Nikkei jumped 63 points to 17711, Hang Seng was
down 158 points at 24521; European indices were trading lower.
CONFERENCE CALLS
Conference call details company
Premier Explosives Ltd.
Date
10-Feb-15
Time
11.00 AM IST
ABB India Limited.

IFB Industries
10-Feb-15
10-Feb-15
2.30 PM IST
3.30 PM IST
Cadila Healthcare Ltd.

Hexaware Technologies Limited
10-Feb-15
10-Feb-15
4.00 PM IST
4.00 PM IST
India Midcaps
RESULT UPDATE
CHAMBAL FERTILISERS AND CHEMICALS

Delivering on expectations
India Equity Research| Fertilisers
Chambal Fertilisers and Chemicals (Chambal) standalone Q3FY15 sales

and EBITDA came in line with our estimates. However, PAT beat estimate
on account of higher other income. The company received dividend of
INR0.44bn from its IMACID JV during the quarter, which led to higher
other income. Key positives were: (i) 26% YoY jump in trading volume; (ii)
19.6% QoQ fall in interest cost; and (iii) shipping business continued to
perform well. Key negatives were: (i) 2% YoY dip in urea volume; (ii)
180bps YoY EBITDA margin decline, which we believe was on account of
higher trading sales; and (iii) increase in subsidy by INR13.1bn QoQ to
INR28bn. Chambal is actively considering new brown field urea plant
post clarity on the new investment policy. However, the government has
continued to delay urea pricing and import parity price linked volume
policy. We believe the stock has consistent/good dividend yield.
However, persistent uncertainty over urea policies, lack of growth drivers
and rising working capital will be overhangs. Maintain HOLD.
EDELWEISS RATINGS
Absolute Rating
HOLD
Investment Characteristics
Growth
MARKET DATA (R: CHMB.BO, B: CHMB IN)

CMP
: INR 61
Target Price
: INR 70
52-week range (INR)
: 71 / 36
Share in issue (mn)
: 416.2
M cap (INR bn/USD mn)
: 25 / 408
Avg. Daily Vol. BSE/NSE (000) : 976.3

SHARE HOLDING PATTERN (%)
Current
Q2FY15
Q1FY15
56.8
10.8
56.8
12.9
56.8
10.8
Promoters *
MF's, FI's & BKs
Robust trading volumes drive the quarter
FII's
6.5
6.4
6.5
Net sales jumped 19.7% YoY predominantly owing to higher trading volumes (up 26%
YoY). EBITDA margin fell 180bps YoY to 8.1% due to higher contribution of trading
sales. Chambal has merged manufactured and trading segments w.e.f. Q1FY15. Hence,
revenue and profitability are not ascertainable separately for the businesses.
Depreciation fell 23.5% YoY to INR0.45bn led by revised useful life of assets as per the
Companies Act (lower by INR158mn). Other income jumped 192% YoY on account of
dividend income of INR0.4bn from its JV, IMACID. PAT rose 60.3% YoY to INR1.45bn
versus estimate of INR1.2bn.
Others
25.9
24.0
25.9
Outlook and valuations: Awaiting policy actions; maintain HOLD
NIL
BSE Midcap
Stock
Index
Stock over
Index
* Promoters pledged shares

(% of share in issue)
PRICE PERFORMANCE (%)
1 month
6.8
1.5
(5.3)
3 months
15.2
2.7
(12.5)
12 months
64.7
59.4
(5.2)
The stock has a consistent and good dividend yield. However, persistent uncertainty
over urea policies, lack of growth drivers and rising working capital will be overhangs.
We are rolling forward our target price to FY17E EPS. We maintain HOLD with a
revised target price of INR70 (earlier INR60) based on 7x FY17E EPS. The stock is
trading at 6.3x FY16E and 6.1x FY17E EPS. Favourable policy and business restructuring
actions are key risks to our rationale.
Financials (standalone)
Year to March Q3FY15
(INR mn)
Q3FY14 % change
Q2FY15 % change
FY14*
FY15E*
FY16E*
Net rev.
28,246
23,599
19.7
25,082
12.6
89,106
97,039
102,845
EBITDA
2,288
2,332
(1.9)
2,479
(7.7)
6,739
9,236
9,313
Adj profit
1,447
903
60.3
1,148
26.1
1,842
3,847
4,033
3.5
2.2
0.0
2.8
0.0
4.4
9.3
9.7
13.7
9.4
6.6
17.5
6.3
16.1
Dil. EPS (INR)

Diluted P/E (x)
ROAE (%)
* Annual numbers are on consolidated basis

Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Manish Mahawar
+91 22 6623 3481
manish.mahawar@edelweissfin.com
Manoj Bahety, CFA

+91 22 6623 3362
manoj.bahety@edelweissfin.com
February 9, 2015
Fertilisers
Q3FY15 conference call: Key highlights
Management highlighted that Chambal has shut its Gadepan, Kota, plant from Feb 8, 2015,
as manufacture of urea beyond 100% utilisation is unviable for the company on account of
delay in policy regarding production beyond cut off volume. The company will carry out
routine maintenance activities during the shutdown and the plant is expected to resume
operations during last week of March or first week of April 2015.
The company has increased DAP prices from INR22,700/MT to INR23,300 /MT in Q4FY15.
Subsidy outstanding as on Dec 31, 2014, was INR28bn (INR14.9bn as on Sept 30, 2014).
Gross debt stood at INR38.9bn for the quarter ended Dec 31, 2014 (INR27.3bn as on
Sept 30, 2014.)
IT business incurred loss of USD9.3mn in CY14 at PAT level. Chambal is planning to

restructure its IT business.
Chambal Fertilisers and Chemicals

Post announcement and notifcation of the new urea investment policy, Chambal is actively
considering new brown field urea plant in Gadepan, Kota (Rajasthan). The company has
already shortlisted the technical partner. However, Chambal will announce the project post
financial closure. Management highlighted that capex is expected to be ~INR50bn.
Management has indicated that gas price hike from November 1, 2014, will lead to increase
in working capital going forward.
The government is continuing to delay the urea policy regarding import parity-linked
production. Chambal believes that if the government will not clear this policy in the
near term, then the company will cut production of urea beyond cut-off quantity.
Government is actively looking for implementation of gas pooling in the sector. Chambal
highlighted that gas cost for the company is higher than peers. Hence, it is likely to be
benefitted on account of gas pooling. Gas cost for the quarter stood at USD13/mmbtu
for the company.
Subsidy outstanding as on Sept 30, 2014, was INR14.9bn (June 30, 2014, was
INR25.8bn).
IT business incurred loss of USD8-9mn in CY15 so far at PAT level. Management expects
CY14 loss of USD10m in IT business.
Gross debt stood at INR27.3bn, as on Sept 30, 2014.
Shipping business outlook has improved. However, it continues to remain challenging.

Chambal has 1 ship at contracted rate and balance 4 are at spot rates.
The company has invested INR0.3bn in 12% non-convertible preference shares of

Upper Ganges Sugar & Industries.
Table 1: Fertiliser sales volume

Sales volume (MT)
Urea
SSP
DAP imported
Imported DAP Lite
Imported MAP lite
Imported NPK 20:20:0
Imported NPK 10:26:26
Q3FY15
519,784
50,439
248,835
286
0
0
0
Q3FY14 Y-o-Y (%)

532,835
17,269
241,040
2,455
0
0
0
Q2FY15 Q-o-Q (%)

536,583
54,211
175,890
583
0
0
0
YTDFY15
1,530,841
146,331
548,579
1,014
0
0
0
YTDFY14 Y-o-Y (%)

1,704,263
57,732
511,556
7,372
0
0
5,086
FY14
2,096,452
82,353
586,283
26,231
0
0
5,086
MOP
Total
59,409
878,753
1,677
795,276
10.5
74,993
842,260
4.3
170,645
2,397,410
35,406
2,321,415
42,488
2,838,893
Manufactured
Traded
Total
570,223
308,530
878,753
550,104
245,172
795,276
3.7
25.8
10.5
590,794
251,466
842,260
(3.5)
22.7
4.3
3.3
1,677,172 1,761,995
(4.8)
2,178,805
720,238
559,420
28.7
660,088
2,397,410 2,321,415
3.3
2,838,893
Source: Department of Fertilisers, Edelweiss research
Fertilisers
Table 2: Operational performance (Standalone)
Segment revenue
Manufactured & Traded Fertiliser
Shipping
Textiles/Others
Net revenue from operations
Net profit before interest and tax
Shipping
Textiles/Others
Total
Less: Interest
Less: Other unallocable exp
Total profit before tax
PBIT margin (%)
Manufactured & Traded Goods
Shipping
Textiles/Others
Capital employed
Shipping
Textiles/Others
Unallocated
Total (INR mn)
Q3FY15
25,157
2,064
1,025
28,246
Q3FY14
21,195
1,467
937
23,599
% change
18.7
40.6
9.4
19.7
2,011
157
32
2,200
339
(231)
2,093
2,069
119
54
2,242
576
301
1,365
8.0
7.6
3.1
9.8
8.1
5.8
9.4
12.6
1.9
41,715
15,063
1,715
(33,354)
25,139
49,401
15,645
1,739
(43,893)
22,892
34,193
15,391
1,821
(27,712)
23,693
(2.8)
NA
(40.2)
(1.9)
(41.2)
53.2
Q2FY15
22,399
1,773
910
25,082
2,106
223
18
2,346
443
165
1,739
% change
12.3
16.4
12.7
12.6
(4.5)
NA
83.8
(6.2)
(23.6)
20.3
FY14
69,932
5,893
3,994
79,819
YTD15
65,038
5,197
3,060
73,294
5,544
(135)
262
5,671
1,935
278
3,459
5,874
438
92
6,405
1,217
131
5,057
7.9
(2.3)
6.6
9.0
8.4
3.0
48,248
41,715
15,174
15,063
2,260
1,715
(43,821)
(33,354)
21,862
25,139
Source: Company, Edelweiss research

Financial snapshot
(INR mn)
Year to March
Net revenues
Raw material
Staff costs
Other expenses
Total expenditure
EBITDA
Depreciation
Other income
Interest
Profit before tax
Tax
Core profit
Extraordinary items
PAT
Minority interest
Profit after tax and min. int.
Equity capital (FV INR 10)
No. of shares (mn)
Diluted EPS (INR)
As % of net revenues
Raw material
Employee cost
Other expenses
EBITDA
Reported net profit
Q3FY15
28,246
17,432
399
8,127
25,958
2,288
445
611
362
2,093
645
1,447
Q3FY14
23,599
14,019
365
6,883
21,267
2,332
583
209
593
1,365
463
903
% change
19.7
24.3
9.2
18.1
22.1
(1.9)
(23.5)
192.0
(39.1)
53.2
39.5
60.3
Q2FY15
25,082
14,913
410
7,280
22,603
2,479
456
166
450
1,739
591
1,148
% change
12.6
16.9
(2.9)
11.6
14.8
(7.7)
(2.3)
267.9
(19.6)
20.3
9.2
26.1
YTD15
73,294
43,874
1,200
21,641
66,716
6,579
1,338
1,068
1,251
5,057
1,654
3,404
FY15E
97,039
55,137
3,514
29,152
87,803
9,236
2,595
1,000
1,793
5,848
2,026
3,822
FY16E
102,845
59,798
3,867
29,867
93,533
9,313
2,735
1,100
1,545
6,133
2,130
4,003
1,447
903
60.3
1,148
26.1
3,404
4,162
416
3.5
4,162
416
2.2
60.3
4,162
416
2.8
26.1
3,404
4,162
416
8.2
3,822
(26)
3,847
4,140
414
9.3
4,003
(30)
4,033
4,140
414
9.7
61.7
1.4
28.8
8.1
5.1
59.4
1.5
29.2
9.9
3.8
59.9
1.6
29.5
9.0
4.6
56.8
3.6
30.0
9.5
4.0
58.1
3.8
29.0
9.1
3.9
59.5
1.6
29.0
9.9
4.6
Change in Estimates
Net Revenue
New
97,039
FY15E
Old
95,240
% change
1.9
New
102,845
FY16E
Old
96,533
% change Comments
6.5 On account of higher traded
volumes
EBITDA
9,236
8,627
7.1
9,313
8,568
8.7 On account of higher traded

volumes
EBITDA Margin
Core profit
9.5
9.1
3,822
3,348
14.1
9.1
8.9
4,003
3,703
8.1
On account of higher traded

Volumes and lower depreciation
PAT Margin
Capex
3.9
3.5
(651)
(669)
(2.7)
3.9
3.8
1,438
1,374
4.6
Fertilisers
Company Description
Chambal was promoted by Zuari Industries in 1985. It is India's largest producer of urea in
the private sector. The company has three divisions, namely, agri-inputs, shipping and
textiles. It is a diversified conglomerate with interests in fertilisers, phosphoric acid, agriinputs & seeds, biotechnology, textiles, information technology, food processing and
shipping. The company operates two nitrogenous fertiliser plants. The company markets
urea under the Uttam Veer brand, primarily in North and West India. Chambal has 33.33%
ownership interest in Indo Maroc Phosphore S.A. IMACID, which is engaged in
manufacturing of phosphoric fertilisers. The remaining stake in IMACID is owned equally by
Tata Chemicals and OCP, Morocco.
Chambal has three subsidiaries:
Chambal Infrastructure Ventures: For development of power projects
CFCL Overseas, Cayman Islands: For consolidation of its software business
India Steamship Pte., Singapore: Engaged in shipping business
Investment Theme
Chambal is the largest manufacturer of urea in the private sector in India, with an installed
capacity of 1.73mnMT. With the government planning to ease regulations in the urea space
and make it lucrative to urea manufacturers to boost investment, Chambal is poised to be a
key beneficiary. Moreover, the company has also announced plans to set up a 1.2mnMT
urea manufacturing facility at Gadepan, but is awaiting more clarity on the policy. On
account of nutrient-based subsidy (NBS) scheme (which has freed non-urea fertilisers pricing)
and also due to good monsoons, Chambal is expected to enhance the trading of complex
fertilisers significantly, which will add to its profitability. The company has a vast marketing
network, comprising 11 regional offices, 1,500 dealers and 20,000 village level outlets, through
which it caters to farmers in ~10 states in northern, central and western regions of India. Though
Chambal is poised to be one of the biggest beneficiaries of the expected new urea policy, its
software division is expected to be a drag on profitability for few years.
Key Risks
Poor monsoon could hit fertiliser demand
Indian agriculture is largely dependent on monsoon. Poor monsoon could, therefore, be a
dampener on demand.
Regulatory risk
The fertiliser sector, especially urea, has always been subject to stringent government
policies. Any change in policies could significantly impact our earnings estimates. As part of
the policy risk, in the event of urea getting decontrolled, upside risk exists for our earnings
estimates.
Delay in payment of fertiliser subsidies by government
Any delay in the payment of subsidies by the government or payment of the same via
fertiliser bonds, could strain the companys working capital cycle. The finance minister has,
however, assured that the entire subsidy amount will be paid in cash and not bonds. With
Chambal investing in a variety of businesses both related and unrelated, there is a risk of
misallocation of capital, resulting in sub-optimal value realisation.
Financial Statements
Key Assumptions
Year to March
Income statement
FY14 FY15E FY16E
FY17E
Macro
(INR mn)
Year to March
FY14
FY15E
FY16E
FY17E
Net revenue
Materials costs
89,106
49,948
97,039
55,137
102,845
59,798
104,387
60,674
Gross profit
39,158
41,902
43,047
43,713
GDP(Y-o-Y %)
Inflation (Avg)
4.7
9.5
5.4
6.8
6.3
5.5
7.3
5.5
Repo rate (exit rate)
8.0
7.8
6.8
6.3
Employee costs
4,098
3,514
3,867
3,918
60.5
61.0
62.0
62.0
Other Expenses
28,321
29,152
29,867
30,484
EBITDA
6,739
9,236
9,313
9,311
Urea sales (mn MT)
Depreciation and amortisation
2,824
2,595
2,735
2,767
Traded fertiliser sales volume (MT)
EBIT
3,915
6,642
6,578
6,544
90.3
20.0
Other income
1,050
1,000
1,100
1,210
P2O5 sales growth (%)
5.0
10.0
Interest expenses
2,074
1,793
1,545
1,440
Other Subsidiaries sales growth (%)
5.0
5.0
Profit before tax
2,891
5,848
6,133
6,314
Staff costs as % of sales
4.6
3.6
3.8
3.8
Provision for tax
1,145
2,026
2,130
2,181
Raw Material Cost as % Net Revenue
56.1
56.8
58.1
58.1
Net profit
1,746
3,822
4,003
4,133
Other expenses as % of net revenues
31.8
30.0
29.0
29.2
Extraordinary income/ (loss)
600
2,345
3,822
4,003
4,133
USD/INR (Avg)
Company
Shipping sales growth (%)
Financial assumptions
Profit After Tax
Net borrowings (INR mn)
42,589 24,817 22,012 19,543
Minority interest
Capex (INR mn)
(1,548)
(651)
1,438
1,453
Profit after minority interest
146
112
88
92
71
49
50
51
Debtor days
Inventory days
Payable days
(96)
(26)
(30)
(23)
2,441
3,847
4,033
4,156
Shares outstanding (mn)
414
414
414
414
Diluted EPS (INR)
4.4
9.3
9.7
10.0
11.3
15.6
16.3
16.7
1.9
1.9
1.9
1.9
42.7
20.4
19.5
18.9
Year to March
FY14
FY15E
FY16E
FY17E
Cost of goods sold

EBITDA margins
43.9
7.6
43.2
9.5
41.9
9.1
41.9
8.9
EBIT margins
4.4
6.8
6.4
6.3
Net profit margins
2.0
3.9
3.9
4.0
Year to March
FY14
FY15E
FY16E
FY17E
Revenues
EBITDA
8.6
(1.5)
8.9
37.1
6.0
0.8
1.5
-
Net profit
(12.8)
118.9
4.7
3.2
EPS
(18.3)
108.9
4.8
3.0
55
63
66
69
CEPS (INR)
Cash conversion cycle (days)
162
97
71
75
Dividend per share (INR)
Depreciation as % of gross block
5.0
4.8
4.9
4.8
Dividend payout (%)
Interest rate as % of average gross debt
4.4
5.0
6.0
6.0
Common size metrics
Growth ratios (%)
Fertilisers
Balance sheet
As on 31st March
(INR mn)
Cash flow metrics
FY14
FY15E
FY16E
FY17E
Year to March
FY14
FY15E
FY16E
FY17E
Equity capital
Reserves & surplus
4,140
16,424
4,140
19,354
4,140
22,470
4,140
25,709
Operating cash flow

Investing cash flow
7,409
2,598
18,833
1,651
5,604
(338)
5,070
(243)
Shareholders funds
20,563
23,494
26,610
29,849
Financing cash flow
(3,183)
715
689
659
636
Short term debt
34,370
17,000
16,500
14,500
Long term debt
10,194
9,500
8,500
8,500
Total Borrowings
44,564
26,500
25,000
23,000
Deferred tax (net)
4,172
4,172
4,172
4,172
Sources of funds
70,016
54,855
56,442
57,657
Year to March
Gross block
Accumulated depreciation
53,682
29,329
55,062
31,924
56,499
34,658
57,952
37,426
ROAE (%)
ROACE (%)
Tangible assets
Minority interest (BS)
(7,477)
(19,811)
(2,898)
Net cash flow
2,531
673
2,368
1,644
Capex
1,548
651
(1,438)
(1,453)
Dividends paid
(917)
(917)
(917)
(917)
FY14
FY15E
FY16E
FY17E
9.4
5.5
17.5
10.6
16.1
11.8
14.7
11.5
Profitability and efficiency ratios
24,353
23,138
21,841
20,527
ROA
2.4
6.1
7.2
7.2
Intangible assets
2,219
2,219
2,219
2,219
Inventory day
71
49
50
51
CWIP (incl. intangible)
4,274
2,243
2,243
2,243
Debtors days
146
112
88
92
Total net fixed assets
30,846
27,600
26,303
24,989
Payable days
55
63
66
69
Investments
162
97
71
75
Non current investments
Current ratio (x)
4.8
3.3
3.4
3.5
Cash and equivalents
1,975
1,683
2,988
3,457
Debt/EBITDA (x)
6.6
2.9
2.7
2.5
Inventories
6,855
7,824
8,462
8,582
Debt/Equity (x)
2.2
1.1
0.9
0.8
35,595
24,027
25,538
27,232
4,366
4,718
5,105
5,531
775
828
828
828
47,591
37,396
39,933
42,174
8,765
10,365
11,323
11,503
Sundry debtors
Loans and advances
Other assets
Total current assets (ex cash)
Trade payable
Other current liabilities and
Total current liabilities &
1,633
1,461
1,461
1,461
10,398
11,826
12,783
12,963
Operating ratios
Year to March
FY14
FY15E
FY16E
FY17E
Total asset turnover

Fixed asset turnover
1.2
3.2
1.6
3.7
1.8
4.2
1.8
4.5
Equity turnover
4.6
4.4
4.1
3.7
FY14
FY15E
FY16E
FY17E
4.4
(18.3)
9.3
108.9
9.7
4.8
10.0
3.0
Net current assets (ex cash)
37,193
25,571
27,150
29,210
Valuation parameters
Uses of funds
70,016
54,855
56,442
57,657
Year to March
49.7
56.8
64.3
72.1
CEPS (INR)
11.3
15.6
16.3
16.7
Year to March
FY14
FY15E
FY16E
FY17E
Diluted PE (x)
13.7
6.6
6.3
6.1
Net profit
Depreciation
2,441
2,824
3,847
2,595
4,033
2,735
4,156
2,767
Price/BV (x)
1.2
1.1
0.9
0.8
EV/Sales (x)
0.8
0.5
0.5
0.4
329
768
415
207
5,594
7,210
7,183
7,130
10.2
3.1
5.5
3.1
5.1
3.1
4.9
3.1
Less: Changes in WC
(1,815)
(11,622)
1,579
2,060
Operating cash flow
7,409
18,833
5,604
5,070
(1,548)
(651)
1,438
1,453
8,958
19,483
4,166
3,617
Book value per share (INR)

Free cash flow
Others
Gross cash flow
Less: Capex
Free cash flow
(INR mn)
Diluted EPS (INR)

Y-o-Y growth (%)
EV/EBITDA (x)
Dividend yield (%)
Peer comparison valuation

Market cap
Name
Diluted PE (X)
EV/EBITDA (X)
ROAE (%)
(USD mn)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
408
6.6
6.3
5.5
5.1
17.5
16.1
1,281
18.1
12.6
10.0
7.3
17.7
21.9
Deepak Fertilizer Ltd
194
20.2
5.0
6.5
3.3
4.1
15.8
Zuari Agro Chemicals
166
19.6
6.3
8.4
6.4
5.1
14.4
Median
18.8
6.3
7.4
5.8
11.3
15.9
AVERAGE
16.1
7.5
7.6
5.5
11.1
17.0

Coromandel International
Source: Edelweiss research
Additional Data
Directors Data
S.K. Poddar
Anil Kapoor
Dipankar Basu
C.S. Nopany
Marco Wadia
Chairman
Managing Director
Independent Director
Non Executive Director
Shyam S. Bhartia
R.N. Bansal
K.N. Memani
Radha Singh
Co-Chairman
Auditors - S.R. Batliboi & Co.
Holding Top -10

Perc. Holding
Perc. Holding
Life Insurance Corp of India
6.71
Govt Pension Fund Global
1.27
Earthstone Holding
3.28
Dimension Fund Advisors LP
1.09
Earthstone Invst & Fin
2.02
UTI Asset Management Co Ltd
0.85
DSP Blackrock Investment Manager
1.88
Reliance Capital Asset Management
Norges Bank
1.27
IDFC Mutual Fund
0.7
0.66
*as per last available data
Bulk Deals
Data
Acquired / Seller
B/S
Qty Traded
Price
No Data Available
Insider Trades
Reporting Data
27 Aug 2014
27 Aug 2014
Acquired / Seller
Simon India Limited
Jyotsna Poddar
B/S
Sell
Buy
Qty Traded
830000.00
830200.00
RESULT UPDATE
IPCA LABORATORIES
Big miss, recovery to take time
India Equity Research| Pharmaceuticals
Ipca Laboratories (Ipca) Q3FY15 adjusted PAT of INR483mn was way

below our INR1.2bn estimate as revenue remained muted (16% below) and
negative operating leverage played its part. EBITDA margin (@16.4%) was
the lowest in the past 5 years. We expect recovery from FY16 (HCQS
driven) and forecast 25% EPS CAGR over FY15-17 on a low base of FY15E.
Sharpened management focus on USFDA resolution (import alert, Form
483s), additional costs (remediation, more quality/regulatory staff,
overheads) and uncertainty around USFDA resolution could possibly hurt
this recovery. We maintain Ipca as our least preferred mid-cap stock post
our recent downgrade (refer, Ratlam import ban: US plans derailed, once
again, dated January 27, 2015). Maintain HOLD with TP of INR690.
Ratlam facility import alert resolution may take considerable time

Ipca expects to approach FDA for reinspection of its Ratlam API facility by March 2015.
Although it is difficult to predict USFDAs next move, we believe the resolution may
take 18-24 months as: (a) FDA has exempted a few critical products (possibly shortage
ones) and may not be in a hurry to approve this facility; and (b) historically, import
alert resolutions have taken close to 2 years. We have not built in any resolution till
FY17 in our estimates. Ipca believes resolution can be achieved faster given that the
remediation plan is on since the Form 483 was issued (July 2014). Moreover, the
companys confidence has been bolstered by a recent successful inspection of the
same unit by 3 regulators (EMA, WHO, TGA-Australia).
EDELWEISS 4D RATINGS
Absolute Rating
HOLD
Rating Relative to Sector
Underperformer
Risk Rating Relative to Sector
High
Sector Relative to Market
Overweight
MARKET DATA (R: IPCA.BO, B: IPCA IN)

CMP
: INR 615
Target Price
: INR 690
52-week range (INR)
: 907 / 599
Share in issue (mn)
: 126.2
: 78 / 1,257
Avg. Daily Vol.BSE/NSE(000) : 227.9

Current
Q2FY15
Q1FY15
Promoters *
45.9
45.9
45.9
MF's, FI's & BKs
11.6
11.6
11.0
FII's
24.2
24.2
25.3
Others
18.3
18.3
17.9

NIL

(a) US shipments of exempted products (HCQS and Propranolol) will begin soon; expect
Ipca to benefit from HCQS price hikes in the market; (b) Form 483s at Silvassa and
Indore facilities have been responded tono feedback as yet from USFDA; (c) though
most of its sales are denominated in USD/ GBP/ EUR (65%/ 20%/ 10%), it has to bear
some of the pressure borne by its partners in struggling EM economies like CIS; (d)
FY15 institutional malaria sales guidance lowered to ~INR3.2bn (INR4.0bn earlier); (e)
R&D expense at 4.6% of sales for 9mFY15 (INR1.1bn versus INR940mn in 9mFY14).
Stock
Nifty
EW Pharma
Index
1 month
(2.0)
4.0
4.6
3 months
1.3
9.9
11.9
12 months
(8.1)
36.6
48.2
Outlook and valuations: Multiple challenges; maintain HOLD

We believe the road ahead will be challenging on multiple accounts. With core
investment thesis shaken and rich valuations (13x FY17E), we maintain HOLD/SU.
Financials (Consolidated)
Year to March
Q3FY15 Q3FY14
Net revenue
7,407 8,290
EBITDA
1,211 2,133
Adj. net profit
483 1,380
Adj. dil. EPS (INR)
3.8
10.9
Dil. P/E (x)
Core EV/EBITDA (x)
ROAE (%)
% change Q2FY15
(10.7) 7,806
(43.2) 1,348
(65.0)
678
5.4
% change
FY14
(5.1) 24,572
(10.1) 4,868
(28.7) 2,599
20.6
15.3
10.5
29.0

FY15E
33,872
6,667
3,972
31.5
20.3
13.1
19.1
(INR mn)
FY16E
39,366
8,081
5,209
41.3
15.5
10.4
21.3
Anshuman Gupta
+91 22 6623 3399
anshumanm.gupta@edelweissfin.com
Rahul Solanki
+91 22 6623 3317
rahul.solanki@edelweissfin.com
February 9, 2015
Pharmaceuticals
Further call details:
Last week, 3 regulatory agencies--EMEA, WHO Geneva and TGA Australia--inspected

the Ratlam API plant and there were no critical observations (no data integrity as well).
Ipca expects to get a clearance soon.
Clearance from WHO Geneva would imply normalisation of institutional business

supplies from Q1FY16. Currently, the Global Fund has advised all shipments to be
tested / routed through Vietnam, which has led to disruptions in the business.
EU has currently exempted ~23 products from Ipcas facilities.
Status of facilities:
Ratlam API (US Import Alert): Ipca has been taking corrective steps all along since
the receipt of Form 483 and plans to invite the USFDA by Mar 2015 for a
reinspection of the facility. Ipca has already sent updates as per its remediation
plan to the USFDA since Form 483.
Indore SEZ and Silvassa facility Form 483s: Both Form 483s have been responded
to in the stipulated time. No response has been received as yet from USFDA.
Athal facility (for EU): MHRA is due for inspection anytime, but difficult to predict
timeline.
Ipca believes only 2 out of the 4 exempted products (from import ban) are not
commercially viable and it will begin manufacturing only for those 2- HCQS and
Propanolol HCl.
US business could get a boost with reinitiation of supplies for HCQS and Propanolol HCl.
Ipca currently has 3 months inventory for HCQS, which was manufactured prior to the
voluntary halting of supplies.
HCQS (estimated market USD400-500mn): Interesting product as prices have been

hiked by almost 20x after Ipcas voluntary stoppage of manufacturing. The company
used to hold 80%+ share (still holds 40%) and expects to gain share on relaunch, but
that will be at the expense of prices.
Total products under development stand at 75 ANDAs. Of which, 42 have been filed
with 24 awaiting approval.
CIS market declined drastically from INR500mn to INR200mn as Ipca stopped shipping
products given the macro and currency situation. The good part is that most products
are out of price control and the billing is in USD (no local currency). Distributors have
hiked prices but given the situation Ipca will need to share the brunt of currency hit
with distributors.
The management believes they may be close to securing an alternate supplier for APIs
after evaluating several (>10) suppliers
Clopidogrel 505b2s clinical studies will take another 3-4 months to finish
IPCA is incurring some drag on margins as Alpa and Tarapur facilities (~INR40mn) are
not contributing to revenues yet.
Ipca Laboratories
Table 1: Actual versus estimate
Year to March
Net Revenue
Net Revenue (excl other op. inc.)
(INR mn)
Y-o-Y
Actual Growth Estimates
Q3FY15
(%)
Q3FY15
7,407
(10.7)
8,800
7,341
(9.9)
8,740
Raw material costs

Gross profit
Gross margin(%)
Employee costs
2,726
4,615
62.9
1,344
(1.9)
Other expenses
Total operating expenses
EBITDA
EBITDA margin (%)
Y-o-Y Deviation
Growth from Actual
(%)
(%)
6.2
(15.8)
7.2
(16.0)
16.3
(9.1)
(15.7)
(16.2)
8.1
3,234
5,506
63.0
1,311
5.5
2.5
2,125
(0.3)
2,229
4.5
(4.7)
3,469
1,211
16.4
2.8
(43.2)
3,540
2,027
23.0
10.0
(5.0)
(2.0)
(40.2)
(667.2)
EBITDA margin (ex. op inc) (%)

Net finance expense (income)
Depreciation
15.6
59
420
8.3
64.2
22.5
60
400
10.3
56.4
(1.8)
5.0
Other income
PBT
Income tax expense
PAT
Adj. PAT
Adjusted diluted EPS (INR)
64
797
270
527
483
3.8
18.8
(57.5)
(46.2)
(61.7)
(65.0)
(65.0)
60
1,627
392
1,235
1,235
9.8
10.7
(13.4)
(22.0)
(10.2)
(10.5)
(10.5)
7.3
(51.0)
(31.0)
(57.3)
(60.9)
(60.9)
Comments
Remedial procedures have led to

under-utilization of facilities
Hit in margin mainly attributable to

under-utilization
D&A slightly higher than estimates

due to new facilities (Alpa Labs,
Tarapur)
Table 2: Revenue mix by segment
(INR mn)
Q3FY15
5,838
2,787
Q3FY14
6,281
2,463
% chg
(7.1)
13.1
Q2FY15
6,341
3,279
Export
Institutional anti-malaria
3,051
820
3,818
1,360
(20.1)
(39.7)
3,062
353
Ex-anti-malaria exports
- Branded generic
2,231
740
2,459
1,001
(9.3)
(26.1)
2,709
951
(0.4)
132.4 Shipments affected due to Ratlam
plant issues
(17.7)
(22.2) EM currency has led to some pain
- Generic
1,491
1,455
2.4
2,709
(45.0)
API
Domestic
International
Net sales (excl Other Oper Inc)
1,504
370
1,134
7,341
1,870
419
1,451
8,152
(19.6)
(11.6)
(21.9)
(9.9)
1,407
445
962
7,749
6.8
(16.9)
17.8
(5.3)
Formulations
Domestic
% chg Comments
(7.9)
(15.0)
Pharmaceuticals
0.0
Net Revenue
Q3FY15
4,489
Q2FY15
7.0
Q1FY15
5,623
Q4FY14
14.0
Q3FY14
6,758
Q2FY14
21.0
Q1FY14
7,892
Q4FY13
28.0
Revenue growth
29.0
24.4
1,780
19.8
1,365
15.2
949
10.6
534
6.0
Chart 3: Domestic market growth

Secondary growth
32.0
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Adj. PAT
EBITDA margin
PAT margin
Primary growth
3,315
25.0
8.2
(2.0)
1,181
4.0
(%)
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Jul-14
Industry growth
India
Q3FY15
1,608
Q2FY15
4.8
Q1FY15
12.4
Q4FY14
2,035
11.6
Q3FY14
16.6
Q2FY14
2,461
Q1FY14
18.4
Q4FY13
20.8
Q3FY13
2,888
(INR mn)
25.2
Growth (%)
EBITDA
Q4FY13
(%)
2,196
Q3FY13
(INR mn)
Chart 2: Topline miss affects Margin

2,611
Company growth
Growth (%)
35.0
9,027
Q3FY13
(INR mn)
Chart 1: Growth affected by a host of issues

10,161
YoY growth
Source: AIOCD, Company, Edelweiss research
Ipca Laboratories
Chart 4: Institutional anti-malaria sales affected by WHO mandated testing
1,450
3.0
700
(22.0)
450
(47.0)
(72.0)
200
Q1FY15
Q2FY15 Q3FY15
YoY growth
(INR mn)
Chart 5: US revenues down due to Ratlam API plant shipment halt

750.0
32.0
600.0
2.0
450.0
(28.0)
300.0
(58.0)
150.0
(88.0)
0.0
Growth (%)
Q2FY14 Q3FY14 Q4FY14

Institutional malaria
(118.0)
Q2FY14
Q3FY14
US
Q4FY14
Q1FY15
Q2FY15 Q3FY15
YoY growth
Chart 6: EU business benefiting from past orderbook

1,041
80.0
(53.0)
Europe
Q3FY15
342
Q2FY15
(26.4)
Q1FY15
482
Q4FY14
0.2
Q3FY14
622
Q2FY14
26.8
Q1FY14
761
Q4FY13
53.4
Q3FY13
901
Growth (%)
(INR mn)
950
Growth (%)
28.0
1,200
(INR mn)
53.0
YoY growth
Pharmaceuticals
0.0
Branded generics
Q3FY15
363
Q2FY15
16.8
Q1FY15
531
Q4FY14
33.6
Q3FY14
699
Q2FY14
50.4
Q1FY14
866
Q4FY13
67.2
Growth (%)
84.0
1,034
Q3FY13
(INR mn)
Chart 7: Branded generics markets affected by currency movements

1,202
YoY growth
Ipca Laboratories
Financial snapshot
(INR mn)
Year to March
Net revenues
Net Revenue (excl other operating income)
Raw material costs
Gross profit
Employee expenses
Other expenses
Total expenditure
EBITDA
Operating margin (%)
EBITDA margin (excl other operating income) (%)
Depreciation
Other income
Net finance expense
Profit before tax
Tax
Core profit
Extraordinary items
Net profit
Adjusted net profit
Adj. EPS (INR)
As % of net revenues
COGS
Gross profit
Employee cost
Other expenses
Total expenses
EBITDA
Reported net profit
Tax rate
Q3FY15 Q3FY14 % change Q2FY15

7,407
8,290
(10.7)
7,806
7,341
8,152
(9.9)
7,749
2,726
2,781
(1.9)
2,710
4,680
5,509
(15.0)
5,096
1,344
1,243
8.1
1,375
2,125
2,132
(0.3)
2,373
3,469
3,376
2.8
3,749
1,211
2,133
(43.2)
1,348
16.4
25.7
17.3
15.6
24.5
16.7
420
256
64.2
396
64
54
18.8
87
59
54
8.3
57
797
1,877
(57.5)
981
270
502
(46.2)
275
527
1,375
(61.7)
707
(112)
16
NA
(94)
415
1,391
(70.1)
613
483
1,380
(65.0)
678
3.8
10.9
5.4
36.8
63.2
18.1
28.7
46.8
16.4
5.6
33.9
33.5
66.5
15.0
25.7
40.7
25.7
16.8
26.7
34.7
65.3
17.6
30.4
48.0
17.3
7.9
28.0
% change
(5.1)
(5.3)
0.6
(8.2)
(2.3)
(10.5)
(7.5)
(10.1)
6.0
(26.1)
2.6
(18.8)
(1.6)
(25.4)
NA
(32.3)
(28.7)
YTD15
24,572
24,372
8,862
15,710
4,108
6,734
10,842
4,868
19.8
19.3
1,195
214
174
3,714
1,048
2,666
(183)
2,483
2,599
20.6
FY15E
33,872
33,016
12,051
21,821
5,478
9,676
15,154
6,667
19.7
17.6
1,286
100
185
5,296
1,324
3,972
3,972
3,972
31.5
FY16E
39,366
38,404
14,209
25,156
6,026
11,049
17,075
8,081
20.5
18.5
1,480
100
150
6,552
1,343
5,209
5,209
5,209
41.3
36.1
63.9
16.7
27.4
44.1
19.8
10.1
28.2
35.6
64.4
16.2
28.6
44.7
19.7
11.7
25.0
36.1
63.9
15.3
28.1
43.4
20.5
13.2
20.5
Pharmaceuticals
Company Description
From a company which was known for anti-malarials and an API manufacturer in the past,
its business has evolved into a full-fledged global Pharma company with multiple segments
spanning multiple countries. IPCA is a vertically integrated company with a diverse presence
across geographies including India, Africa, Asia, Australia, Europe and the US. It boasts of
high level of vertical integration that has enabled leadership in various segments and
delivered good profitability at the same time. India business is its largest business where it
has consistently beaten market growth over the years. Exports formulations account for
almost 50% of its revenues with branded generics business accounting for 1/4th of exports.
While branded generics continues to register steady growth, the growth in exports will be
driven by the generics business (US, EU and Institutional malaria).
Investment Theme
We believe a focused management and superior execution capabilities will continue to
enhance shareholder returns as in the recent past. Ipca has a strong execution track record
and has delivered sales/PAT CAGR of ~20%/28% in the past five years along with
maintaining healthy balance sheet (low net D/E). We believe that bounce back in India,
steady Institutional malaria business and other emerging markets should lead to steady
growth. However, its decision to stop supplies to the US will pull down near term growth
and profitability. We forecast 5% earning CAGR (FY14-17E) assuming limited ramp up in US
and higher costs (related to remediation). While the overhang on slower/delay in ramp up in
US will limit stock price movement, early resolution will expedite rerating. We have a HOLD
rating on the stock with a TP of INR690 based on 14xFY17E.
Key Risks
Escalation of form 483 to its Indore/ Silvassa plants to any adverse action
Currency appreciation to hurt earnings: Currency realisations have high beta on the
companys margins, as ~60% of its revenue comes from exports.
Potential funding risks to Institutional anti-malarial business
Ipca Laboratories
Financial Statements
Key Assumptions
Year to March
Income statement
FY14
FY15E
FY16E
FY17E
Macro
Year to March
(INR mn)
FY14
FY15E
FY16E
FY17E
Gross revenues
Excise duties
32,315
373
33,397
381
38,847
443
45,872
524
Net revenue
45,349
GDP(Y-o-Y %)
Inflation (Avg)
4.8
6.2
5.4
6.8
6.3
5.5
7.3
6.5
31,942
33,016
38,404
Repo rate (exit rate)
8.0
7.8
6.8
6.3
Other Operating Income
823
856
962
1,079
60.5
60.0
60.0
60.0
Income from operations
32,765
33,872
39,366
46,427
Materials costs
11,366
12,051
14,209
16,326
10.0
15.0
15.0
15.0
Employee costs
4,980
5,478
6,026
7,050
R&D Cost
1,265
1,863
2,165
2,786
Total SG&A expenses
7,102
7,813
8,884
10,489
USD/INR (Avg)
Sector
India pharma market growth (Y-o-Y) %
Company
India sales (INR mn)
% change
Cardiovascular and Diabetics
% change
Pain management
% change
Anti Malaria
% change
Anti-infectives
% change
Institutional anti-malaria (INR mn)
% change
AL
AS-AQ
9,694 11,439 13,384 15,659

10.4
18.0
17.0
17.0
2,312
2,651
3,060
3,580
Total operating expenses
24,712
27,205
31,284
36,650
EBITDA
8,053
6,667
8,081
9,777
Core EBITDA
8,053
6,667
8,081
9,777
Depreciation & Amortization
1,031
1,286
1,480
1,569
EBIT
7,022
5,380
6,602
8,208
Other income
(500)
100
100
100
269
185
150
61
5.3
14.7
15.4
17.0
3,485
4,282
5,179
6,060
24.0
22.9
21.0
17.0
1,381
1,556
1,725
2,018
(7.5)
12.6
10.9
17.0
Interest expenses
555
608
656
767
Profit before tax
6,253
5,296
6,552
8,247
Provision for tax
1,524
1,324
1,343
2,062
Adjusted PAT
5,276
3,972
5,209
6,186
Basic EPS (INR)
37.4
31.5
41.3
49.0
5.3
9.5
7.9
17.0
4,370
3,500
4,000
4,750
11.6
(19.9)
14.3
18.8
3,970
Shares outstanding (mn)
126
126
126
126
400
Diluted EPS (INR)
41.8
31.5
41.3
49.0
Core EPS
41.8
31.5
41.3
49.0
CEPS (INR)
45.6
41.7
53.0
61.4
6.4
5.6
7.4
8.8
15.3
17.9
17.9
17.9
US generics (USD mn)
38
13
15
23
Growth (YoY)%
6.1
(65.7)
15.4
50.0
No of launches
13
20
30
3,631
5,026
5,918
7,129
% change
26.0
38.4
17.7
20.5
EBITDA margins (%)
24.6
19.7
20.5
21.1
Common size metrics
Domestic formulations
24.0
26.0
26.0
26.0
Year to March
FY14
FY15E
FY16E
FY17E
Institutional malaria
26.5
26.5
26.5
26.5
Branded generics exports
27.5
27.7
27.7
27.7
Operating expenses
Materials costs
75.4
34.7
80.3
35.6
79.5
36.1
78.9
35.2
Branded generics exports (INR mn)
Domestic- API
Dividend per share (INR)

Dividend payout (%)
Employee expenses
15.2
16.2
15.3
15.2
API exports
18.5
18.5
18.5
18.5
SG&A expenses
21.7
23.1
22.6
22.6
US
28.0
30.0
30.0
30.0
R & D cost
3.9
5.5
5.5
6.0
EU
14.0
14.0
14.0
14.0
Depreciation
3.1
3.8
3.8
3.4
R&D (% of sales)
3.9
5.5
5.5
6.0
Interest expenditure
0.8
0.5
0.4
0.1
ANDA filings (per annum)
12
15
16
17
EBITDA margins
24.6
19.7
20.5
21.1
Net profit margins
14.8
12.0
13.6
13.6
Year to March
FY14
FY15E
FY16E
FY17E
Revenues
EBITDA
16.8
29.2
3.4
(17.2)
16.2
21.2
17.9
21.0
PBT
20.9
(15.3)
23.7
25.9
Net profit
42.8
(24.7)
31.1
18.8
EPS
42.8
(24.7)
31.1
18.8
USD/INR (Avg)
60.5
60.0
60.0
60.0
Capex (USD mn)
62
83
25
25
Net debt to equity ratio(x)
0.3
0.2
0.2
0.1
Growth ratios (%)
Pharmaceuticals
Balance sheet
As on 31st March
(INR mn)
Cash flow metrics
FY14
FY15E
FY16E
FY17E
FY14
FY15E
FY16E
FY17E
Equity capital
Reserves & surplus
252
19,344
252
22,482
252
26,597
252
31,483
Operating cash flow

Investing cash flow
7,143
(3,770)
3,326
(5,000)
5,589
(1,500)
3,622
(1,500)
Shareholders funds
(1,299)
Year to March
19,597
22,734
26,849
31,736
Financing cash flow
(7,012)
1,307
(4,594)
Short term debt
1,439
1,500
1,000
1,000
Net cash flow
(3,640)
(368)
(505)
823
Long term debt
2,940
5,020
2,020
2,020
Capex
(3,774)
(5,000)
(1,500)
(1,500)
Total Borrowings
4,379
6,520
3,020
3,020
Dividends paid
(947)
(834)
(1,094)
(1,299)
Deferred tax liability (net)
1,484
1,484
1,484
1,484
Sources of funds
25,460
30,738
31,353
36,240
Profitability and efficiency ratios
Tangible assets
Intangible assets
13,354
344
17,068
344
17,088
344
17,019
344
Year to March
FY14
FY15E
FY16E
FY17E
CWIP (incl. intangible)
1,486
1,486
1,486
1,486
ROAE (%)
ROACE (%)
27.0
29.0
18.8
19.1
21.1
21.3
21.2
24.3
Total net fixed assets
135
15,185
18,898
18,919
18,850
Inventory day
133
125
135
Investments
90
90
90
90
Debtors days
54
55
55
55
Non current investments
90
90
90
90
Payable days
112
95
100
100
Cash and equivalents
764
157
(643)
(192)
75
85
90
90
Inventories
8,476
9,317
11,571
13,556
Current ratio (x)
2.5
2.9
2.5
3.4
Sundry debtors
4,495
5,104
5,932
6,996
Debt/EBITDA (x)
0.5
1.0
0.4
0.3
Loans and advances
1,386
1,554
1,932
2,481
Debt/Equity (x)
0.2
0.3
0.1
0.1
Other assets
1,708
1,708
1,708
1,708
Adjusted debt/equity
0.2
0.3
0.1
0.1
16,065
17,683
21,143
24,741
Trade payable
3,413
2,860
4,926
4,020
Operating ratios
Other current liabilities and
3,230
3,230
3,230
3,230
Year to March
FY14
FY15E
FY16E
FY17E
Total current liabilities &
6,643
6,090
8,156
7,249
Net current assets (ex cash)
9,421
11,593
12,988
17,492
Total asset turnover

Fixed asset turnover
1.3
2.4
1.2
2.0
1.2
2.1
1.3
2.4
25,460
30,738
31,353
36,240
Equity turnover
1.8
1.6
1.5
1.5
155.3
180.1
212.8
251.5
Year to March
FY14
FY15E
FY16E
FY17E
Diluted EPS (INR)

Y-o-Y growth (%)
41.8
42.8
31.5
(24.7)
41.3
31.1
49.0
18.8
CEPS (INR)
45.6
41.7
53.0
61.4
Diluted PE (x)
14.7
19.5
14.9
12.5
4.0
3.4
2.9
2.4
14.7
19.5
14.9
12.5
Total current assets (ex cash)
Uses of funds
Book value per share (INR)
Valuation parameters
Free cash flow
(INR mn)
Year to March
FY14
FY15E
FY16E
FY17E
Net profit
Depreciation
4,726
1,031
3,972
1,286
5,209
1,480
6,186
1,569
171
238
295
371
5,928
5,497
6,983
8,126
Price/BV (x)
Less: Changes in WC
(1,215)
2,171
1,394
4,504
PE based on core EPS
Operating cash flow
7,143
3,326
5,589
3,622
EV/Sales (x)
2.6
2.6
2.1
1.8
Less: Capex
3,774
5,000
1,500
1,500
EV/EBITDA (x)
10.1
12.6
10.0
8.3
Free cash flow
3,369
(1,674)
4,089
2,122
Core EV/EBITDA (x)

Dividend yield (%)
10.1
1.0
12.6
0.9
10.0
1.2
8.3
1.4
Others
Gross cash flow
Peer comparison valuation

Market cap
Name
Core EV/EBITDA (X)
PE based on core EPS
ROAE (%)
(USD mn)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
Ipca Laboratories
1,257
12.6
10.0
19.5
14.9
18.8
21.1
Cadila Healthcare
4,865
17.9
13.0
25.9
18.4
29.5
31.7
Glenmark Pharmaceuticals
3,253
14.2
12.0
22.2
18.2
25.7
24.6
Torrent Pharmaceuticals
2,957
17.6
12.4
29.0
19.9
33.8
32.6
Median
15.9
12.2
24.0
18.3
27.6
28.2
AVERAGE
15.6
11.9
24.1
17.9
27.0
27.5
10
Ipca Laboratories
Additional Data
Directors Data
Premchand Godha
Pranay Godha
Babulal Jain
Dev Parkash Yadava
Dr Manisha Premnath
Chairman & Managing Director

Executive Director
Director
Director
Director
A K Jain
Prashant Godha
Anand T Kusre
Dr Ramakanta Panda
Joint Managing Director

Executive Director
Director
Director
Auditors - Natvarlal Vepari & Co

*as per last annual report
Holding Top10
Perc. Holding
21.41
5.53
3.53
2.24
2.23
Kaygee Investments Pvt Ltd

Chandurkar Investments
HDFC Asset Management
Dendana Investments
Govt Pension Fund Global
Perc. Holding
6.56
3.99
2.64
2.23
2.13
Exon Laboratories Pvt Ltd

Paschim Chemicals Pvt Ltd
Lavender Investments
Norges Bank Investment Mgmt
Godha Premchand
*in last one year
Bulk Deals
Data
Acquired / Seller
B/S
Qty Traded
Price
No Data Available
*in last one year
Insider Trades
Reporting Data
Acquired / Seller
B/S
Qty Traded
No Data Available
*in last one year
11
IndiaMidcaps
RESULTUPDATE
JETAIRWAYS(INDIA)
Turnaroundplaninprogress
IndiaEquityResearch|Aviation
Jet Airways (JAL) reported Q3FY15 net profit of INR631mn led by

INR698mn oneoff gain from lessors towards maintenance. Operational
performance improved as standalone gross margin jumped 25% YoY to
INR28.5bn.Theimprovementwasdueto11%YoYrevenuesurgeand11%
YoY fuel cost dip. Average fuel rate for it was lower ~10% versus ~21%
drop in ATF prices due to lag of a month and most of the benefits will
accrueinQ4FY15.Otherexpense(includesMROexpenses)rose18%YoY
and expected to remain high as JAL tries to standardise its maintenance
contracts.MaintainBUYwithTPofINR590.
EDELWEISSRATINGS
AbsoluteRating
BUY
InvestmentCharacteristics
Growth
MARKETDATA(R:JET.BO,B:JETININ)
CMP
: INR445
TargetPrice
: INR590
52weekrange(INR)
: 544/203
Shareinissue(mn)
: 113.6
Mcap(INRbn/USDmn)
: 51/813
Passengersurge,fuelpriceskeygrowthlevers
Avg.DailyVol.BSE/NSE(000) : 2,250.0
JALs passenger traffic surged 13.8% YoY (14.7% QoQ), which led to 12% jump in
passengerrevenue.However,thecompanysharpenedfocusondomesticbusinessin
Q3FY15 to take advantage of seasonality in domestic traffic and hike market share
210bpsto22.3%.Growthinpassengertraffic,increaseinoutboundtrafficfromIndia,
preferenceofJALoverotherfullcostcarriers,lowerfuelpricesandmeasuredpasson
offuelbenefitstocustomerswillfurtherimproveprofitability.
RiseinPLFpropelsRASK
Thecompanyreportedpassengerloadfactor(PLF)of82.0%versusquarterlyaverageof
78.7% over past 6 years as passenger growth had averaged 9% (over past 6 quarters),
significantlyhigherthanASKMgrowthof7.9%(oversameperiod).IncreasedPLFledto
2%YoYincreaseinrevenue/ASKM.WeexpectJALtomaintainhighPLFasitfocuseson
routerationalisationandnetworkefficiency.
Outlookandvaluations:Playonstrategy;maintainBUY
SHAREHOLDINGPATTERN(%)
Current Q2FY15
Promoters*
51.0
5.8
MF's,FI's&BKs
51.0
5.8
51.0
4.7
FII's
3.3
3.3
3.2
Others
39.9
39.9
41.1
NIL
BSEMidcap
Stock
Index
Stockover
Index
*Promoterspledgedshares
(%ofshareinissue)
PRICEPERFORMANCE(%)
1month
6.8
8.5
1.7
3months
15.2
93.3
78.1
12months
64.7
63.5
(1.1)
We expect FY16 to be better due to pick up in traffic led by overall improvement in

macros, outbound traffic uptick and progression of JALs 3year turnaround plan. Over
thelongterm,higheryields,assetutilisationandlowercostsshouldboostprofitability.
WevalueJALat7.0xEV/EBITDARbycapitalisingleaseexpensesat7x.WemaintainBUY
withatargetpriceofINR590.
Financials(Standalone)
(INRmn)
YeartoMarch
Q3FY15 Q3FY14
YoY Q2FY15
QoQ
FY14
FY15E
Revenue
50,510
45,359
11.4
47,723
5.8
173,019
EBITDAR
7,202
4,270
68.7
3,967
81.5
1,915
26,525
37,206
193,851
FY16E
201,721
Netprofit
631
(2,679)
NA
698
(9.6)
(29,459)
(1,910)
6,835
DilutedEPS(INR)
5.6
(23.6)
NA
6.1
(9.6)
(322.9)
19.6
60.2
DilutedP/E(x)
(1.4)
23.5
7.7
+912266233315
niraj.mansingka@edelweissfin.com
EV/EBITDAR(x)
67.4
5.1
3.3
ROACE(%)
(24.7)
1.0
15.0
EdelweissResearchisalsoavailableonwww.edelresearch.com,
BloombergEDEL<GO>,ThomsonFirstCall,ReutersandFactset.
Q1FY15
NirajMansingka,CFA
February9,2015
EdelweissSecuritiesLimited
Aviation
DomesticASKM
(%)
Q3FY15
Q1FY15
60.0
Q3FY14
2,000
Q1FY14
65.0
Q3FY13
2,400
Q1FY13
70.0
Q3FY12
2,800
Q1FY12
75.0
Q3FY11
3,200
Q1FY11
80.0
Q3FY10
3,600
Q1FY10
(mn)
Chart1:DomesticASKMPassengertrafficgrowthleadstoalltimehighPLF
4,000
85.0
DomesticPLF(%)
Intl.ASKM
(%)
Q3FY15
Q1FY15
74.0
Q3FY14
4,000
Q1FY14
77.0
Q3FY13
4,800
Q1FY13
80.0
Q3FY12
5,600
Q1FY12
83.0
Q3FY11
6,400
Q1FY11
86.0
Q3FY10
7,200
Q1FY10
(mn)
Chart2:InternationalASKMsFocusonaddingcapacity;PLFdropsmarginally
89.0
8,000
Intl.PLF(%)
80.0
1,200
75.0
1,000
70.0
800
65.0
600
60.0
(%)
1,400
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
(mn)
Chart3:JetliteCapacityreductioncontinues;butPLFinlinewithdomesticgrowth
1,600
85.0
JetLiteASKM
JetLitePLF(%)
Source:Company,Edelweissresearch
JetAirways(India)Ltd
Chart4:Jetincreasesdomesticcapacitymarginallytotakeadvantageofseasonality
8,000
(Nos.)
6,400
4,800
3,200
1,600
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Intl.ASKM
DomesticASKM
JetLiteASKM
Chart5:InternationalPLFdropswhiledomesticPLFincreases
100.0
90.0
(%)
80.0
70.0
60.0
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
50.0
Intl.PLF(%)
DomesticPLF(%)
JetLitePLF(%)
Table1:JALTargetPriceatINR590
StandaloneFY17eEBITDAR
JetLiteEBITDAR
ConsolEBITDAR
EV/EBITDAR(x)
EV
Aircraftleaserentalscapitalisedat7x
FY17ENetdebt
Equityvalue
MarketCap/CMP
%upside
INRmn
40,819
1,277
42,096
7.0
294,674
150,957
76,690
67,028
52,482
27.7
INR/share
359
11
371
2,594
1,329
675
590
462
27.7
Source:Edelweissresearch
Aviation
Financialsnapshot
YeartoMarch
Totaloperatingincome
AircraftFuelExpenses
Employeeexpenses
SellingandDistributionExpenses
Otherexpenses
EBITDAR
AircraftLeaseRentals
Depreciation
EBIT
Otherincome
Interest
Profitbeforetax
TotalTax
Coreprofit
DilutedEPS(INR)
As%ofnetrevenues
Aircraftfuelexpenses
Employeecost
Sellinganddistributionexpenses
Otheroperatingexpenses
EBITDAR
Depreciation
Aircraftleaserentals
Interestexpenditure
Reportednetprofit
Q3FY15
50,510
17,011
5,281
5,021
15,996
7,202
4,913
1,923
365
1,832
2,264
631
631
5.6
34
10.5
9.9
31.7
14.3
3.8
9.7
4.5
1.2
Q3FY14
45,359
19,148
4,837
3,507
13,596
4,270
4,237
2,296
(2,262)
1,675
2,303
(2,679)
%change
11.4
(11.2)
9.2
43.2
17.6
68.7
(2,679)
(23.6)
(123.6)
(123.6)
42
10.7
7.7
30.0
9.4
5.1
9.3
5.1
(5.9)
(16.2)
(116.2)
9.4
(1.7)
(123.6)
Q2FY15
47,723
18,460
5,039
4,966
15,291
3,967
4,698
1,933
(2,664)
2,435
2,123
698
%change
5.8
(7.8)
4.8
1.1
4.6
81.5
698
6.1
(9.6)
(9.6)
39
10.6
10.4
32.0
8.3
4.1
9.8
4.4
1.5
(0.5)
(113.7)
(24.8)
6.7
(9.6)
YTDFY15
98,233
35,470
10,321
9,986
31,287
11,169
9,611
3,857
(2,298)
4,267
4,387
1,329
1,329
11.7
36
10.5
10.2
31.8
11.4
9.8
3.9
4.3
1.4
(INRmn)
FY15E
193,851
64,738
21,513
19,200
61,874
26,525
18,016
7,740
769
5,756
8,435
2,229
FY16E
201,721
53,572
24,740
21,181
65,021
37,206
17,356
8,233
11,618
3,852
8,635
6,835
2,229
19.6
6,835
60.2
33
11.1
9.9
31.9
13.7
4.0
9.3
4.4
1.1
27
12.3
10.5
32.2
18.4
4.1
8.6
4.3
3.4
CompanyDescription
JetAirways(JAL)isoneofIndiaslargestprivatesectorairlineswithmarketshareof~24%in
domestic market. JAL was incorporated as an air taxi operator in April 1992. It began its
commercial airline operations in May 1993 and international operations in March 2004. It
acquired Sahara Airlines (rebranded as Jet Lite, JLL) in April 2007. JAL in May 2009
introduced Jet Airways Konnect (JAK), an all economy service to serve routes where the
traffic is predominately price sensitive and demand for high service oriented product is
limited.
JAL received an investment of INR 20,580mn from Etihad Airways in 2014 for 24% equity
stake. Etihad Airways invested an additional amount of INR 8,590mn for 50.1% equity
investmentinJetPrivilege,JALsFrequentFlyerProgram.PartnershipwithEtihadwillenable
JALtohavecombinednetworkofmorethan130routesandwouldbringadditionalfeeder
traffictoJet.
JAL as of FY 14 has a fleet of 101 aircrafts of which 8 aircrafts are subleased to Turkish
Airlines(3)andEtihadAirways(5).AsofFY14JALflewto56domesticdestinations(includes
flightsoperatedbyJLL)and20internationaldestinations.InFY14,internationaloperations
contributed~53%tothetotalrevenuesandmorethan51%totheoperatingprofitofthe
companyatconsolidatedlevel.
InvestmentTheme
Lowoilprices:LowcrudeoilpriceswouldimprovemarginsduetolowAviationTurbineFuel
(ATF)prices.Fuelexpensesaccountedfor~43%oftotalexpensesinFY14.
Demand supply mismatch: Demand growth is expected to outpace the supply growth
leading to better yields. Domestic traffic in India is expected to increase at CAGR of 11%,
whileinternationalpassengertrafficisexpectedtoincreaseatCAGRof7.5%overthenext
decade. The growth of supply is expected to be lower as currently there is oversupply in
market.
Aircrafts on operating lease: JAL sells some of its own aircrafts and takes back those
aircrafts on and operating lease basis after 57 years of their operations. This not only
releasesequityfromsaleofaircraftbutalso addstobottomlineasdepreciationoverthe
periodofoperationsishigherthandropinrealizablevalueofaircraft.
KeyRisks
Strong capacity addition: Capacity addition by other airlines especially low cost carrier
couldposeariskforincreaseinmarketshare.Currentlythereisovercapacityinthemarket
howevergrowthincapacityadditionisexpectedtolagdemandgrowth.
Passengertrafficgrowth:Growthinpassengertrafficisexpectedtobehighsingledigit/low
doubledigitforinternational/domestictrafficovernextdecade.Anyslowdowningrowthof
trafficwillimpactprofitability.
Leverage:JALhasnegativereservesofINR42,885mnasofFY14.ThoughJALsleveragehas
improvedpostinvestmentfromEtihadandborrowingshavedecreasedinFY14,itsforward
saleshaveincreased33%leadingtoincreaseincurrentliabilities.
Aviation
FinancialStatements
KeyAssumptions
YeartoMarch
FY14 FY15E FY16E FY17E
Macro
Incomestatement
YeartoMarch
FY14
GDP(YoY%)
Inflation(Avg)
4.7
9.5
5.4
6.8
6.3
5.5
7.3
5.5
Reporate(exitrate)
8.0
7.8
6.8
6.3
60.5
61.0
62.0
62.0
Totaloperatingexpenses
EBITDA
USD/INR(Avg)
Company
Domestic
Netrevenue
23,119
26,426
30,221
20,182
21,938
23,221
Operatingexpenses
72,069
65,653
67,185
68,157
189,404 180,272
174,160
182,114
29,747 33,820 37,874 39,889
Depreciationandamortisation
78
81
84
86
59.3
50.8
42.4
40.1
Otherincome
SG&Aexpensesas%ofrevenues
8.4
9.9
10.5
10.5
Interestexpenses
Otheroperatingexpenses(INR/ASKM)
1.7
1.5
1.4
1.4
Employeeexpense(%yoyinc)
23.0
13.3
15.0
15.0
Extraordinaryincome/(loss)
Otherincomeas%ofCash+Investments
41.5 127.1 858.8
40.0
ProfitAfterTax
Forwardtickets%revenues
14.8
14.0
14.0
14.0
Extraordinaries
26
26
26
26
AdjustedPAT
Sharesoutstanding(mn)
Inventorydays
224,210
60,514
15,304
RPKMs(mn)
Debtordays
212,541
58,610
20,778
AircraftLeaseRentals
Financialassumptions
FY17E
190,358 207,542
81,253 71,318
SellingandDistributionExpenses
38,064 41,558 45,298 46,204
Fuelrate(INR/lt)
(INRmn)
FY16E
EmployeesRemunerationand
ASKMs(mn)
PLF(%)
FY15E
EBIT
954
27,271
38,381
42,096
19,549
20,114
19,505
21,565
8,778
7,770
8,259
8,601
(27,373)
(613)
10,617
11,930
4,095
5,855
3,971
1,813
10,836
8,951
9,148
7,852
Profitbeforetax
(41,288)
312
5,440
5,892
Provisionfortax
(1)
(7,174)
4,022
(41,287)
312
5,440
5,892
(7,174)
4,022
(34,113)
(3,709)
5,440
5,892
17
18
18
18
114
114
114
114
Payabledays
103
103
103
105
DilutedEPS(INR)
(300.3)
(32.7)
47.9
51.9
InterestCost(%ofDebt)
9.2
8.4
9.2
8.0
CEPS(INR)
(223.0)
35.7
120.6
127.6
Depreciationas%ofgrossblock
5.5
4.8
5.1
5.2
Commonsizemetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
Nonfuelexpenses
43
56.8
34
52.5
28
54.4
27
54.2
EBITDARmargins
0.5
13.1
18.1
18.8
EBITmargins
(14.4)
(0.3)
5.0
5.3
Netprofitmargins
(17.9)
(1.8)
2.6
2.6
Growthratios(%)
YeartoMarch
FY14
FY15E
FY16E
FY17E
1.0
(96)
9.0
2,757
2.4
41
5.5
10
Netprofit
1,641.5
8.3
EPS
8.3
Revenues
EBITDARGrowth
Balancesheet
Ason31stMarch
FY14
FY15E
(INRmn)
Cashflowmetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
(2,523)
277
(2,522)
3,855
17,259
1,671
23,285
(587)
(13,352)
FY16E
FY17E
Equitycapital
Reserves&surplus
1,136
1,136
1,136
(42,885) (42,572) (37,132)
1,136
(31,240)
Operatingcashflow
Investingcashflow
Shareholdersfunds
(41,749) (41,436) (35,996)
(30,104)
Financingcashflow
1,460 (14,217)
(14,648)
Shorttermdebt
40,305
35,500
30,000
24,500
Netcashflow
(785) (12,884)
4,283
9,347
Longtermdebt
65,461
65,000
65,000
65,000
Capex
2,670
(2,300)
(2,400)
105,765 100,500
95,000
89,500
Profitabilityandefficiencyratios
TotalBorrowings
Sourcesoffunds
Totalnetfixedassets
Noncurrentinvestments
Cashandequivalents
Inventories
64,017
59,064
59,004
59,396
108,170 102,401
6,657
6,657
96,442
6,657
90,241
6,657
(2,000)
YeartoMarch
FY14
FY15E
FY16E
FY17E
(29.1)
31
8.5
38
24.7
48
23.2
18
25
12,065
(819)
3,463
12,810
ROACE(%)
Inventoryday
8,594
10,235
10,481
11,057
Debtorsdays
25
24
25
Sundrydebtors
12,872
14,371
14,814
15,695
Payabledays
192
205
231
82
Loansandadvances
22,743
24,590
25,208
26,574
Cashconversioncycle(days)
(136)
(143)
(158)
(39)
Totalcurrentassets(excash)
44,208
49,196
50,503
53,326
NetDebt/Equity
(2.1)
(2.3)
(2.4)
(2.3)
Tradepayable
52,283
50,260
48,691
51,734
54,801
48,111
49,370
51,904
Operatingratios
Totalcurrentliabilities&
107,084
98,371
98,062
103,638
YeartoMarch
FY14
FY15E
FY16E
FY17E
Netcurrentassets(excash)
(62,876) (49,175) (47,559)
(50,313)
2.4
1.6
3.4
2.0
3.6
2.1
3.8
2.4
(6.3)
(5.0)
(5.5)
(6.8)
Othercurrentliabilitiesand
Usesoffunds
64,017
59,064
59,004
59,396
Totalassetturnover
Fixedassetturnover
Bookvaluepershare(INR)
Freecashflow
(367.5)
(364.8)
(316.9)
(265.0)
Equityturnover
YeartoMarch
Netprofit
Depreciation
Others
(INRmn)
Valuationparameters
YeartoMarch
FY14
FY15E
FY16E
FY17E
FY14
FY15E
FY16E
FY17E
312
20,114
5,440
19,505
5,892
21,565
DilutedEPS(INR)
YoYgrowth(%)
(300.3)
(32.7)
47.9
51.9
8.3
(223.0)
35.7
120.6
127.6
0.8
98.2
0.7
3.7
0.7
2.4
0.5
1.8
(3,762)
(9,248)
(6,070)
(6,926)
CEPS(INR)
(25,499)
11,178
18,876
20,531
Less:ChangesinWC
(22,977)
13,701
1,616
(2,754)
EV/Sales(x)
EV/EBITDA(x)
Operatingcashflow
(2,523)
(2,522)
17,259
23,285
Less:Capex
(2,670)
2,000
2,300
2,400
147
(4,522)
14,959
20,885
(41,287)
19,549
Grosscashflow
Freecashflow
Aviation
AdditionalData
DirectorsData
NareshGoyal
IMKadri
GaurangShetty
JamesRigney
Chairman,NonexecutivePromoterDirector
NonexecutiveIndependentDirector
WholetimeDirectorandManager
Director
JavedAkhtar
AmanMehta
JamesHogan
Director
AuditorsDeloitteHaskins&Sells,Chaturvedi&Shah
*asperlastavailabledata
HoldingTop10
Perc.Holding
51
2.34
1.41
1.29
0.67
Goyalnareshk
Reliancecapitaltru
Parvestequityindia
Birlasunlifeasset
Sbifundsmanagement
Etihadairwayspjsc
Lifeinsurancecorp
Tataassetmanagemen
Bnpparibasassetma
Prudentialiciciass
Perc.Holding
24
2.07
1.4
0.99
0.36
BulkDeals
Data
Acquired/Seller
NoDataAvailable
B/S
QtyTraded
Price
InsiderTrades
ReportingData
NoDataAvailable
Acquired/Seller
B/S
QtyTraded
RESULTUPDATE
KALPATARUPOWER
Matchesexpectations; Brightprospects
IndiaEquityResearch|EngineeringandCapitalGoods
KalpataruPowers(KPP)overallQ3FY15performancewasbroadlyinline
with our estimates with ~9% revenue and 20% PAT surge led by 60bps
marginexpansionintheT&Dbusiness.However,60%dipinorderintake
wasakeynegative,duetowhichorderbookalsoshrunk20%.Whilethe
company has revised down its FY15 order intake guidance from INR40
45bn to INR3540bn, it continues to maintain 1215% revenue growth
guidance.Managementexpectsorderbookposition(includingL1)to be
at INR72bn at FY15 end. We continue to remain positive on KPP as we
perceive it to be amply equipped to tap the emerging growth
opportunities in the T&D business. We introduce and roll forward our
valuations to FY17E with revised SOTPbased target price of INR242
(INR197earlier).MaintainBUY.
Orderintakedisappointing;revenuegrowthguidancemaintained
KPPs revenue surged 9% led by robust growth in the infra business, though T&D
growthwasmoderateat~5%.However,marginexpanded80bpsonaccountofbetter
performanceintheT&Dbusiness(up70bps).Thecompanyhasmaintaineditsrevenue
growthguidanceof1215%forFY15,implying~613%growthinQ4FY15.Orderintake
plummeted 60% to INR5.6bn, as a result, order book fell 20% to INR55bn. The
companyexpectsINR1722bnorderintakeinQ4FY15ridingonINR10bnL1position.
JMCrevenuetepid,butlowerexpensespropupmargin
AbsoluteRating
BUY
RatingRelativetoSector
Outperformer
RiskRatingRelativetoSector
Medium
SectorRelativetoMarket
Overweight
MARKETDATA(R:KAPT.BO,B:KPPIN)
CMP
:INR229
TargetPrice
:INR242
52weekrange(INR)
:252/71
Shareinissue(mn)
:153.5
Mcap(INRbn/USDmn)
:35/565
Avg.DailyVol.BSE/NSE(000) :407.0
Current
59.5
59.5
59.5
MF's,FI's&BKs
22.8
22.4
22.8
FII's
9.4
9.0
9.4
Others
8.4
9.2
8.4
(%ofshareinissue)
PRICEPERFORMANCE(%)
Outlookandvaluations:Improving;maintainBUY
12months
WebelievestructuraldriversareinplacetospurT&Dspending,whichaugurswellfor
KPPgivenitsstrongpositioning.Whileorderintakegrowthwillcatchupinsubsequent
quarters, margin improvement in KPP and JMC over the next 2 years will propel the
companys growth. We cut our consolidated core PAT by ~6% each for FY15E and
FY16EfactoringinlowerorderintakeinKPPandlowerrevenuegrowthinJMC.AtCMP,
thestockistradingat17xand13xonFY16EandFY17EconsolidatedEPS,respectively.
Wemaintain`BUY/SO.
Netrev.(INRmn)
EBITDA(INRmn)
11,471 10,513
FY15E
FY16E
11,408
0.6
7.7
3,863
4,409
5,178
1,464
1,769
2,133
940
18.8
1,038
Netprofit(INRmn)
410
337
21.6
427
(4.0)
DilutedEPS(INR)
2.7
2.2
21.7
2.8
(4.0)
DilutedP/E(x)
ROAE(%)
6.0
EWCapital
GoodsIndex
Stock
Nifty
1month
20.7
4.0
6.5
3months
77.0
9.9
15.1
175.2
36.6
69.2
AmitMahawar
+912240407451
amit.mahawar@edelweissfin.com
RahulGajare
FY14
9.1
1,118
Q2FY15 Q1FY15
Promoters*
JMCProjects(JMC)revenuedeclined17%YoYinQ3FY15duetoweaktractionacross
projects. Revenue growth is likely to remain muted in FY15. But margin improved
20bpsYoYto6.2%duetolowerconstructionexpenses.Managementestimates100bps
marginexpansionoverthenext34quarters.
YeartoMarch
Q3FY15 Q3FY14 %change Q2FY15 %change
EDELWEISS4DRATINGS
40,553 45,738 51,021
9.5
11.5
13.9
24.0
19.9
16.5
7.7
8.7
9.7
+912240635561
rahul.gajare@edelweissfin.com
SwarnimMaheshwari
+912240407418
swarnim.maheshwari@edelweissfin.com
February9,2015
EngineeringandCapitalGoods
Q3FY15conferencecall:Keyhighlights
Outlook:ManagementexpectsdomesticorderbooktoimprovefromH2FY16.International
businesscontinuestobestrong.ExpectsT&Dmargintobe~10%goingahead.
Weakorderintakein9mFY15:KPPrecordedmorethan40%declineinorderintakedueto
weaker finalisation of orders. The company is L1 in projects worth INR10bn, which are
expectedtobeorderedoutinQ4FY15.Itexpectsorderbookposition(includingL1)tobeat
INR72bnatQ4FY15end.
Update on infra business: Total infra order book currently stands at INR8.5bn, of which
railway is ~INR1bn and pipeline projects ~INR7.5bn. In the infra business, KPP expects
profitable growth from H2FY16. In legacy projects, of the 6 railway projects, 5 are almost
completed. Legacy order book stands at ~INR1.4bn. The company continues to be
conservative in terms of bidding for new orders. Outlook for the pipeline business has
improved. Margins in pipeline business are lower than T&D margins. Also, L1 position is
INR1.5bninthepipelinebusiness.
UpdateonJMC:JMCcontinuestofocusonbettermargincontractsasevidentintheEBITDA
margin as well. Execution was low primarily due to lower road BOOT sales. Revenues are
expected to rise from FY16 led by higher B&F sales. Order intake growth in JMC business
wasduetocommercialandresidentialbuildingsaswellas somegovernmentcontracts.It
continuestomaintainstrongholdinSouthernmarkets.JMCsdebthadjumpedtoINR7.5bn
due to investments in road BOT projects and expects another INR400500mn of debt by
FY15 end. Debt is expected to remain at INR80bn over FY16. On ballpark number basis, it
expects ~510% revenue growth in FY16. Average execution period is ~3036 months.
Marginisexpectedtoimprovefurtherbyanother7075bpsinFY16Eonabaseof~6.36.5%.
~INR2.5bn legacy order forms part of the current order book. ~25% of the current order
bookcomesfromgovernmentcontracts.
Otherkeypoints
ForexlossofINR15mnduringthequarter.
PendingequityrequirementinroadprojectsINR0.5bn(~INR0.25bntowardscostover
runs).ThecompanytillnowhasinvestedINR4.6bnequityinroadprojects.Costofdebt
inJMCbusinessis~11%.
ThecompanyhasreceivedsecondprovisionalCODintheAgraAligarhprojectrecently.
Consolidated debt of 4 BOOT projects is ~INR13bn. Potential annual revenues from
theseprojects~INR2bn.
Green energy corridor opportunity: KPP expects ~INR200bn T&D opportunity in the
greenenergycorridorinFY16.
HugepotentialofhydeleletricityinNepal&Bhutanof~30GW,whiletherequirement
overthereis~1GW.Governmentcanlookforwardtotapthatopportunity.
Real estate project: Expected to launch the project in the next 2 quarters. On Thane
landparcel,15%oftheprojectisalreadyleasedoutandtalksareontosell/leasesome
moreportionofit.
KalpataruPower
Table1:Segmentalsnapshot
YeartoMarch
Revenues(INRmn)
Transmission&distribution
Others
InfrastructureEPC
Total
Segmentrev.mix(%)
Others
InfrastructureEPC
EBIT(INRmn)
Others
InfrastructureEPC
Total
SegmentEBITmargin(%)
Others
InfrastructureEPC
TotalEBITmargins
SegmentEBITmix(%)
Others
Q3FY15
Q3FY14
%change
9MFY15
9MFY14
10,583
164
725
11,471
10,072
161
281
10,513
5.1
1.8
158.4
9.1
31,316
486
1,731
33,533
27,204
443
1,385
29,031
92.3
1.4
6.3
95.8
1.5
2.7
93.4
1.4
5.2
93.7
1.5
4.8
(INRmn)
%change
15.1
9.8
25.0
15.5
1,013
25
(126)
912
895 13.2
18 36.1
(152)
NM
761 19.9
2,955
44
(384)
2,615
2,593
14.0
35 25.2
(365)
NM
2,263
15.6
9.6
15.0
(17.4)
7.9
8.9
11.2
(54.3)
7.2
9.4
9.0
(22.2)
7.8
9.5
7.9
(26.3)
7.8
111.1
2.7
117.7
2.4
113.0
1.7
114.6
1.5
2.4
33,000
1.8
22,000
1.2
11,000
0.6
0.0
Sales
Q3FY15
Q1FY15
Q3FY14
Q1FY14
Q3FY13
Q1FY13
Q3FY12
Q1FY12
Q3Y11
Q1FY11
Q3FY10
Q1FY10
(x)
44,000
Q3FY09
(INRmn)
Chart1:Revenuevisibilityonadecliningspreeduetosharpfallinorderintake
3.0
55,000
OB/Sales(x)
14.0
12.8
720
11.6
480
10.4
240
9.2
8.0
EBITDA
Q3FY15
Q1FY15
Q3FY14
Q1FY14
Q3FY13
Q1FY13
Q3FY12
Q1FY12
Q3Y11
Q1FY11
Q3FY10
Q1FY10
(%)
960
Q3FY09
(INRmn)
Chart2:T&Dmarginsledtooverallimprovementinoperatingprofitability
1,200
EBITDAmargins(%)
Chart3:BreakupofINR107bnconsolidatedorderbook(JMCproportiononarise)
Infra
8%
JMC
54%
Transmission
overseas
25%
Transmission
domestic
13%
KalpataruPower
Table2:SOTPbasedtargetprice
Kalpatarustandalone
ValuationMethodology
PATFY17E(INRmn)
Multiple(x)
Impliedvalue(INRmn)
Noofshares
Valuepershare(INR)
JMC67%stake
PATFY17E(INRmn)
Multiple(x)
Impliedvalue(INRmn)
Noofshares
Valuepershare(INR)
ShreeShubhamLogistics70%stake
PATFY17E(INRmn)
Multiple(x)
Impliedvalue(INRmn)
Noofshares
Valuepershare(INR)
Totalvalue
P/E
2,642
12
32,890
154
214
P/E
433
6
1,758
154
11
P/E
366
10.0
2,564
154
17
242
Source:Company
Financialsnapshot
YeartoMarch
Netrevenues
Rawmaterialcosts
Staffcosts
Totalexpenditure
EBITDA
Depreciation
Otherincome
Interest
Profitbeforetax
Tax
Coreprofit
Adjustednetprofit
Equitycapital(FVINR2)
No.ofshares(mn)
DilutedEPS(INR)
Asa%ofsales
Rawmaterial
Employeecost
Otherexpenses
EBITDA
Depreciation
Otherincome
Adjustednetprofit
Taxrate
Q3FY15
11,471
8,037
789
1,527
10,354
1,118
215
113
386
630
221
410
410
307
153
2.7
70.1
6.9
13.3
9.7
1.9
1.0
3.6
35.0
Q3FY14
10,513
7,537
662
1,374
9,573
940
181
103
350
513
176
337
337
307
154
2.2
%change
9.1
6.6
19.3
11.1
8.2
18.8
18.7
9.5
10.1
22.9
25.4
21.6
21.6
21.7
71.7
6.3
13.1
8.9
1.7
1.0
3.2
34.3
Q2FY15
11,408
8,189
778
1,402
10,370
1,038
223
196
368
643
216
427
427
307
153
2.8
%change
0.6
(1.9)
1.4
8.9
(0.2)
7.7
(3.5)
(42.2)
4.8
(2.0)
2.1
(4.0)
(4.0)
(4.0)
71.8
6.8
12.3
9.1
2.0
1.7
3.7
33.6
YTD15
34,350
21,209
2,357
4,456
20,723
2,156
652
422
1,139
1,273
657
1,247
1,247
307
154
8.1
61.7
6.9
13.0
6.3
1.9
1.2
3.6
51.6
(INRmn)
FY15E
45,738
33,224
2,748
5,356
41,329
4,409
851
574
1,492
2,641
871
1,769
1,771
307
153
11.5
FY16E
51,021
36,803
3,065
5,975
45,843
5,178
934
603
1,662
3,184
1,051
2,133
2,135
307
153
13.9
72.6
6.0
11.7
9.6
1.9
1.3
3.9
33.0
72.1
6.0
11.7
10.1
1.8
1.2
4.2
33.0
ChangeinEstimates
Netrevenue
New
74,178
FY15E
Old
78,390
%change
(5.4)
New
83,440
FY16E
Old
89,891
%change Comments
(7.2) Buildinginlowerorderintake
growthinSAbusinessandlower
salesgrowthinJMC
EBITDA
EBITDAmargin
Coreprofit
PATmargin
Capex
6,563
6,723
8.8
8.6
1,454
1,536
2.0
2.0
7,510
7,510
(2.4)
(5.4)
0.0
7,845
8,337
(5.9)
9.4
9.3
2,153
2,312
(5.9)
2.6
2.6
4,011
4,011
0.0
KalpataruPower
CompanyDescription
KPPhasthreebusinessdivisionsviz.,transmissionline,biomassenergyandinfrastructure.It
hasaninhousetowertestingstationwithacapacitytotestsquare/rectangularbasetowers
ofupto800kVD/Caswellasmulticircuittowers.KPPisexposedtoconstructionsegment
with a 67% stake in JMC Projects (JMC); JMC is primarily engaged in the construction of
industrialbuildings,andresidentialandcommercialcomplexes.Offlate,JMChasventured
intotheinfrastructuresegmentwithprojectsinroads,bridges,flyovers,andtransportation
structures.
InvestmentTheme
T&DspendinginIndiaisexpectedtobearoundINR1,800bnandINR2,300bnover12thand
13th Plans against INR1,400bn in the Eleventh Plan. It augurs well for KPP which has
maintained market share of 1213% over the past 56 years in PGCIL ordering. Also,
expansioninregionaltransmissionnetworkinAfricaandMiddleEastislikelytosupplement
domesticdemandandpresentalargebusinessopportunity.KPPisthefrontrunnerinthe
powerT&DEPCsector,andhence,iswellplacedtoleveragefromtheopportunity.Further,
JMCsFactory&Buildingbusinessiseasilyscalablewhichisexpectedtoimprovethemargin
profileofthecompany.
KeyRisks
PowerT&Dinvestmentsareexecutedbystateutilities,which,inturn,aremandatedbythe
government.Hence,anychangeinthepoliticalenvironmentcanpotentiallyimpactthepace
ofexecutionintheindustry,thusimpactingthetimingofrevenuegrowth.
Additionally,customerconcentrationriskishighinthebusiness,whichinturn,impactsthe
bargainingpoweroftransmissiontowercompanies.
Delayinpickupineconomicactivity
FinancialStatements(Consolidated)
KeyAssumptions
YeartoMarch
FY14
FY15E
GDP(YoY%)
Inflation(Avg)
4.7
9.5
5.4
6.8
6.3
5.5
7.3
5.5
Reporate(exitrate)
8.0
7.8
6.8
6.3
60.5
61.0
62.0
62.0
Macro
USD/INR(Avg)
Company
Incomestatement
FY16E
FY17E
YeartoMarch
(INRmn)
FY14
FY15E
FY16E
FY17E
70,903
53,630
74,178
56,366
83,440
63,005
96,856
72,884
Employeecosts
4,520
4,429
4,962
5,752
Othermanufacturingexpenses
6,856
6,821
7,628
8,805
65,006
67,615
75,595
87,441
Incomefromoperations
Materialscosts
EBITDA
5,897
6,563
7,845
9,415
KPPSAOrderintake(%)
14.8
10.2
29.3
24.6
Depreciation&Amortization
1,490
1,800
1,903
2,005
JMorderintake(%)
10.0
5.0
15.0
15.0
EBIT
4,408
4,763
5,942
7,410
KPPSAsalesgrowth(%)
21.6
12.8
11.6
14.8
Otherincome
233
244
335
300
4.7
(10.0)
12.9
17.7
Interestexpenses
2,488
2,814
3,061
3,553
42.4
29.0
29.0
29.0
Profitbeforetax
2,153
2,192
3,216
4,157
2.0
2.0
2.0
2.0
Provisionfortax
914
739
1,064
1,363
7,954
7,510
4,011
4,011
1,239
1,453
2,153
2,794
17
65
92
143
1,222
1,389
2,060
2,651
154
154
154
154
DilutedEPS(INR)
8.0
9.0
13.4
17.3
JMCsalesgrowth(%)
Taxrate(%)
Excisedutyasa%ofsales
Capex(INRmn)
Netprofit
Minorityinterest
Profitafterminorityinterest
Dividendpershare(INR)
Dividendpayout(%)
2.0
2.5
3.5
3.5
25.1
27.6
26.1
20.3
Commonsizemetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
Operatingexpenses
EBITDAmargins
91.7
8.3
91.2
8.8
90.6
9.4
90.3
9.7
1.7
2.0
2.6
2.9
Netprofitmargins
Growthratios(%)
YeartoMarch
FY14
FY15E
FY16E
FY17E
Revenues
EBITDA
16.5
24.3
4.6
11.3
12.5
19.5
16.1
20.0
Netprofit
(5.6)
13.6
48.4
28.7
KalpataruPower
Balancesheet
Ason31stMarch
(INRmn)
Cashflowmetrics
FY14
FY15E
FY16E
FY17E
FY14
FY15E
FY16E
FY17E
Equitycapital
Reserves&surplus
307
20,685
307
21,980
307
23,866
307
26,433
Operatingcashflow
Investingcashflow
1,713
(7,885)
787
(7,520)
2,298
(4,021)
1,389
(4,021)
Shareholdersfunds
20,991
22,287
24,173
26,740
Financingcashflow
6,354
6,802
2,124
2,624
1,436
1,501
1,593
1,736
182
70
401
(8)
17,275
23,275
25,775
28,775
(7,954)
(7,510)
(4,011)
(4,011)
(266)
(448)
(627)
(627)
328
Minorityinterest(BS)
Securedloans
YeartoMarch
Netcashflow
Capex
Unsecuredloans
8,111
9,361
9,612
9,863
TotalBorrowings
25,386
32,636
35,387
38,638
96
96
96
96
Sourcesoffunds
47,909
56,520
61,249
67,210
Tangibleassets
Intangibleassets
14,549
74
17,782
50
17,416
25
16,948
(2)
YeartoMarch
FY14
FY15E
FY16E
FY17E
CWIP(incl.intangible)
15,956
18,456
20,956
23,456
ROAE(%)
ROACE(%)
6.1
10.4
6.7
9.1
9.3
10.1
11.0
11.6
Totalnetfixedassets
30,578
36,288
38,396
40,402
Inventoryday
73
80
76
75
100
110
120
130
Debtorsdays
89
94
92
91
Payabledays
185
194
185
181
1,172
1,241
1,642
1,634
(24)
(21)
(18)
(15)
Inventories
12,293
12,345
13,731
16,353
Currentratio(x)
1.5
1.6
1.6
1.7
Sundrydebtors
18,511
19,730
22,192
26,025
Debt/EBITDA(x)
4.3
5.0
4.5
4.1
Loansandadvances
7,864
8,651
9,516
10,943
Debt/Equity(x)
1.2
1.5
1.5
1.4
Otherassets
9,491
10,440
11,484
12,632
Interestcoverage(x)
1.8
1.7
1.9
2.1
Totalcurrentassets
48,158
51,166
56,922
65,954
Sundrycreditorsandothers
29,927
30,113
33,660
38,738
2,174
2,174
2,174
2,174
32,100
32,287
35,834
40,912
Netcurrentassets
16,058
18,879
21,088
Usesoffunds
Deferredtax(net)
Investments
Cashandequivalents
Provisions
Dividendspaid
Shareissuance/(buyback)
Operatingratios
YeartoMarch
FY14
FY15E
FY16E
FY17E
25,042
Totalassetturnover
Fixedassetturnover
1.7
2.6
1.4
2.2
1.4
2.2
1.5
2.5
Equityturnover
3.5
3.4
3.6
3.8
47,909
56,520
61,249
67,210
Freecashflow
136.8
145.2
157.5
174.2
YeartoMarch
FY14
FY15E
FY16E
FY17E
Netprofit
Depreciation
1,036
1,489
1,808
1,800
2,605
1,903
3,337
2,005
Others
2,535
Grosscashflow
5,061
3,608
4,507
5,342
Price/BV(x)
Less:ChangesinWC
3,348
2,821
2,210
3,953
EV/Sales(x)
Operatingcashflow
1,713
787
2,298
1,389
Less:Capex
7,954
7,510
4,011
4,011
EV/EBITDA(x)
Dividendyield(%)
(6,241)
(6,723)
(1,713)
(2,622)
Freecashflow
(INRmn)
Valuationparameters
YeartoMarch
FY14
FY15E
FY16E
FY17E
DilutedEPS(INR)
YoYgrowth(%)
8.0
(5.6)
9.0
13.6
13.4
48.4
17.3
28.7
CEPS(INR)
17.8
21.2
26.4
31.3
DilutedPE(x)
29.0
25.5
17.2
13.3
1.7
1.6
1.5
1.3
0.8
0.9
0.8
0.7
10.3
0.9
10.4
1.1
9.0
1.5
7.9
1.5
Peercomparisonvaluation
Marketcap
Name
DilutedPE(X)
Price/BV(X)
ROAE(%)
(USDmn)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
573
25.5
17.2
1.6
1.5
6.7
9.3
59
5.4
0.3
0.3
(2.5)
5.6
350
60.7
15.2
1.8
1.7
3.0
11.5
Median
25.5
15.2
1.6
1.5
3.0
9.3
AVERAGE
28.7
12.6
1.2
1.1
2.4
8.8
KalpataruPower
JyotiStructuresLtd
KECInternational
AdditionalData
DirectorsData
MofatrajPMunot
SPTalwar
NarayanSeshadri
VimalBhandari
ManishMohnot
Chairman
NonExecutiveIndependentDirector
ExecutiveDirector
PankajSachdeva
MahendraGPunatar
SajjanrajMehta
KVMani
ParagMunot
ManagingDirector
NonExecutiveDirector
PromoterDirector
AuditorsM/s.DeloitteHaskins&Sells
*asperlastannualreport
HoldingTop10
Kalpataruconstructi
Munotmofatrajpukha
Munotparagmofatraj
Idbitrusteeshipsvs
Hsbcglobalinvmaur
Perc.Holding
15.22
8.95
8.77
3.65
3.55
Kcholdingspvtltd
Kalpataruproperties
Prudentialplc
Hsbcinvestmentfund
Prudentialiciciass
Perc.Holding
13.78
8.89
5.5
3.55
3.54
*inlastoneyear
BulkDeals
Data
NoDataAvailable
Acquired/Seller
B/S
QtyTraded
Price
*inlastoneyear
InsiderTrades
ReportingData
NoDataAvailable
Acquired/Seller
B/S
QtyTraded
*inlastoneyear
10
RESULTUPDATE
LARSEN&TOUBRO
Profitabilitytakesabreather;domesticrecoveryholdskey
Larsen&Toubros(L&T)Q3FY15numbersweredisappointingwithbelow
estimates sales and bottom line, which were marred by dip in margins
across segments (including infra). While low order book took a toll on
metals, power and hydrocarbon margins, core infrastructure segments
margin took a hit due to some large value projects being in initial
executionstage,apartfromjobmiximpact.Sharpjump(up72%YoY)in
interestcostwasduetoriseindebtandonprovisioningduetopension
liabilityadjustmentofINR1.0bn.Whilemanagementtoneddownintake
growthguidance(1520%nowasagainst20%earlier),itmaintained10
15%revenuegrowthguidanceforFY15.9MFY15standaloneorderintake
grewrobust27%YoY.Hence,withstrongrevenuevisibility,L&Tissetto
clock decent double digit pick up in execution over FY1617 with
reasonable prospects of a working capital reduction from H2FY16.
MaintainBUYwitharevisedSOTPbasedTPofINR2,150(INR1,845)as
we introduce and roll forward our earnings on FY17 EPS valuing
standalonecoreearningsat24x.
BUY
Outperformer
Medium
Overweight
MARKETDATA(R:LART.BO,B:LTIN)
CMP
:INR1,572
TargetPrice
:INR2,150
52weekrange(INR)
:1,777/976
Shareinissue(mn)
:928.8
Mcap(INRbn/USDmn)
:1,461/23,496
Avg.DailyVol.BSE/NSE(000) :2,139.3
Current
Promoters*
Q2FY15 Q1FY15
35.7
35.7
36.6
Infrasegments(70%ofstandalonesales)EBIDTA marginplummeted110bpsYoYled
byinitialcostsinlargeticketprojectsandjobmiximpact.Also,workingcapitalinched
upfurtherto26%(25%inQ2FY15)ofsales,apartfrominterestcost(up38%adjusted
forpensionliabilityimpactofINR1.0bn).
FII's
18.8
18.8
19.6
Others
45.5
45.5
43.8
INR1,500bnordersinpipeline;9mstandaloneorderintakeat27%
PRICEPERFORMANCE(%)
L&T is anticipating significant ramp up in project awards over the next 6 months
primarilyfromtransportation,powergeneration,powerT&D,domestichydrocarbon
segment etc. Led by domestic infra project awards, standalone Q3FY15 and 9mFY15
intakestoodatINR280bn(up27%YoY)andINR840bn(up25%YoY),respectively.
Outlookandvaluations:Positive;maintainBUY
Propelledbyfavourablegovernmentpoliciesandimprovingcapexoutlookindomestic
market,L&Tissettoclockastrongrecoveryinexecutionandprofitabilityoverthenext
23years.Defenceandshipbuildingcouldaddasubstantialchunktocurrentrevenue
base over next 23 years. We maintain BUY/SO with TP of INR2,150. The stock
currentlytradesataP/Eof25xand19xonFY16EandFY17EconsolEPSrespectively.
YeartoMarch
Netrev.(INRbn)
Q3FY15 Q3FY14 %change Q2FY15 %change
Stock
1month
5.2
4.0
6.5
3months
11.1
9.9
15.1
12months
61.0
36.6
69.2
AmitMahawar
FY14
FY15E
FY16E
+912240407451
566.0
610.0
729.4
RahulGajare
66.7
69.9
87.6
4.2
127.2
15.7
16.7
(6.3)
13.4
10.6
11.4
(6.7)
10.4
1.7
49.0
49.0
59.7
+912240635561
rahul.gajare@edelweissfin.com
11.5
12.3
(6.7)
11.3
1.6
52.7
52.4
63.9
SwarnimMaheshwari
DilutedP/E(x)
29.8
30.0
24.6
+912240407418
EV/EBITDA(x)
22.6
21.8
17.6
ROAE(%)
15.6
13.9
15.4
17.0
NIL
EW
Nifty Construction
Index
143.9
DilutedEPS(INR)
17.9
(%ofshareinissue)
150.0
EBITDA(INRbn)
Adj.netprofit(INRbn)
AbsoluteRating
MF's,FI's&BKs
Inframargindipkeymiss;highworkingcapital,interestcostwoes
EDELWEISS4DRATINGS
February9,2015
Q3FY15conferencecall:Keyhighlights
Guidance for intake cut, revenue guidance maintained: While management has
maintained its FY15 revenue guidance at 1015%, order intake guidance has been cut
from20%to1520%atconsolidatedlevel.
Interest cost increased: Borrowing cost surged INR29bn (standalone) during the
quarter and hence the jump (up 70%) in interest cost. Also, accounting for pension
liabilityofINR1.0bnwasincludedininterestcostasperAS15.
Employees cost down: Integrated Engg Services (IES) was a part of standalone
financialstilllastyearandwasseparatedinApril2014.Thisisthereasonfordeclinein
employeecostasitwashighinIES.
EBITDA margin under pressure: mainly due to change in job mix and execution of
selectlargeprojectswithnoprofitrecognitionasperL&Tsrevenuerecognitionpolicy.
Workingcapital&otherincome:Workingcapitalinchedupfurtherfrom25%inQ2to
26%ofsalesinQ3FY15.OtherincomeincludesdividendfromsubsidiariesofINR2.3bn.
Update on hydrocarbon business: A total charge of USD60mn was expected to be

bookedbythecompanytowardsclosingofsomeoverseasprojectinhydrocarbon.The
company has booked charge of USD20mn during Q3FY15 with another USD40mn
remaining which will depend on client discussion regarding LDs/ provisions over the
next 2 quarters. Further, management indicated that there are no additional risks to
existingprojectsinhydrocarbonevenasnewprojectsremainlow.
Developmental projects: Both units of Rajpura have started. Also, there has been
growthof1015%inroadtrafficduringthequarter.
Real estate business: L&T reported INR15bn sales in this business with high double
digitmargins.
New order pipeline remains strong: The domestic order pipeline remains strong at
INR1.5tnexpectedoverthenextfewquartersmainlyfromthepublicsector.Thestrong
order pipeline is driven by transportation, power generation (coal + nuclear), water,
T&D, steel plant, material handling, hydrocarbon (mainly domestic) orders. Orders in
defence are likely to be delayed, especially the Landing Platform Docks which can be
expectedinFY16.
Segmentalhighlights:
Infrastructure margin fall was due to change in job mix, both during the quarter
and9mFY15.
Power business affected due to delay in orders and revenue, which impacted
marginsaswell.
Metal continues to be negatively impacted due to a combination of mining ban,

demand slump and overcapacity. This had a bearing on both revenue and
profitability.
Heavy Engg was affected due to delay in investments in Oil & Gas, Fertilizer and
Nuclear.Defencesectorcontinuestoremainpromising.Marginwasaffecteddue
tounderutilisationandcostoverrunsinsomeprojects.
Hydrocarbon affected due to a combination of lower crude prices and decline in

capex.Marginaffectedduetocostoverrunsinselectprojects.
Capex:atstandalone(excludingdevelopmentprojects)atINR10bnduringFY15.
Larsen&Toubro
Table1:Keysegmentalperformance
Segments
Consolidated
Q3FY15
Q3FY14
Revenues
Infra
Power
Metals
HeavyEngineering
ElectricalAutomation
Hydrocarbons
IT&services
FinancialServices
Developmentprojects
Others
Total
117,967
11,419
7,310
8,293
13,595
17,919
19,889
16,363
11,459
21,323
245,537
96,469
16,274
16,065
11,015
13,206
24,280
16,419
13,294
3,462
13,089
223,572
EBITmargins
Infra
Power
Metals
HeavyEngineering
ElectricalAutomation
Hydrocarbons
IT&services
FinancialServices
Developmentprojects
Others
Total
7.5
13.4
5.5
4.9
10.2
(7.7)
17.5
14.5
21.3
22.9
9.9
8.6
19.5
13.7
10.5
10.3
(0.6)
17.9
7.6
6.3
12.0
9.7
Standalone
Q3FY15
Q3FY14
%change
22.3
(29.8)
(54.5)
(24.7)
2.9
(26.2)
21.1
23.1
231.0
62.9
9.8
107,201
10,747
6,961
7,486
10,596
10,305
153,296
89,085
12,116
15,556
10,495
10,028
10145.9
147,426
8.7
6.1
5.2
8.6
11.9
34.2
10.3
10.3
5.4
14.1
14.9
11.6
14.7
11.0
%change
20.3
(11.3)
(55.3)
(28.7)
5.7
1.6
4.0
Subsidiaries
Q3FY15
Q3FY14
10,765
672
2,999
17,919
19,889
16,363
11,459
11,018
91,084
7,384
4,157
3,178
24,280
16,419
13,294
3,462
2,943
75,117
(5.1)
NM
4.3
(7.7)
17.5
14.5
21.3
12.3
9.6
(11.9)
NM
6.2
(0.6)
17.9
7.6
6.3
2.4
7.9
%change
45.8
(83.8)
(5.6)
(26.2)
21.1
23.1
231.0
274.4
Chart1: ReconciliationofL&TgroupPATwithSAandsubsidiariesfor9MFY15
45.0
30.0
27.0
(INRbn)
30.0
15.0
3.7
7.7
5.9
0.0
(15.0)
Group
Dev.Projects
IT&TS
FS
SAPAT
Others
(20.3)
(30.0)
3.1
2.7
510
2.3
340
2.0
170
1.6
1.2
Sales
3QFY15
1QFY15
3QFY14
1QFY14
3QFY13
1QFY13
3QFY12
1QFY12
3QFY11
1QFY11
3QFY10
1QFY10
(x)
680
3QFY09
(INRbn)
Chart2:Revenuevisibilitymaintainedforthe~3years
850
OB/NS(X)
Chart3:Networkingcapitalnowhoveringat~25%ofsales
30.0
24.0
(%)
18.0
12.0
6.0
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
0.0
NWCasa%ofsales
Larsen&Toubro
Chart4:1yearforwardPEband
50.0
40.0
(x)
30.0
Average at19x
(FY0514)
20.0
10.0
Feb04
Aug04
Feb05
Aug05
Feb06
Aug06
Feb07
Aug07
Feb08
Aug08
Feb09
Aug09
Feb10
Aug10
Feb11
Aug11
Feb12
Aug12
Feb13
Aug13
Feb14
Aug14
Feb15
0.0
1yearforwardL&TP/E(Adj.)
Table2:SOTPvaluation
L&TParent
Valuation
methodology
PE
Multiple
24
L&T's
Value Pershare
Remark
stake(%) (INRmn)
(INR)
100 1,641,339 1,765 Assigning20%premiumtoavgFY0514PE
onFY17EPS(Exdividendfromsubsidairies)
L&TMHI(BTGJVs)
L&TInfotech
L&TFinanceHoldings
DCF
PER
10.0
51
100
75
66,041
127,343
74,070
L&TIDPL
HyderabadMetro
P/BV
DCF
1.0
100
100
65,719 70 1.0xbook
(6,375) (7) DCFbasis
L&TForging
L&TShipbuilding
P/BV
P/BV
1.0
1.0
76
97
5,666
9,340
5
10
1xequityinvested
1xequityinvested
L&TPowerDevelopment
L&TRealtyltd.
P/BV
P/BV
1.0
1.0
100
100
18,000
4,716
19
5
1xequityinvested
1xequityinvested
L&THydrocarbons
PE
10.0
100
28,130
30
Assigning20%discounttoGlobal
Hydrocarboncompanies
2,005,859
2,150
Total
36
136
80
DCFbasis
InlinewithothermidcapITcompanies
20%discounttomarketcap
Financialsnapshot(SA)
YeartoMarch
Netrevenues
Staffcosts
Directcosts
Totalexpenditure
EBITDA
Depreciation
EBIT
Otherincome
Interest
Profitbeforetax
Tax
Coreprofit
Extraordinaryitems
Netprofit
Adjustednetprofit
No.ofshares(mn)
DilutedEPS(INR)
As%ofnetrevenues
Directcosts
Employeecost
EBITDA
Adjustednetprofit
Taxrate
Q3FY15
149,950
9,588
119,209
134,256
15,694
2,638
13,056
6,219
5,004
14,271
3,673
10,598
10,598
10,598
1,234
926
11.5
79.5
6.4
3.6
10.5
7.1
25.7
Q3FY14
143,875
10,682
111,857
127,127
16,748
1,992
14,757
4,468
2,909
16,316
4,953
11,363
1,044
12,407
11,363
1,234
926
12.3
77.7
7.4
3.2
11.6
7.9
30.4
%change
4.2
(10.2)
6.6
5.6
(6.3)
32.5
(11.5)
39.2
72.1
(12.5)
(25.8)
(6.7)
(100.0)
(14.6)
(6.7)
(6.7)
Q2FY15
127,168
12,744
97,206
113,756
13,412
2,376
11,036
6,033
3,126
13,943
3,522
10,422
10,422
10,422
1,233
924
11.3
76.4
10.0
3.0
10.5
8.2
25.3
%change
17.9
(24.8)
22.6
18.0
17.0
11.0
18.3
3.1
60.1
2.4
4.3
1.7
1.7
1.7
1.6
YTD15
380,495
31,337
295,886
340,515
39,980
7,623
32,356
17,133
10,849
38,640
10,399
28,241
1,714
29,955
28,241
1,233
935
30.2
77.8
8.2
3.5
10.5
7.4
26.9
(INRmn)
FY15E
609,968
43,794
474,111
540,085
69,882
10,171
59,711
22,159
14,802
67,068
18,108
48,960
48,960
48,960
1,233
935
52.4
FY16E
729,436
48,716
566,602
641,843
87,593
10,723
76,870
22,181
15,576
83,475
23,790
59,685
59,685
59,685
1,233
935
63.9
77.7
7.2
3.6
11.5
8.0
27.0
77.7
6.7
3.6
12.0
8.2
28.5
Larsen&Toubro
Financialsnapshot:Consol
YeartoMarch
Totalrevenues(net)
Directcost
Staffcost
Totalexpenditure
EBITDA
Depreciation
EBIT
Interest
Otherincome
PBT
Tax
Reportednetprofitbeforeextraord.
Extraord
Netprofitafterextrao.
Less:MinorityInterest
Add:Shareinprofitsofassoc.
PATafterminorityinterest
Adjustednetprofit
Equitycapital(FV:INR2)
#ofshares(mn)
AdjustedEPS(INR)
PE(x)
EV/EBITDA(x)
ROAE
Q3FY15
238,479
177,963
19,253
12,363
209,579
28,900
6,791
22,109
9,204
2,347
15,252
5,693
9,559
0
9,559
911
17
8,665
8,665
1,245
934
9.3
as%ofnetrevenues
Directcost
Employeecost
EBITDA
Reportednetprofit
Taxrate
0.0
74.6
8.1
5.2
12.1
4.0
37.3
Q3FY14 %change
220,071
8.4
164,550
8.2
17,105
12.6
13,091
(5.6)
194,746
7.6
25,325
14.1
5,878
15.5
19,446
13.7
7,927
16.1
1,891
24.2
13,410
13.7
6,694
(15.0)
6,716
42.3
843
7,559
26.5
429.8
8.8
7,980
7,137
21.4
1,234
926
7.7
20.3
0.0
74.8
7.8
5.9
11.5
3.1
49.9
Q2FY15 %change
YTD15
211,594
12.7 639,820
153,526
15.9 464,728
22,275
(13.6) 59,038
12,451
(0.7) 38,659
188,252
11.3 562,425
23,342
23.8
77,394
5,486
23.8 20,350
17,856
23.8
57,045
6,904
33.3 23,895
2,145
9.4 7,263
13,097
16.5
40,412
4,692
21.3 14,875
8,406
13.7
25,538
2,493
8,406
13.7
28,031
205.2
1,118
6.8
39
8,618
26,952
8,618
0.6
24,459
1,234
1,245
926
934
9.3
(0.3)
26.2
33.8
21.1
11.1
0.0
72.6
10.5
5.9
11.0
4.0
35.8
2.0
72.6
9.2
6.0
12.1
4.0
36.8
(INRmn)
FY15E
FY16E
945,309 1,140,408
693,101
834,632
89,890
108,542
48,055
55,700
831,047
998,875
114,262
141,533
26,170
27,495
88,092
114,038
32,794
37,419
9,171
9,924
64,469
86,543
20,952
28,559
43,516
57,984
0
0
43,516
57,984
435
580
426
593
43,507
57,998
43,507
57,998
1,245
1,245
934
934
46.6
62.1
33.8
25.3
21.1
17.6
11.1
13.4
2.0
73.3
9.5
5.1
12.1
4.6
32.5
2.0
73.2
9.5
4.9
12.4
5.1
33.0
CompanyDescription
Larsen&Toubro(L&T),headquarteredinMumbai,isatechnologydrivenengineeringand
constructionorganisation,andoneofthelargestcompaniesinIndia'sprivatesector.Ithas
additional interests in manufacturing, services, and information technology. A strong
customerfocused approach and the constant quest for topclass quality has enabled the
companyattainandsustainleadershipinitsmajorlinesofbusinessesoversevendecades.
L&Thasaninternationalpresence,withaglobalspreadofoffices.Athrustoninternational
business over the past few years has seen overseas earnings growing to 18% of total
revenues.Withfactoriesandofficeslocatedaroundthecountry,furthersupplementedbya
widemarketinganddistributionnetwork,L&T'simageandequityextendtovirtuallyevery
districtofIndia.
InvestmentTheme
DominantpresenceacrossverticalsexposesL&Ttopickupinroads,power,commercial
&residentialrealestate,railway,wateretc.
Strong OB and domestic execution pick up to drive earnings from FY16 (+27% core
earnings).
Huge scope for revenue scale up in new capacities (<15% of peak potential): Power
equipment, defence & commercial shipbuilding, nuclear forgings imparts longterm
scalability.
Inpast810years,L&Thasaddedseveralnewrevenuestreamsthatnotonlyinsulateit
from slow down in select sectors, but also impart strong scalability in a recovery
scenario.
KeyRisks
Furtherdelayinrecoveryoftheinvestmentcycle.
Greaterthanexpecteddeclineinmargin.
Continueddeteriorationinworkingcapitalrequirement
Larsen&Toubro
FinancialStatements(Standalone)
Incomestatement(Standalone)
YeartoMarch
(INRmn)
Balancesheet
Ason31stMarch
(INRmn)
FY14
FY15E
FY16E
1,854
1,854
1,854
1,854
Reserves&surplus
334,765
366,759
405,760
457,802
54,732
Shareholdersfunds
336,618
368,613
407,614
459,656
Longtermborrowings
75,829
93,329
99,329
104,329
FY14
FY15E
FY16E
FY17E
565,989
609,968
729,436
890,528
Equitycapital
Directcosts
433,465
474,111
566,602
683,911
Employeecosts
46,624
43,794
48,716
Otherexpenses
19,231
22,181
26,525
40,602
499,319
540,085
641,843
779,245
Shorttermborrowings
EBITDA
66,670
69,882
87,593
111,283
Loanfunds
FY17E
38,760
51,760
52,260
53,260
114,589
145,089
151,589
157,589
Depreciationandamort.
7,924
10,171
10,723
11,523
Deferredtaxliability/asset
4,099
4,099
4,099
4,099
EBIT
58,746
59,711
76,870
99,760
Sourcesoffunds
455,307
517,801
563,302
621,344
Interestexpenses
10,761
14,802
15,576
15,459
Tangibleassets
75,708
75,537
74,814
73,291
Otherincome
18,809
22,159
22,181
22,613
Intangibleassets
2,645
1,140
1,140
1,140
Profitbeforetax
66,794
67,068
83,475
106,914
4,119
4,219
4,319
4,419
Provisionfortax
17,748
18,108
23,790
30,471
Totalnetfixedassets
CoreProfit
49,046
48,960
59,685
76,444
Extraord.items/Excep.items
5,885
Currentinvestments
Profitaftertax
54,931
48,960
59,685
76,444
Inventories
Adjustednetprofit
49,046
48,960
59,685
76,444
Sundrydebtors
82,472
80,896
80,273
78,850
151,684
169,684
187,684
202,684
40,462
40,462
40,462
40,462
19,825
22,082
26,390
31,853
215,388
261,644
312,889
365,847
Basicsharesoutstanding(mn) 924
930
930
930
Cashandequivalents
17,924
39,379
32,566
48,557
EPS(INR)basic
53.1
52.7
64.2
82.2
Loansandadvances
100,672
115,773
133,139
146,453
Dilutedequityshares(mn)
930
935
935
935
Othercurrentassets
154,718
170,190
187,209
205,930
569,689
659,627
750,083
303,708
358,177
413,178
475,161
24,131
24,131
24,131
24,131
TotalCL&provisions
327,839
382,308
437,309
499,292
Netcurrentassets
162,764
187,380
222,318
250,791
Usesoffunds
455,307
517,802
563,303
621,344
364.2
396.5
438.5
494.5
186,896
211,512
EPS(INR)fullydiluted
52.7
52.4
63.9
81.8
Totalcurrentassets(excash) 490,603
CoreEPS
49.6
44.2
56.1
73.6
CEPS(INR)
61.6
63.6
75.7
94.6
Provisions
14.3
18.3
22.3
26.3
27.0
34.8
34.8
32.1
Dividendpershare
Dividendpayout(%)
28.8%
30.7%
30.5%
28.2%
AdjustedBVpershare(INR)
Commonsizemetricsas%ofnetrevenues
YeartoMarch
FY14
FY15E
FY16E
FY17E
Directcost
76.6
77.7
77.7
76.8
Freecashflow
Employeeexpenses
8.2
7.2
6.7
6.1
YeartoMarch
SG&Aexpenses
3.4
3.6
3.6
4.6
Netprofit
88.2
88.5
88.0
87.5
1.4
1.7
1.5
1.3
Others
(10,350)
(1,652)
Operatingexpenses
Depreciation&amortization
Interestexpenditure
EBITDAmargins
EBITmargins
Corenetprofitmargins
Depreciation
FY14
FY15E
FY16E
FY17E
54,931
48,960
59,685
76,444
7,924
10,171
10,723
(902)
11,523
15,456
1.9
2.4
2.1
1.7
Grosscashflow
52,505
57,480
69,508
11.8
11.5
12.0
12.5
Less:ChangesinWC
42,032
24,616
34,937
28,474
10.4
9.8
10.5
11.2
Operatingcashflow
10,473
32,863
34,571
74,952
8.7
8.0
8.2
8.6
9,620
8,595
10,100
10,100
853
24,269
24,471
64,852
Less:Capex
Freecashflow
103,425
Growthmetrics(%)
YeartoMarch
Revenues
Cashflowmetrices
FY14
FY15E
FY16E
FY17E
9.7
7.8
19.6
22.1
YeartoMarch
EBITDA
23.0
4.8
25.3
27.0
Operatingcashflow
PBT
17.6
0.4
24.5
28.1
Financingcashflow
Corenetprofit
18.6
(0.2)
21.9
28.1
Investingcashflow
FY14
FY15E
FY16E
FY17E
10,473
32,863
34,571
74,952
5,040
5,520
(23,917)
(33,861)
(12,142) (16,928) (17,467)
(25,100)
EPS
18.6
(0.7)
21.9
28.1
Netcashflow
3,371
21,455
CoreEPS
15.1
(10.8)
26.9
31.1
Capex
(9,620)
(8,595) (10,100)
(10,100)
(12,271) (16,965) (20,684)
(24,402)
Dividendspaid
(6,813)
15,991
Operatingratios
Profitability&liquidityratios
YeartoMarch
FY14
FY15E
FY16E
FY17E
ROAE(%)(onadjustedprofits) 15.6
13.9
15.4
17.6
20.9
23.9
28.0
ROACE(%)
Inventorydays
24.0
YeartoMarch
FY14
FY15E
FY16E
Totalassetturnover
1.3
1.3
1.3
1.5
Fixedassetturnover
6.6
7.5
9.1
11.2
Equityturnover
1.8
1.7
1.9
2.1
FY14
FY15E
FY16E
FY17E
17
16
16
16
Debtorsdays
142
143
144
139
Payabledays
259
255
248
237
Valuationparameters
Cashconversioncycle
(99)
(96)
(89)
(82)
YeartoMarch
FY17E
Currentratio
1.5
1.5
1.5
1.5
DilutedEPS(INR)
52.7
52.4
63.9
81.8
Debt/EBITDA
1.7
2.1
1.7
1.4
YoYgrowth(%)
18.6
(0.7)
21.9
28.1
Interestcoverage
5.5
4.0
4.9
6.5
CEPS
61.6
63.6
75.7
94.6
DilutedP/E(x)
29.8
30.0
24.6
19.2
4.3
4.0
3.6
3.2
Fixedassetst/o(x)
6.6
7.5
9.1
11.2
Debt/equity
0.3
0.4
0.4
0.3
Price/BV(x)
Adjusteddebt/Equity
0.3
0.4
0.4
0.3
EV/Sales(x)
EV/EBITDA(X)
Dividendyield(%)
10
2.7
2.5
2.1
1.7
22.6
21.8
17.6
13.7
0.9
1.2
1.4
1.7
Larsen&Toubro
KeyAssumptions
YeartoMarch
FY14
FY15E
GDP(YoY%)
Inflation(Avg)
4.7
9.5
5.4
6.8
6.3
5.5
7.3
5.5
Reporate(exitrate)
8.0
7.8
6.8
6.3
60.5
61.0
62.0
62.0
Macro
USD/INR(Avg)
Company
Process
Oil&Gas
Power
FY16E
FY17E
Incomestatement
YeartoMarch
FY14
Directcosts
(INRmn)
FY15E
FY16E
FY17E
851,284 945,309 1,140,408 1,372,188

616,948 693,101 834,632 1,026,382
Employeecosts
80,276
89,890
108,542
110,068
OtherExpenses
46,517
48,055
55,700
58,674
743,741 831,047
998,875 1,195,123
EBITDA
107,543 114,262
141,533
(45.0)
40.0
60.0
20.0
14,458
26,170
27,495
177,065
29,904
36.0
65.0
15.0
15.0
EBIT
93,085
88,092
114,038
147,161
10,081
(80.0)
300.0
20.0
25.0
Otherincome
9,819
9,171
9,924
Infra
46.0
5.0
12.0
13.0
Interestexpenses
31,414
32,794
37,419
42,231
Others
55.0
1.0
10.0
10.0
Profitbeforetax
71,490
64,469
86,543
115,011
Taxrate(%)
28.5
27.0
28.5
28.5
Provisionfortax
26,284
20,952
28,559
37,954
1.0
1.0
1.0
1.3
Netprofit
45,206
43,516
57,984
77,058
54,579 50,758 52,281
55,941
3,340
48,546
43,516
57,984
77,058
771
Excisedutyasa%ofsales
Totalno.ofemployees
Employeecostperhead(INRmn)
Netborrowings(INRmn)
Customeradvancesaa%ofOI
Capex(INRmn)
Depreciationas%ofgrossblock
21,227 30,500
6,500
6,000
(381)
435
580
13.0
13.0
Shareinprofitofassociates
93
426
593
638
8,595 10,100
10,100
49,020
43,507
57,998
76,925
13.7
9,620
2.4
13.0
8.2
8.0
8.0
ProfitAfterTax
Minorityinterest
930
935
935
935
DilutedEPS(INR)
49.1
46.6
62.1
82.3
12.2
12.8
13.4
14.1
Dividendpayout(%)
24.6
27.3
21.5
17.1
Commonsizemetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
Operatingexpenses
EBITDAmargins
87.4
12.6
87.9
12.1
87.6
12.4
87.1
12.9
5.3
4.6
5.1
5.6
Netprofitmargins
Growthratios(%)
YeartoMarch
FY14
FY15E
FY16E
FY17E
Revenues
EBITDA
14.3
9.1
11.0
6.2
20.6
23.9
20.3
25.1
PBT
(4.8)
(4.8)
33.3
32.6
Netprofit
(4.8)
(5.2)
33.3
32.6
11
Balancesheet
Ason31stMarch
FY14
(INRmn)
FY16E
FY17E
Equitycapital
Reserves&surplus
1,854
1,854
1,854
375,262 406,807 452,245
1,854
515,982
Shareholdersfunds
377,116 408,661 454,099
517,835
31,792
FY15E
32,807
33,577
Shorttermdebt
136,787 136,787 136,787
136,787
Longtermdebt
674,542 824,542 924,542 1,024,543
TotalBorrowings
811,329 961,329 1,061,329 1,161,330
Deferredtaxliability(net)
Sourcesoffunds
34,819
32,227
34,819
34,819
34,819
1,258,430 1,440,410 1,586,428 1,750,936
Cashflowmetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
Operatingcashflow
Investingcashflow
(69,633) (74,576)
(55,118) (36,500)
(20,144)
(21,501)
(14,751)
(21,503)
Financingcashflow
129,582 105,244
50,021
44,583
Netcashflow
4,830
(5,832)
8,376
8,328
Capex
(66,787) (36,500)
(21,501)
(21,503)
Dividendspaid
(11,326) (11,962)
(12,560)
(13,188)
YeartoMarch
FY14
FY15E
FY16E
FY17E
Tangibleassets
Intangibleassets
209,771 223,971 221,871

93,914 89,044 84,150
218,471
78,149
ROAE(%)
ROACE(%)
12.8
8.8
11.1
6.9
13.4
8.0
15.8
9.3
140,416 141,416 142,416
143,416
Inventoryday
32
32
32
32
Totalnetfixedassets
444,101 454,431 448,437
440,036
Debtorsdays
106
109
106
106
112
Goodwillonconsolidation
21,362
21,362
21,362
21,362
Payabledays
117
116
113
14,328
14,328
14,328
14,328
20
25
26
27
CurrentInvestments
66,762
66,762
66,762
66,762
Currentratio(x)
2.8
3.0
3.0
2.9
Cashandequivalents
40,966
35,133
43,509
51,837
Interestcoverage(x)
3.0
2.7
3.0
3.5
Inventories
55,275
66,462
80,033
98,420
Sundrydebtors
263,846 300,714 363,112
437,255
Operatingratios
Loansandadvances
535,555 654,262 773,981
961,353
YeartoMarch
FY14
FY15E
FY16E
FY17E
Otherassets
254,547 292,729 330,783
347,323
Totalassetturnover
Fixedassetturnover
0.7
2.9
0.7
3.1
0.8
3.7
0.8
3.1
Equityturnover
2.4
2.4
2.6
2.8
Provisions
1,109,221 1,314,167 1,547,909 1,844,351

405,340 453,810 543,319
32,969
12,560
13,188
438,309 465,772 555,879
687,740
670,912 848,395 992,031 1,156,612
NetDeferredtax
3,375
Usesoffunds
11,962
674,552
3,375
3,375
3,375
1,258,430 1,440,410 1,586,428 1,750,936
Freecashflow
408.0
439.6
488.5
YeartoMarch
FY14
FY15E
49,020
14,458
43,507
26,170
Netprofit
Depreciation
Others
557.1
Valuationparameters
YeartoMarch
FY14
FY15E
FY16E
FY17E
DilutedEPS(INR)
YoYgrowth(%)
49.1
(4.8)
46.6
(5.2)
62.1
33.3
82.3
32.6
CEPS(INR)
65.3
75.0
92.0
114.9
DilutedPE(x)
32.0
33.8
25.3
19.1
(INRmn)
Price/BV(x)
3.9
3.6
3.2
2.8
FY16E
FY17E
EV/Sales(x)
2.6
2.5
2.2
1.9
57,998
27,495
76,925
29,904
EV/EBITDA(x)
Dividendyield(%)
6.8
0.8
7.8
0.8
7.0
0.9
6.1
0.9
(45,610) (75,357) (70,587) (119,878)
Grosscashflow
17,869
(5,680)
14,905
Less:ChangesinWC
87,502
68,897
35,049
1,702
(69,633) (74,576) (20,144)
(14,751)
Operatingcashflow
Less:Capex
66,787
Freecashflow
36,500
(13,049)
21,501
21,503
(136,420) (111,076) (41,645)
(36,254)
Marketcap
Name
DilutedPE(X)
Price/BV(X)
ROAE(%)
(USDmn)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
Larsen&Toubro
23,496
33.8
25.3
3.6
3.2
11.1
13.4
BharatHeavyElectricals
10,180
25.9
21.9
1.8
1.7
7.2
8.2
2,111
55.7
32.5
6.0
5.3
10.6
16.6
Median
33.8
25.3
3.6
3.2
10.6
13.4
AVERAGE
38.5
26.6
3.8
3.4
9.6
12.7
Thermax
12
Larsen&Toubro
AdditionalData
DirectorsData
AMNaik
SNSubrahmanyan
NMohanRaj
MVKotwal
VKMagapu
MMChitale
SRajgopal
Chairman
WholeTimeDirector&SeniorExecutiveVicePresident
NomineeDirector LIC
WholeTimeDirector
WholeTimeDirector
KVenkataramanan
ShailendraRoy
ThomasMathewT
RShankarRaman
AKJain
SNTalwar
SubodhBhargava
ManagingDirector
WholeTimeDirector&SeniorExecutiveVicePresident
NomineeDirectorLIC
WholeTimeDirector
NomineeDirector
AuditorsSharpTannan&Co.
HoldingTop10
Perc.Holding
16.96
8.17
1.82
1.34
1.16
Lifeinsurancecorp
Unittrustofindia
Hdfcassetmanagemen
Gicprivatelimited
Abudhabiinvestment
L&temploywelfaref
Generalinsuranceco
Carmignacgestion
Prudentialplc
Blackrock
Perc.Holding
12.02
1.94
1.35
1.31
1.01
*inlastoneyear
BulkDeals
Data
NoDataAvailable
Acquired/Seller
B/S
QtyTraded
Price
*inlastoneyear
InsiderTrades
ReportingData
04Apr2014
04Apr2014
02Apr2014
28Mar2014
Acquired/Seller
MrAMNaik
MrAMNaik
Mr.A.M.Naik
Mr.A.M.Naik
B/S
Sell
Sell
Sell
Sell
QtyTraded
55000.00
55000.00
117500.00
225000.00
*inlastoneyear
13
RESULTUPDATE
TATASTEEL
Sectorpangs
IndiaEquityResearch|MetalsandMining
TataSteels(Tata)Q3FY15consolidatedEBITDAofINR30.8bn(down23%
YoY) was in line with our estimate, but standalone EBITDA (down 33%
YoY) stood 18% below estimate (led by 9% QoQ realisation drop and
impactofironoreimports).DismalperformanceinIndiawasmadegood
by international operations with EBITDA of INR11bn (up 3% YoY) being
higher than our INR6.2bn estimate (led largely by low employee cost in
Europe operations TSE). With Tata restarting majority of its domestic
ironoremines,theimpactofhighrawmaterialcostisexpectedtoease
graduallyincomingquarters,thoughpartiallyoffsetbyweaksteelprices
(down4%sofarinQ4FY15versusQ3FY15).Factoringweaksteelprices,
we revise down our FY16 EBITDA estimate ~10% while keeping FY15
EBITDA broadly unchanged. We also introduce FY17 EBITDA estimate
with~18%growthYoY.Withweaksteelsectorfundamentals(slowdown
inChina,risingsteelimportsinIndia/Europeandglobalironoreglut),we
downgradeTatatoHOLDwithaTPofINR376.
EDELWEISS4DRATINGS
AbsoluteRating
HOLD
Performer
Medium
Underweight
MARKETDATA(R:TISC.BO,B:TATAIN)
CMP
:INR347
TargetPrice
:INR376
52weekrange(INR)
:580/332
Shareinissue(mn)
:971.2
Mcap(INRbn/USDmn)
:337/5,428
Avg.DailyVol.BSE/NSE(000) :6,035.0
Current
Q2FY15 Q1FY15
Indiaoperationsdisappoint;TSEshinesonlowemployeecost
Promoters*
31.4
31.4
31.4
India operations: Sales volume of 2.1mt (up 4% YoY) was in line; however, blended
realisationdisappointedbyslipping~9%QoQtrackingweaksteelprices.Withimpact
of imported iron ore escalating cost, blended EBITDA/t of INR9,300 dipped 35% YoY
and37%QoQ.Benefitsfromrestartofironoremineswilllowerrawmaterialcostin
coming quarters, though will be partially offset by weak steel prices. International
operations: On a low base, TSEs EBITDA/t of USD64 stood higher than USD46 in
Q2FY15duetolowemployeecost.However,theoutlookremainssubduedgivenrising
imports from China and Russia. SouthEast Asia operations remained muted with
EBITDAlossofINR180mnandarecoveryisunlikelygivenChinaslowdownconcerns.
MF's,FI's&BKs
24.6
24.6
24.7
FII's
18.8
18.8
18.2
Others
25.3
25.3
25.7
(%ofshareinissue)
NIL
PRICEPERFORMANCE(%)
Stock
Nifty
EWMetals
andMining
Index
1month
(5.1)
4.0
(4.8)
Outlookandvaluations:Weakfundamentals;downgradetoHOLD
3months
(14.0)
9.9
(6.9)
Global fundamentals of the steel sector remain weak factoring: (1) China slowdown
leadingtoriseinexportsanddownwardpressureonsteelprices;(2)lowcostofiron
ore due to supply glut; and (3) rising exports from CIS countries due to currency
depreciation.Ergo,wedowngradeTatatoHOLD/SPfromBUY/SOwithatargetprice
of INR376 (based on FY17E EV/EBITDA of 6.5x for Indian operations and 5x for
internationaloperations).AtCMP,thestocktradesat7.1xFY16EEV/EBITDA.
12months
1.9
36.6
4.9
Financials(Consolidated)
YeartoMarch
Q3FY15
Netrevenue
336
Q3FY14
%change
Q2FY15
%change
FY14
FY15E
FY16E
367
(8.4)
358
(6.0)
1,481
1,476
31
40
(23.2)
36
(15.5)
1,486
164
145
170
(68.8)
43.7
36
16
31
1.6
5.2
(68.8)
1.1
43.7
37.2
16.5
32.3
SalvinShah
P/E(x)
9.3
21.0
10.8
EV/EBITDA(x)
6.6
7.9
7.1
+912266233392
salvin.shah@edelweissfin.com
ROE(%)
9.7
3.9
7.3
EBITDA
Adj.netprofit
EPS(INR/share)
(INRbn)
NavinSahadeo
+912266233473
navin.sahadeo@edelweissfin.com
February9,2015
MetalsandMining
Conferencecall:Keyhighlights
Indiabusiness:Neartermconcerns
Steel demand remained flat in India due to lower government spending, liquidity
crunchandlowerruralconsumption.
Steel demand is expected to be subdued in the traditionally strong Q4, amidst rising
liquidityconcerns.
Softening of global commodity prices and surge in exports from China and Russia to
intensifypressureondomesticsteelprices.
Ongoing reforms by the government and reversal in interest rate cycle should spur
growthgoingahead.
Steelrealisationsdroppedby~INR4.6k/tQoQdueto:(i)increasedexportsfromChina
(almostattherateof100mtpa)impactingglobalsteelprices;(ii)sharpdepreciationin
Russianroubleleadingtoriseinexports;and(iii)softsteeldemandinIndia.Spotsteel
pricesinIndiahavefallenfurtherby~INR2k/tinQ4FY15versusQ3FY15.
Raw material cost rose ~26% QoQ owing to external purchase of iron ore. Tata
imported ~5mt iron ore (so far in FY15), of which ~2.5mt was consumed in Q3FY15.
With resumption of mining operations, Tata is expected to use only ~1mt in Q4FY15
andbalance~1.5mtisexpectedtobeconsumedovernextfewquarters.
Freight cost increased ~5% QoQ due to rise in freight rates and impact of change in
destinationmix.
FAMDsegmentoperationswereadverselyimpactedduetotheminingshutdown,now
resumed.
Mining update: Mining operations in Joda East, Katamati, Bamebari and Joda West
mines were suspended since November 15, 2014, due to the mining stoppage order
issued by Government of Odisha, and restarted with effect from December 16, 2014,
onthebasisofthedirectionissuedbyHonourableOdishaHighCourtinthisregard.The
expressorderswereissuedbyGovernmentofOdishaonDecember1,2014,infavour
of the Sukinda Chromite mine. Based on the order of the Honourable High Court of
Odisha,theGovernmentofOdishahaspermittedtherestartoftheminingoperations
at Sukinda on January 31, 2015. The company based on the above permission has
commencedminingofChromeOreandproductionofFerroAlloys.Miningoperations
and the expansion of mining capacity in Khondbond and mining operations in
Tiringpahar,Manmora,MaldaandGomardihMinesremainsuspendedsinceMay2014.
In Jharkhand, mining operations in Noamundi iron mines which was suspended since
September4,2014,wereresumedwitheffectfromJanuary1,2015,inNoamundiMine
basedontheExpressOrderissuedbyGovernmentofJharkhandpursuanttotheorders
passedbytheHighcourtofJharkhand.
TheMinesandMineralsDevelopmentandRegulation(MMDR)AmendmentOrdinance
2015promulgatedonJanuary12,2015,providesforextensionoftheaboveminestill
March31,2030,incaseofcaptiveconsumption.
The company continues to engage with the Government of India and the respective
State Governments on matters relating to the operational issues of the above
ordinance.
TataSteel
Europeanbusiness:Focusoncostsavingsandcustomerneeds
Steel demand in Europe is expected to have grown by 2.6% in 2014 according to

Eurofer.
Modest EU demand growth expected in 2015 to continue in line with a mild rise in
activityofthesteelusingsectorsintheEU.
Imports are expected to remain on a high level, including from China and Russia,
maintainingmarginpressureonEUsteelmills.
SouthEastAsia:FacingpressurefromChineseimports
Regional markets experiencing some slowdown though the construction activity

remains steady. Contraction in new project pipeline, lower demand outlook in some
regionsandhigherimportstokeepthepricesunderpressure.
Thailandsteelindustryisawaitingthekickstartofgovernmentinfrastructureprojects.
At NatSteel, deliveries moderated due to China slowdown. Strategy is to focus on

exportmarkets,valueaddedproductsandcostreductioninitiatives.
AtThailand,Deliveriesdeclinedduetolowerwirerodssaleswhilethedomesticrebar
salesincreasedmarginallyoverthelastquarter.Wirerodsimportssurgedintheregion.
Capexupdate:Orissaexpansiontocommenceoperationsbymid2015
Kalinganagar steel plants (3mtpa) progress is satisfactory and is likely to commence

operationsbymid2015.Tatahasalreadyspent~INR198bnsofaronthisprojectwith
INR9bnspentinQ3FY15.
Net debt rose by ~INR51.7bn sequentially to INR735bn due to capex and higher
workingcapitalrequirement.
MetalsandMining
Table1:Operationalperformancesummary
TataSteelIndia
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)
Q3FY14
2.1
1,636
790
505
244
Q4FY14
2.4
1,973
819
656
272
Q1FY15
2.1
1,751
834
546
260
Q2FY15
2.1
1,780
844
528
250
Q3FY15
2.1
1,596
749
319
150
TataSteelEurope
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)
Q3FY14
3.2
3,341
1,047
139
43
Q4FY14
4.1
3,945
969
132
32
Q1FY15
3.2
3,470
1,084
166
52
Q2FY15
3.4
3,335
992
153
46
Q3FY15
3.3
3,128
945
211
64
SouthEastAsia
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)
Q3FY14
1.1
732
671
22
20
Q4FY14
1.1
706
660
13
12
Q1FY15
1.1
677
627
5
5
Q2FY15
1.0
612
645
(46)
(49)
Q3FY15
0.8
457
571
(3)
(4)
Others
Volume(mt)
Revenue(USDmn)*
EBITDA(USDmn)*
Q3FY14
0.0
217
(33)
Q4FY14
0.1
242
(5)
Q1FY15
0.1
20
1
Q2FY15
0.1
178
(16)
Q3FY15
0.1
243
(29)
Overall
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)
Q3FY14
6.4
5,926
930
633
99
Q4FY14
7.6
6,867
900
796
104
Q1FY15
6.5
5,917
916
718
111
Q2FY15
Q3FY15
6.5
6.3
5,905
5,424
909
860
619
498
95
79
*includesotherincome
Changeinestimates
YoY
Revenue
EBITDA
EBITDAmargins(%)
AdjustedPAT
AdjustedPATmargins(%)
FY15E
FY16E
New
Old %change
New
Old %change
1,481,179 1,473,068
0.6 1,475,894 1,468,812
0.5
145,132
143,616
1.1
170,122
188,469
(9.7)
9.8
9.7
11.5
12.8
16,021
15,086
6.2
31,351
43,563
(28.0)
1.1
1.0
2.1
3.0
Comments
RevisioninEBITDA
factoringinweaksector
fundamentals
TataSteel
Table2:TargetpricerevisedtoINR376(INR607earlier)
TataSteelEurope(TSE)EBITDA(INRmn)
Less:cashpensionpaymentnotinP&L(INRmn)
EffectiveTSEEBITDA(INRmn)
EV/EBITDAmultiple(x)
TSEEV
SEA/othersEBITDA(INRmn)
SEAEV(INRmn)
TotalEVofinternationaloperations(INRmn)
Less:netdebtofinternationalbusiness(TSE)
Less:pensiondeficit(INRmn)
Equityvaluationofinternationalbusiness(INRmn)
Equityvaluationofinternationalbusinesspershare(INR)
TataSteelIndiaEBITDA(INRmn)
TataSteelIndiaEV(INRmn)
Less:penalty/leviesforallegedillegalmining
Less:NetdebtpreviousFY(INRmn)
CWIP(INRmn)
Discount(%)
Add:AdjustedCWIP(INRmn)
EquityvaluationofIndiabusiness(INRmn)
EquityvaluationofIndiabusinesspershare(INR)
Add:valueofDhamraPortpershare(INR)
FY17E
34,887
9,558
25,329
5.0
126,646
1,951
5.0
9,757
136,403
304,553
56,572
(224,722)
(231)
163,771
6.5
1,064,512
15,000
542,018
12,885
38
8,019
515,513
531
77
971
376
347
8
Add:Valueofsubsidiaryinvestments(discounted)(INR)
Noofshares(x)
Targetprice(INR)
Currentmarketprice(INR)
Upside(%)
MetalsandMining
Financialssnapshot(standalone)
YeartoMarch
Totalnetrevenues
Dec/(inc)instock
Purchaseofsemis
Rawmaterial
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
Totalexpenditure
EBITDA
Interest
Depreciation
Otherincome
PBT
Tax
Adjustednetprofit
Extraordinaryitems
Reportednetprofit
Outstandingshares(mn)
BasicEPS(INR)
Q315
98,968
(6,620)
2,317
37,091
11,674
5,366
7,272
22,069
79,169
19,799
4,624
4,573
1,083
11,685
8,806
2,878
0
2,878
9,714
971
3.0
Q314 %change
Q215 %change
101,434
(2.4) 107,851
(8.2)
365
NA
(3,042)
NA
648 NA
1,763
31.5
22,151
67.4
27,217
36.3
9,040
29.1
11,433
2.1
6,375
(15.8)
6,775
(20.8)
7,166
1.5
6,940
4.8
26,330
(16.2) 25,824
(14.5)
72,075
9.8
76,909
2.9
29,359
(32.6) 30,941
(36.0)
4,888
(5.4)
4,529
2.1
4,565
0.2
4,746
(3.6)
2,648
(59.1)
2,624
(58.7)
22,913
(49.0) 23,932
(51.2)
7,726
14.0
10,636
(17.2)
15,188
(81.0) 13,296
(78.4)
0
NA 11,469
NA
15,188
(81.0) 24,764
(88.4)
9,714
9,714
971
971
15.6
(81.0)
25.5
(88.4)
YTD15
311,501
(13,096)
4,759
89,948
34,410
19,353
21,121
71,708
228,202
83,299
14,436
14,251
5,142
59,754
28,780
30,974
19,348
50,322
9,714
971
51.8
FY15E
432,267
0
3,485
118,093
38,567
25,871
27,209
107,282
320,508
111,758
20,026
20,251
6,283
77,763
25,662
52,102
0
52,102
9,714
971
53.6
(INRmn)
FY16E
458,193
0
3,994
105,567
41,460
27,479
30,345
113,851
322,697
135,496
20,627
20,859
6,313
100,323
33,107
67,216
0
67,216
9,714
971
69.2
as%ofnetrevenues
Rawmaterial
Purchaseofgoods
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
EBITDA
Adjustednetprofit
Reportednetprofit
Taxrate
Pertonneperformance
Volume(mt)
Blendedrealisation
Dec/(inc)instock
Purchaseofsemis
Rawmaterial
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
Cost
EBITDA
30.8
2.3
11.8
5.4
7.3
22.3
20.0
2.9
2.9
75.4
22.2
0.6
8.9
6.3
7.1
26.0
28.9
15.0
15.0
33.7
Q315
2.1
46,486
(3,109)
1,088
17,422
5,483
2,520
3,416
10,366
37,186
9,300
22.4
1.6
10.6
6.3
6.4
23.9
28.7
12.3
23.0
44.4
Q314
2.1
49,097
177
314
10,721
4,375
3,086
3,469
12,745
34,886
14,210
%change
3.0
(5.3)
NA
NA
62.5
25.3
(18.3)
(1.5)
(18.7)
6.6
(34.6)
24.7
1.5
11.0
6.2
6.8
23.0
26.7
9.9
16.2
48.2
27.3
0.8
8.9
6.0
6.3
24.8
25.9
12.1
12.1
33.0
23.0
0.9
9.0
6.0
6.6
24.8
29.6
14.7
14.7
33.0
(INR/t)
Q215
%change
2.1 0.9
51,114
(9.1)
(1,442)
NA
835
30.3
12,899
35.1
5,419
1.2
3,211
(21.5)
3,289
3.8
12,239
(15.3)
36,450
2.0
14,664
(36.6)
TataSteel
Financialsnapshot(Consolidated)
YeartoMarch
Netrevenues
Dec/(inc)instock
Rawmaterial
Freightandhandling
Staffcosts
Purchaseofgoods
Powerpurchase
Otherexpenses
Totalexpenditure
EBITDA
Depreciation
Otherincome
Interest
Profitbeforetax
Tax
Coreprofit
Extraordinaryitems
PAT
Minorityinterest
Shareinprofitfromassociates
Profitaftertaxandmin.int.
No.ofshares(mn)
DilutedEPS(INR)
As%ofnetrevenues
Rawmaterial
Employeecost
Purchaseofpower
Freight&handling
Otherexpenses
EBITDA
Reportednetprofit
Taxrate
Q3FY15
336,332
(5,119)
105,534
21,298
49,527
35,488
13,435
85,394
305,558
30,774
14,511
1,191
11,674
5,780
4,467
1,313
1,313
156
102
1,571
9,714
971
1.6
31.4
14.7
4.0
6.3
25.4
9.1
0.4
77.3
Pertonneperformance
Volume(mt)
Blendedrealisation(INR/t)
Cost(INR/t)
EBITDA(INR/t)
Q3FY14 %change
367,358
(8.4)
(15,084)
NA
116,327
(9.3)
22,330
(4.6)
49,860
(0.7)
47,902
(25.9)
14,053
(4.4)
91,906
(7.1)
327,293
(6.6)
40,065
(23.2)
15,221
(4.7)
181
557.3
11,084
5.3
13,942
(58.5)
8,951
(50.1)
4,991
(73.7)
4
(100.0)
4,995
(73.7)
27
470.4
10
916.0
5,032
(68.8)
9,714
971
5.2
(68.8)
31.7
13.6
3.8
6.1
25.0
10.9
1.4
64.2
(INRmn)
Q2FY15 %change
YTD15
FY15E
FY16E
357,771
(6.0) 1,058,376 1,481,179 1,475,894
334
NA
(10,712)
103,957
1.5
319,593
438,188
363,102
21,905
(2.8)
65,106
156,700
164,958
54,017
(8.3)
159,887
221,841
244,317
36,673
(3.2)
113,449
167,918
170,622
15,279
(12.1)
44,781
89,178
(4.2)
256,344
351,399
362,773
321,343
(4.9)
948,448 1,336,047 1,305,771
36,428
(15.5)
109,928
145,132
170,122
14,295
1.5
44,309
62,483
63,247
3,215
(63.0)
6,568
6,820
4,050
12,328
(5.3)
36,526
48,222
52,667
13,021
(55.6)
35,661
41,247
58,258
11,748
(62.0)
27,019
24,536
26,216
1,273
3.2
8,643
16,712
32,042
11,450
(100.0)
8,825
8,825
12,723
(89.7)
17,468
25,537
32,042
(33)
(568.0)
(21)
(699)
(699)
(146)
(169.5)
41
8
8
12,543
(87.5)
17,488
16,021
31,351
9,714
9,714
9,714
9,714
971
971
971
971
1.1
43.7
8.9
16.5
32.3
29.1
29.6
24.6
15.1
15.0
16.6
4.3
6.1
10.6
11.2
24.9
23.7
24.6
10.2
9.8
11.5
3.6
1.7
2.2
90.2
59.5
45.0
Q3FY15
Q3FY14
%change
Q2FY15
6.3
6.4
(1.3)
6.5
53,386 57,580
(7.3) 55,042
48,501 51,300
(5.5) 49,437
4,885 6,280 (22.2) 5,604
(INR/t)
%change
(3.1)
(3.0)
(1.9)
(12.8)
MetalsandMining
Financialssnapshot(International)
YeartoMarch
Totalnetrevenues
Dec/(inc)instock
Purchaseofsemis
Rawmaterial
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
Totalexpenditure
EBITDA
Interest
Depreciation
Otherincome
PBT
Tax
Adjustednetprofit
Extraordinaryitems
Reportednetprofit
Outstandingshares(mn)
BasicEPS(INR)
as%ofnetrevenues
Rawmaterial
Purchaseofgoods
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
EBITDA
Adjustednetprofit
Reportednetprofit
Taxrate
Pertonneperformance
Volume(mt)
Blendedrealisation(INR/t)
Cost(INR/t)
EBITDA(INR/t)
Q3FY15
237,365
1,501
33,171
68,444
37,853
8,069
14,027
63,326
226,390
10,975
7,050
9,938
108
(5,905)
(4,340)
(1,565)
0
(1,565)
9,714
971
(1.6)
Q3FY14
265,924
(15,448)
47,253
94,177
40,821
7,677
15,163
65,575
255,218
10,707
6,555
10,656
(2,467)
(8,972)
1,225
(10,197)
4
(10,193)
9,714
971
(10.5)
29.5
14.0
15.9
3.4
5.9
26.7
4.6
(0.7)
(0.7)
73.5
29.6
17.8
15.4
2.9
5.7
24.7
4.0
(3.8)
(3.8)
(13.7)
%change
(10.7)
NA
(29.8)
(27.3)
(7.3)
5.1
(7.5)
(3.4)
(11.3)
2.5
7.5
(6.7)
NA
NA
NA
NA
NA
NA
NA
Q3FY15
Q3FY14
%change
4.1
4.3
(4.0)
57,753 62,132 (7.0)
55,083 59,630 (7.6)
2,670 2,502 6.7
Q2FY15
249,920
3,376
34,911
76,740
42,584
8,505
14,965
63,354
244,434
5,487
7,440
9,549
591
(10,911)
1,112
(12,023)
(19)
(12,041)
9,714
971
(12.4)
(INRmn)
%change
(5.0)
(55.5)
(5.0)
(10.8)
(11.1)
(5.1)
(6.3)
(0.0)
(7.4)
100.0
(5.2)
4.1
(81.7)
NA
NA
NA
NA
NA
NA
32.1
14.0
17.0
3.4
6.0
25.3
2.2
(4.8)
(4.8)
(10.2)
(INR/t)
Q2FY15
%change
4.3
(4.6)
57,986 (0.4)
56,713 (2.9)
1,273 110
TataSteel
CompanyDescription
Established100yearsagoin1907,TataSteelisAsiasfirstandIndiassecondlargestprivate
sector steel company. With the take over of Corus Steel (Europes second largest steel
producer),TataSteelisnowthesixthlargeststeelcompanyintheworldwithover30mtpa
of steel capacity. Tata Steels Indian operations are amongst the lowest cost producers of
steelintheworldcomprising9.7mtpasteelmakingfacilityatJamshedpurinJharkhand.
InvestmentTheme
The outlook for the global steel industry is challenging given 1) expectation of muted
recovery in global steel demand, 2) expected downward pressure on steel prices due to
slowdown in China, 3) rising exports from China and CIS countries, and 4) iron ore supply
glut.Giventheweakfundamentals,thesteelpremiumsinIndiaareatadownwardrisk.High
debtandlowearningsgrowthwillkeepROEsdepressed.
KeyRisks
Sharprecoveryinglobalsteel/ironoreprices.
Sharpcostreduction.
MetalsandMining
FinancialStatements
KeyAssumptions
YeartoMarch
FY14
FY15E
GDP(YoY%)
Inflation(Avg)
4.7
9.5
5.4
6.8
6.3
5.5
7.3
5.5
Reporate(exitrate)
8.0
7.8
6.8
6.3
60.4
61.0
62.0
62.0
594
540
480
500
37
37
37
37
Hardcokingcoalprice(FOB,USD/t)
140
121
125
125
EBITDA
Softcokingcoalprice(FOB,USD/t)
128
102
106
106
28
30
Macro
USD/INR(Avg)
Sector
HRCpriceEurope(exworks,USD/t)
HRCpriceIndia(net,INR'000/t)
Indiasteeldemandgrowth(%)
Company
Shipments(mntonnes)
India
Europe
SEA
BlendedRealisation(INR/t)
Incomestatement
26
27
FY16E
FY17E
YeartoMarch
Netrevenue
Materialscosts
Accretiontostock
FY14
(INRmn)
FY15E
FY16E
FY17E
1,486,140 1,481,179 1,475,894 1,576,307

462,427 438,188 363,102 393,471
Purchaseof goods
170,076 167,918
170,622
171,560
Employeecosts
203,121 221,841
244,317
256,701
TotalSG&Aexpenses
341,182 351,399
362,773
378,021
PowerandFreight
150,437 156,700
164,958
175,944
EBIT
Otherincome
(5,147)
1,322,096 1,336,047 1,305,771 1,375,697

164,044 145,132
170,122
200,610
58,412
62,483
63,247
73,491
105,632
82,649
106,875
127,119
5,168
6,820
4,050
5,122
Interestexpenses
43,368
48,222
52,667
63,917
8.5
8.8
9.4
10.9
Profitbeforetax
67,432
41,247
58,258
68,324
13.9
14.2
14.6
14.6
Provisionfortax
30,582
24,536
26,216
30,746
4.0
4.0
4.0
4.0
Netprofit
36,850
16,712
32,042
37,578
8,825
36,850
25,537
32,042
37,578
(699)
(699)
(699)
(699)
India
48,997 48,844 48,744
49,410
ProfitAfterTax
Europe
60,911 58,011 54,207
55,571
Minorityinterest
SEA
42,683 43,684 43,966
43,997
Shareinprofitofassociates
36,159
16,021
31,351
36,887
BasicEPS(INR)
37.2
16.5
32.3
38.0
971
971
971
971
DilutedEPS(INR)
37.2
16.5
32.3
38.0
Keycosts(cost/tofsteel)
IndiaKeycosts(cost/tofsteel)
Ironore(cost/t)
Cokingcoal(cost/t)
1,988
4,979
2,012
2,012
11,917 11,371 11,921
12,265
Power(cost/t)
2,923
2,923
Europe(USD)
Ironore(cost/t)
198
135
104
112
Cokingcoal(cost/t)
118
100
103
103
StaffCost(GBPmn)
2,473
2,720
2,992
3,141
6.3
6.8
7.1
8.4
AverageDepreciationrate(%)
10.6
11.4
11.7
Taxrate(%)
45.4
59.5
Dividendpayoutratio(%)
24.8
43.2
AverageInterestrate(%)
EBITDA(USD/tonne)
India
Europe
SEA
258.0
207.0
2,923
2,923
Dividendpayout(%)
8.0
8.0
8.0
8.0
24.8
43.2
28.4
24.2
Commonsizemetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
9.8
Operatingexpenses
Depreciation
89.0
3.9
90.2
4.2
88.5
4.3
87.3
4.7
45.0
45.0
Interestexpenditure
28.4
24.2
EBITDAmargins
232.5
242.3
Netprofitmargins
2.9
3.3
3.6
4.1
11.0
9.8
11.5
12.7
2.5
1.1
2.2
2.4
36
35
36
39
Growthratios(%)
18.2
10.8
5.3
5.8
YeartoMarch
FY14
FY15E
FY16E
FY17E
Revenues
EBITDA
10.3
33.1
(0.3)
(11.5)
(0.4)
17.2
6.8
17.9
Netborrowings(INRmn)
724,876 797,966 846,571 818,363
Capex(INRmn)
164,201 122,000 105,400
Debtordays
62,000
37
40
41
42
PBT
106.9
(38.8)
41.2
17.3
Inventorydays
148
165
200
200
Netprofit
979.9
(55.7)
95.7
17.7
Payabledays
130
135
150
150
EPS
979.9
(55.7)
95.7
17.7
55
70
91
92
10
TataSteel
Balancesheet
Ason31stMarch
FY14
Cashflowmetrics
FY16E
FY17E
Equitycapital
Reserves&surplus
9,714
9,714
9,714
395,606 407,557 430,515
9,714
459,009
Operatingcashflow
Investingcashflow
Shareholdersfunds
405,320 417,271 440,229
468,723
Financingcashflow
FY15E
(INRmn)
YeartoMarch
FY14
17,377
16,678
15,979
15,280
200
200
200
200
Shorttermdebt
160,262 160,262 160,262
160,262
Dividendspaid
Longtermdebt
626,359 655,864 681,896
706,896
TotalBorrowings
786,620 816,126 842,158
867,158
Preferencecapital
Deferredtaxliability(net)
Sourcesoffunds
25,958
25,958
25,958
25,958
1,235,475 1,276,233 1,324,524 1,377,319
Goodwill
Tangibleassets
157,488 157,488 157,488

552,494 547,210 541,163
Intangibleassets
47,749
47,749
157,488
747,672
Netcashflow
Capex
FY16E
FY17E
131,459 104,604 115,203

(164,511) (115,879) (102,049)
FY15E
158,794
(57,577)
10,146 (27,808)
(35,728)
(22,907) (39,083)
(22,573)
(48,009)
53,208
(164,201) (122,000) (105,400)
(62,000)
(9,092)
(9,092)
(9,092)
(9,092)
YeartoMarch
FY14
FY15E
FY16E
FY17E
ROAE(%)
ROACE(%)
9.7
9.7
3.9
6.9
7.3
8.6
8.1
9.8
200
47,749
47,749
Inventoryday
148
165
200
259,564 324,364 372,564
154,564
Debtorsdays
37
40
41
42
Totalnetfixedassets
859,806 919,323 961,475
949,984
Payabledays
130
135
150
150
24,251
24,251
24,251
24,251
55
70
91
92
Othernoncurrentassets
95,006
95,014
95,022
95,030
Currentratio(x)
1.2
1.2
1.2
1.3
CurrentInvestments
26,684
26,684
26,684
26,684
Debt/EBITDA(x)
5.1
6.0
5.3
4.6
Cashandequivalents
86,045
42,461
19,888
73,095
Debt/Equity(x)
2.1
2.1
2.0
2.0
Inventories
268,800 279,186 305,717
313,495
Adjusteddebt/equity
1.9
2.0
1.9
1.9
Tradereceivables
160,058 164,584 166,986
195,780
Loansandadvances
Operatingratios
YeartoMarch
FY14
FY15E
FY16E
FY17E
244,955
Totalassetturnover
Fixedassetturnover
1.3
2.6
1.2
2.5
1.1
2.5
1.2
2.3
251,841
Equityturnover
4.0
3.6
3.4
3.5
31,930
31,930
31,930
31,930
6,378
6,378
6,378
6,378
493,849 508,762 537,695
574,266
Tradepayable
229,129 219,224 219,454
Othercurrentliabilitiesand
251,841 251,841 251,841
Otherassets
Usesoffunds
12,880
37,697
66,400
1,235,475 1,276,233 1,324,524 1,377,319

417.3
429.6
453.2
YeartoMarch
FY14
FY15E
FY16E
FY17E
Netprofit
Depreciation
67,221
58,412
50,073
62,483
58,258
63,247
68,324
73,491
Others
18,521
16,866
22,401
28,049
144,155 129,422 143,906
169,864
Grosscashflow
Less:ChangesinWC
12,696
24,818
482.5
(INRmn)
28,703
11,070
Operatingcashflow
131,459 104,604 115,203
158,794
Less:Capex
164,201 122,000 105,400
62,000
Freecashflow
(32,742) (17,396)
96,794
9,803
77,470
Freecashflow
Valuationparameters
YeartoMarch
FY14
FY15E
FY16E
FY17E
DilutedEPS(INR)
YoYgrowth(%)
37.2
979.9
16.5
(55.7)
32.3
95.7
38.0
17.7
98.8
82.3
98.8
115.1
DilutedPE(x)
9.3
21.1
10.8
9.1
Price/BV(x)
0.8
0.8
0.8
0.7
EV/Sales(x)
0.7
0.8
0.8
0.7
EV/EBITDA(x)
Dividendyield(%)
6.6
2.3
7.9
2.3
7.1
2.3
5.8
2.3
CEPS(INR)
Marketcap
Name
DilutedPE(X)
EV/EBITDA(X)
ROAE(%)
(USDmn)
FY15E
FY16E
FY15E
FY16E
FY15E
TataSteel
5,428
21.1
10.8
7.9
7.1
3.9
FY16E
7.3
CiaSiderurgicaNacionalSA
2,286
5.6
7.4
(3.1)
(6.4)
HyundaiSteelCo
6,911
9.9
8.0
7.7
7.0
5.6
6.5
JFEHoldingsInc
13,901
14.9
11.6
9.3
8.3
6.9
7.6
POSCO
20,720
15.5
10.5
7.6
7.1
3.3
4.9
ThyssenKruppAG
14,623
139.1
19.6
7.1
5.8
9.3
19.9
11
MetalsandMining
AdditionalData
DirectorsData
BMuthuraman
IshaatHussain
JacobusSchraven
KarlUlrichKoehler
MallikaSrinivasan
OPBhatt
T.V.Narendran
ViceChairman
Director
Director
Director
AdditionalDirector
AdditionalDirector
ManagingDirectorIndiaandSouthEastAsia
NusliNWadia
SubodhBhargava
AndrewRobb
Cyrus PMistry
KoushikChatterjee
D.K.Mehrotra
Director
Director
Director
Chairman
WholetimeDirector
Independent,NonExecutiveDirector
AuditorsDeloitteHaskins&Sells
HoldingTop10
Perc.Holding
LIFEINSURANCECORPOFINDIA
Perc.Holding
14.59
HDFCASSETMANAGEMENTCOLTD
1.53
DIMENSIONALFUNDADVISORSLP
1.17
RELIANCECAPITALTRUSTEECOLTD
1.07
1.06
NEWINDIAASSURANCECOLTD
1.06
NATIONALINSURANCECOLTD
VANGUARDGROUPINC
0.72
ROBECOASSETMANAGEMENT
0.65
ICICIPRUDENTIALLIFEINSURANCE
0.55
SBILIFEINSURANCECOLTD
0.52
BulkDeals
Data
NoDataAvailable
Acquired/Seller
B/S
QtyTraded
Price
*inlastoneyear
InsiderTrades
ReportingData
NoDataAvailable
Acquired/Seller
B/S
QtyTraded
*inlastoneyear
12
IndiaMidcaps
RESULTUPDATE
VATECHWABAG
Oneoffspinch,butgrowthdriversinplace
VATechWabags(VATW)5%revenuegrowthinQ3FY15missedoursand
Streets 20% estimate due to 8% adverse impact of EUR/INR exchange
rate and projectspecific delays. However, management remains
confident of 1820% revenue growth in FY15, implying a strong (more
than 25%) growth in Q4FY15. Margin dipped 70bps to 6.8% primarily
impacted by higher employee cost (up 19% YoY) due to the Istanbul
O&MprojectandINR100mnprovisiontowardsliquidateddamages(LD)
in the Oman desalination project. 9mFY15 order intake was subdued
(down 20% YoY) partly on account of higher base; management has
maintained its earlier FY15 guidance of 05% growth in order intake.
MaintainBUYwitharevisedtargetpriceofINR1,900(INR1,665earlier)
asweintroduceandrollforwardourvaluationsonFY17EEPS.
Revenuesubdued,butoutlookoptimistic
VATWs revenue grew 5%, way below the 20% estimate. While the standalone
businessrecordedflatrevenuegrowth,overseasbusinessjumped~10%.Management
remains confident of 1820% revenue growth in FY15, implying a robust (more than
25%)growthinQ4FY15.Aspartofitsconservativepolicy,VATWmadeLDprovisionof
INR100mn for Oman desalination project which is running 34 months behind
schedule.AdjustedPATplummeted30%toINR175mn.
EDELWEISSRATINGS
AbsoluteRating
BUY
InvestmentCharacteristics
None
MARKETDATA(R:VATE.BO,B:VATWIN)
CMP
: INR1,462
TargetPrice
: INR1,900
52weekrange(INR)
: 1,748/545
Shareinissue(mn)
: 27.1
Mcap(INRbn/USDmn)
: 40/637
Avg.DailyVol.BSE/NSE(000) : 65.6
Current Q2FY15
Promoters*
Q1FY15
MF's,FI's&BKs
29.4
21.4
29.4
21.4
30.2
22.0
FII's
28.5
28.5
26.0
Others
20.6
20.6
21.9
NIL
BSEMidcap
Stock
Index
Stockover
Index
(%ofshareinissue)
PRICEPERFORMANCE(%)
Robustorderbacklog;domesticorderingprospectsbright
In the domestic market, VATW expects strong ordering opportunity, both from
municipal (led by Namami Ganga, Swatch Bharat, Smart cities etc.) and industrial
business(ledbyfertiliser,Power,oil&gasetc).Orderintakeforthequarterstoodat
INR6.6bn(INR7.4bninQ3FY14).Thecompanyscurrentorderbookstandsat~INR70bn
againstINR60bninQ3FY14,providingstrongvisibility.
1month
6.8
1.8
(5.0)
3months
15.2
(0.8)
(16.0)
12months
64.7
196.2
131.6
Outlookandvaluations:Positive;maintainBUY
VATW remains upbeat on new opportunities in the water sector due to the central
governments thrust on water and infra sectors. Also, sustainable demand for clean
water, especially in emerging economies, will ensure higher market opportunity for
thecompany.WecutourEPS9%eachforFY15EandFY16Ebuildinginlowermargins
in international subsidiaries. We maintain BUY. The stock currently trades at P/E of
22xand16xFY16EandFY17EEPS,respectively.
Financials(Consolidated)
YeartoMarch
Netrevenues
Q3FY15 Q3FY14 %change

6,194
5,893
5.1
EBITDA
423
443
Adj.netprofit
175
254
DilutedEPS(INR)
6.6
9.6
(30.9)
Q2FY15 %change
FY14
FY15E
(INRmn)
FY16E
5,070
22.2
(4.6)
329
28.8
1,885
2,421
3,037
(30.9)
156
12.7
1,026
1,342
1,799
5.9
12.7
38.6
50.6
67.8
DilutedP/E(x)
34.5
29.0
21.6
ROAE(%)
14.5
15.0
17.6
22,386 26,493 31,736
AmitMahawar
+912240407451
SwarnimMaheshwari
+912240407418
February09,2015
Q3FY15conferencecall:Keytakeaways
Turnaround in Philippines and Turkey operations: VATWs Turkey and Philippines
operationspostedstrongorderintakegrowthduringthequarter.Withinashortspanof3
4 years, the company has become a market leader in Philippines. This validates
managements philosophy of entering high growth geographies, localising operations and
therebygainingmarketshare.
Update on Al Gubrah project: Management indicated that the mechanical part of the
projectiscompleteandthecompanyisnowworkingontheautomationside.Workonthe
seabedsitehasbeencompleted.ItshouldbeabletocompletetheprojectbyJune2015.
Though the customer has expressed satisfaction, VATW by nature of excessive
conservatismhasprovidedLDprovisionofINR100mnastheprojecthasbeendelayedbya
couple of months (34). It has billed INR1.6bn in 9mFY15 and does not expect any major
billingsinQ4FY15barring20%oftheproject.
Guidancemaintained:ThecompanyisconfidentoftranslatingINR8bnofframeworktoget
convertedintoorderbookinQ4FY15.ItisalsoL1inINR56bnprojectsandexpectssome
partofittobewoninQ4FY15.Itisconfidentofmaintainingrevenuegrowth.
On opportunity in desalination plants: Expansion of the Nemmeli project is under
consideration for funding. Once that happens, the tendering is expected to soon, may
happen next quarter. The company is also witnessing traction in desal projects in other
stateslikeAP,Mumbaietc.
Demand environment in Europe: The companys presence is primarily in Eastern Europe
and Switzerland. It expects the ordering opportunity in excess of EUR1bn over the next
decadewithaprojectrelatedtomicronutrientremovers.
Industrialbusinessoutlook: Ordering in the industrial sector remains muted, but it sees
brightprospectsinfertiliser,power&oil&gasetc.
Otherkeyhighlights
LongtermvisionofEUR1bntoplineinnext45yearsmaintained.
Working capital cycle: The cycle has improved to 66 days in December 2014 from 72
daysinH1FY15.Managementtargetstobringthecyclebackto~50daysinthenext3
months.
TotaldebtstandsatINR2.62bn(shorttermdebtINR1.66bninIndia,overseasdebt
~INR800mnmainlyforNamibiaproject).GrosscashstandsatINR3.6bn.
Framework contracts of INR8bn from Libiya projects still not part of the order intake
andthesamewasnotincludedinguidance.
UlhasNagarprojectisanonmovingprojectfrompast1year.Managementmaylook
todropitfromthemainorderbookandmoveitintheframeworkcontract.
VATW have recently bid for projects in Bengaluru, Orissa, West Bengal, Mumbai and
Delhi.ThecompanyexpectssubstantialimprovementinbudgetallocationforNamami
Ganga,SwatchBharat,SmartCitiesfundetc.intheupcomingbudget.
VATWtryingtoimproveitsproportionofO&Mcontractsfromlessthan20%currently
to~25%oftheorderbookoverthenext2years.
VATechWabag
Financialsnapshot(Consol)
YeartoMarch
Netrevenues
Rawmaterial
Staffcosts
Totalexpenditure
EBITDA
Depreciation
EBIT
Otherincome
Interest
Profitbeforetax
Tax
Coreprofit
Extraordinaryitems
PAT
Minorityinterest
Shareinprofitfromassociates
Profitaftertaxandmin.int.
Adjustednetprofit
Dilutedshares(mn)
DilutedEPS(INR)
As%ofnetrevenues
Directcosts
Employeecost
Otherexpenses
EBITDA
Depreciation
Interestexpenditure
Taxrate
Q3FY15
6,194
4,832
748
192
5,771
423
55
369
61
308
130
178
(37)
141
3
1
138
175
53
27
6.6
78.0
12.1
3.1
6.8
0.9
1.0
42.2
Q3FY14
5,893
4,523
627
300
5,450
443
45
399
46
352
102
250
(34)
217
(2)
2
220
254
53
27
9.6
%change
5.1
6.8
19.1
(36.1)
5.9
(4.6)
21.4
(7.5)
32.1
(12.7)
27.0
(28.9)
NA
(35.0)
NM
(61.9)
(37.2)
(30.9)
(30.9)
76.7
10.6
5.1
7.5
0.8
0.8
29.0
Q2FY15
5,070
3,843
642
257
4,741
329
55
273
44
229
87
142
142
14
156
156
53
27
5.9
75.8
12.7
5.1
6.5
1.1
0.9
37.9
%change
22.2
25.7
16.5
(25.3)
21.7
28.8
(1.3)
34.9
37.2
34.4
49.7
25.1
(0.9)
NM
(94.2)
(11.1)
12.7
12.7
YTD15
15,274
11,584
1,949
785
14,318
957
143
814
164
650
264
386
6
392
7
10
395
389
53
27
14.6
75.8
12.8
5.1
6.3
0.9
1.1
40.7
(INRmn)
FY15E
26,493
14,477
2,625
6,970
24,072
2,421
206
2,215
126
245
2,096
743
1,353
1,353
11
1,342
1,342
1,342
53
27
50.6
FY16E
31,736
17,289
3,156
8,255
28,699
3,037
239
2,798
202
267
2,733
920
1,813
1,813
15
1,799
1,799
1,799
53
27
67.8
54.6
9.9
26.3
9.1
0.8
0.9
35.5
54.5
9.9
26.0
9.6
0.8
0.8
33.7
ChangeinEstimates
NetRevenue
New
26,493
FY15E
Old
26,901
%change
(1.5)
New
31,736
FY16E
Old
33,277
%change Comments
(4.6) LoweringorderintakebyINR3.5bn
inFY15.
EBITDA
2,421
2,539
9.1
9.4
1,353
1,492
PATMargin
5.1
5.5
Capex
550
550
EBITDAMargin
(4.7)
3,037
3,261
(6.9)
9.6
9.8
1,814
1,985
(8.6)
5.7
6.0
550
550
0.0
Buildinginlowermarginsinthe
internationalbusiness.
Coreprofit
(9.4)
0.0
CompanyDescription
VATWisamultinationalplayerinthewatertreatmentindustrywithpresenceinIndia,the
Middle East, North Africa, Central and Eastern Europe, China and South East Asia through
principalofficesinIndia,Austria,theCzechRepublic,China,Switzerland,Algeria,Romania,
Tunisia, UAE, Libya and Macau. It offers complete life cycle solutions including
conceptualisation, design, engineering, procurement, supply, installation, construction and
O&M (operational and maintenance) services. The company provides a range of EPC and
O&M solutions for sewage treatment, processed & drinking water treatment, effluents
treatment, sludge treatment, desalination and reuse for institutional clients like municipal
corporationsandcompaniesintheinfrastructuresectorsuchaspower,steelandoil&gas
companies. Till date, VATW has executed 2,250 projects and is currently executing 72
projects. It is a technologyfocused player with R&D centers in Chennai, India, Vienna in
Austria and Winterthur in Switzerland respectively. Wabag Austria and Wabag
Wassertechnik own 157 patents, which include both process and product patents. VATW
hasapproximately1,469employeesincluding757qualifiedengineers.InIndia,ithasaround
754 employees including 588 qualified engineers.The company benefits from association
withtheWabagbrand.In2007,itacquiredWabagAustria,therebytakingovertheWabag
Group(foundedin1924).
InvestmentTheme
Unmatched capability in water and wastewater projects: VATW has the strongest
portfolio of water treatment/waste water/desalination, etc., in India and unlike most EPC
peers has inhouse technology, which we believe is the key to its pole position. Its strong
technological competence coupled with a large talent pool impart it the resources to
successfullyexecutecomplexwaterprojects.
India, emerging markets hold humungous growth potential: India, with low per capita
watersupplyof146lts/dayversusdevelopednations500lts/day,hashugepotential.Also,
with rising stringent norms for wastewater treatment, the scope for VATW is enormous,
especiallygiventhatlessthan30%ofindustrialwastewaterisnottreatedbeforerelease.
ThecompanyhasmadesignificantinroadsinChina,SaudiArabia,Egypt,SpainandTurkey
keyemergingmarketsclockinghighgrowthinwaterandwastewatertreatment.
Assetlight business model drives RoCE and cash flow: VATW has an assetlight business
model, which imparts it the capability to take on larger volume of projects and generate
higherRoCE.Thecompanyhasidentifiedcriticalareaswhicharemostlyretainedinhouse,
whilenoncritical,lowvalueaddworkisoutsourced
KeyRisks
Execution risk: VATW outsources construction and depends on the sub contractors for
timelycompletionofprojects.Anydelaysbythelattercouldnegativelyimpactitsmargin.
Financingtosubcontractors:Anyfurtherincreaseinadvancestothemwillimpactitscash
flowsandinturnitsworkingcapitalcycle.
Delays in revival of international operations: VATW is reducing costs in its international

operationsbycuttingworkforceinhighcostlocationsandisinsteadfocusingondomestic
units.Anydelaysinrevivalofinternationalbusinesscouldimpactmarginimprovement.
VATechWabag
KeyAssumptions
YeartoMarch
FY14
FY15E
GDP(YoY%)
Inflation(Avg)
4.7
9.5
5.4
6.8
6.3
5.5
7.3
5.5
Reporate(exitrate)
8.0
7.8
6.8
6.3
60.5
61.0
62.0
62.0
Macro
USD/INR(Avg)
Company
FY16E
FY17E
Incomestatement
YeartoMarch
FY14
FY15E
FY16E
FY17E
22,386
12,908
26,493
14,477
31,736
17,289
37,983
20,838
Employeecosts
2,217
2,625
3,156
3,813
OtherExpenses
5,376
6,970
8,255
9,559
20,501
24,072
28,699
34,210
1,885
2,421
3,037
3,773
150
206
239
281
1,735
2,215
2,798
3,492
186
Directcosts
(INRmn)
A)EPCmunicipalbusiness
43.7
29.1
30.1
28.0
B)EPCindustrialbusiness
21.4
8.8
7.4
6.5
EBIT
C)O&Mmunicipalbusiness
78.1
7.9
7.6
7.8
Otherincome
129
126
202
D)O&Mindustrialbusiness
37.3
8.1
8.5
13.3
Interestexpenses
252
245
267
275
A)EPCmunicipalbusiness
190.3
4.8
19.0
17.5
Profitbeforetax
1,611
2,096
2,733
3,402
B)EPCindustrialbusiness
(26.0)
(12.1)
16.9
22.0
Provisionfortax
526
743
920
1,011
C)O&Mmunicipalbusiness
100.8
12.2
22.0
28.2
Netprofit
1,086
1,353
1,813
2,391
D)O&Mindustrialbusiness
(36.8)
10.3
40.7
42.7
51
3.9
8.5
8.0
8.0
11
15
24
31.6
35.5
33.7
33.0
1,127
1,342
1,799
2,367
AdjustedPAT
1,077
1,342
1,799
2,367
40.5
50.5
67.6
89.0
27
27
27
27
42.4
50.5
67.6
89.0
9.4
10.4
11.4
12.4
Depreciation(%ofAvgGFA)
Taxrate(%)
EBITDA
Depreciationandamortisation
Minorityinterest
BasicEPS(INR)
DilutedEPS(INR)
Commonsizemetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
Operatingexpenses
EBITDAmargins
91.6
8.4
90.9
9.1
90.4
9.6
90.1
9.9
EBITmargins
7.7
8.4
8.8
9.2
Netprofitmargins
4.8
5.1
5.7
6.3
Growthratios(%)
YeartoMarch
FY14
FY15E
FY16E
FY17E
Revenues
EBITDA
38.3
22.4
18.3
28.4
19.8
25.5
19.7
24.2
Netprofit
25.8
19.1
34.0
31.6
Cashflowmetrics
YeartoMarch
FY14
FY15E
FY16E
FY17E
53
12,984
Operatingcashflow
Investingcashflow
1,124
(971)
1,479
(550)
1,727
(550)
2,316
(550)
10,990
13,037
Financingcashflow
477
(420)
(467)
(500)
53
77
Netcashflow
629
508
710
1,266
1,183
1,234
1,286
(1,026)
(550)
(550)
(550)
500
551
603
(217)
(275)
(302)
(329)
Balancesheet
Ason31stMarch
FY14
FY15E
FY16E
FY17E
Equitycapital
Reserves&surplus
53
8,359
53
9,432
53
10,937
Shareholdersfunds
8,412
9,485
28
39
Shorttermdebt
1,133
Longtermdebt
450
(INRmn)
TotalBorrowings
1,583
1,683
1,785
1,889
Sourcesoffunds
9,952
11,136
12,758
14,933
Tangibleassets
Intangibleassets
1,081
111
1,374
111
1,641
106
1,873
94
692
742
792
842
1,884
2,228
2,539
2,808
Totalnetfixedassets
Capex
Dividendspaid
YeartoMarch
FY14
FY15E
FY16E
FY17E
ROAE(%)
ROACE(%)
14.5
19.7
15.0
21.5
17.6
23.9
19.7
25.7
32
32
32
32
Inventoryday
11
14
18
18
CurrentInvestments
200
200
200
200
Debtorsdays
204
221
229
229
Cashandequivalents
3,702
4,210
4,920
6,186
Payabledays
231
269
294
293
350
793
947
1,142
(17)
(34)
(46)
(45)
1.5
Inventories
13,875
18,146
21,737
26,015
Currentratio(x)
1.6
1.5
1.5
Loansandadvances
1,004
1,014
1,024
1,035
Debt/EBITDA(x)
0.8
0.7
0.6
0.5
Otherassets
3,204
3,364
3,533
3,886
Fixedassetturnover(x)
30.9
21.6
21.0
21.6
18,433
23,318
27,242
32,078
Debt/Equity(x)
0.2
0.2
0.2
0.1
8,620
12,692
15,157
18,269
Adjusteddebt/equity
0.2
0.2
0.2
0.1
Provisions
5,679
6,158
7,017
8,102
Interestcoverage(x)
6.9
9.0
10.5
12.7
14,298
18,851
22,175
26,371
Sundrydebtors
NetDeferredtax
4,135
4,467
5,067
5,707
Operatingratios
YeartoMarch
FY14
FY15E
FY16E
FY17E
Totalassetturnover
Fixedassetturnover
2.5
26.3
2.5
19.8
2.7
19.6
2.7
20.5
2.9
3.0
3.1
3.2
(70)
(70)
(70)
(70)
Usesoffunds
9,952
11,136
12,758
14,933
Freecashflow
316.2
356.6
413.2
490.1
YeartoMarch
FY14
FY15E
FY16E
FY17E
Valuationparameters
Netprofit
Depreciation
1,127
150
1,342
206
1,799
239
2,367
281
YeartoMarch
FY14
FY15E
FY16E
FY17E
685
263
289
308
DilutedEPS(INR)
YoYgrowth(%)
42.4
25.8
50.5
19.1
67.6
34.0
89.0
31.6
CEPS(INR)
46.5
58.6
77.1
100.4
DilutedPE(x)
34.5
29.0
21.6
16.4
3.0
Others
Grosscashflow
Equityturnover
(INRmn)
1,962
1,811
2,327
2,956
Less:ChangesinWC
839
332
600
640
Operatingcashflow
1,124
1,479
1,727
2,316
Price/BV(x)
4.6
4.1
3.5
Less:Capex
1,026
550
550
550
EV/Sales(x)
1.6
1.4
1.1
0.9
98
929
1,177
1,766
(1.2)
0.6
(1.1)
0.7
(1.1)
0.8
(1.2)
0.8
Freecashflow
EV/EBITDA(x)
Dividendyield(%)
Peercomparisionvaluations
PE(x)
Nameofthecompanies
VATechWabagltd.
VeoliaEnvironnementSA
AccionaSA
Marketcap
(INRbn)
38.9
700.8
288.2
CMP
1,462
15.5
62.9
P/BV(x)
ROE(%)
2015E
2016E
2015E
2016E
2015E
2016E
29.0
20.5
44.3
21.6
17.0
29.6
4.1
1.1
1.0
3.5
1.0
1.1
15.0
5.5
2.3
17.6
6.9
3.8
Source:Bloomberg,Edelweissresearch
VATechWabag
AdditionalData
DirectorsData
Mr.BhagwanDassNarang
Mr.SumitChandwani
Dr.GuenterHeisler
IndependentChairman
IndependentDirector
IndependentDirector
Mr.Rajiv Mittal
Mr.Jaithirth Rao
Ms.Revathi Kasturi
ManagingDirector
IndependentDirector
IndependentDirector
AuditorsWalker,Chandiok&Co
HoldingTop10
IDFCMF
HSBCbankMauritius
CapitalGroupCompanies
GICpvt.Ltd
PavestequityIndia
Perc.Holding
7.29
4.62
2.96
2.45
2.03
Perc.Holding
5.78
3.73
2.53
2.03
2.0
SBIMF
PrudentialPLC
GovtPensionFundGlobal
BNPParibad
Norgesbank
BulkDeals
Data
Acquired/Seller
NoDataAvailable
B/S
QtyTraded
Price
InsiderTrades
ReportingData
07Oct2014
30Sep2014
Acquired/Seller
ShivNarayanSaraf
Mr.AmitSengupta
B/S
Sell
Sell
QtyTraded
100000.00
70000.00
COMPANY UPDATE
BRIGADE ENTERPRISES
Firing on all cylinders
India Equity Research| Real Estate
Robust sales momentum, high quality rental assets and strong brand
presence have reinforced Brigade Enterprises (BRGD) credentials over
the past few years. Based on current project portfolio and underconstruction rental assets, we estimate the companys development
property and rental business to post 9% and 8% CAGR, respectively, over
FY14-17. Improving outlook on the offices market and expected WTC
branding for Kochi IT park provide upsides to our rental estimates.
BRGDs tie ups with GIC for residential development and with WTC for
offices across several locations further bolster upsides. Maintain BUY
with a revised NAV/TP of INR246 (INR177 earlier).
EDELWEISS 4D RATINGS
Absolute Rating
BUY
Rating Relative to Sector
Outperformer
Risk Rating Relative to Sector
High
Sector Relative to Market
Overweight
MARKET DATA (R: BRIG.BO, B: BRGD IN)

CMP
: INR 155
Target Price
: INR 246
52-week range (INR)
: 180 / 51
Share in issue (mn)
: 112.7
Scaling up without compromising on leverage
: 18 / 284
BRGDs sales bookings have catapulted from INR2.5bn in FY10 to INR13.4bn in FY14
(INR19bn in FY17E) and rental income has jumped from INR275mn to INR1,310mn over
the same period (INR1,768mn in FY17E). Hospitality income too rose from INR302mn in
FY10 to INR1,402mn in FY14 (FY17E INR2,376mn). Whats commendable is that the
significant improvement in scale has been effected while maintaining comfortable debt
to equity at 0.7x and without diluting equity since its IPO in 2007.
Avg. Daily Vol.BSE/NSE(000) : 176.4
Forging bonds to bolster prospects

The company has reinforced its brand might with the iconic mixed use Brigade
Gateway project. Propelled by strong execution and robust brand, we estimate BRGDs
sales bookings to surge to INR19.0bn in FY17 from INR14.4bn in FY15. Project additions
from its Government of Singapore (GIC) INR15bn JV provide upside risks. Further, the
company has over 1.7msf (BRGD share 1.0msf) of rental assets under construction and
is bound to leverage upon its Orion Mall brand and WTC tie up across selective assets.
The company is also adding 3 new hotels to its 2 existing hotels kitty in the near term
and has a tie up with IHG for 10 new Holiday Inn Expresses by 2020.

Current
Q2FY15
Q1FY15
Promoters *
57.7
57.7
57.7
MF's, FI's & BKs
2.2
2.8
2.2
FII's
4.7
4.8
4.7
Others
35.4
34.7
35.4

NIL

Stock
Nifty
EW Real
Estate Index
1 month
12.9
4.0
8.4
3 months
25.9
9.9
13.6
12 months
181.4
36.6
22.4
Outlook and valuations: Sustainable growth; maintain BUY

Robust sales momentum, high quality rental assets and strong brand presence
reinforce our confidence in BRGD. We revise our estimates (rollover to FY16 NAV,
increase in area in WTC and improved leasing outlook) for a NAV/TP of INR246/share
(INR177/share earlier). We maintain BUY/Sector Outperformer.
Financials (consolidated)
Year to March
FY13
FY14
FY15E
FY16E
Revenue
8,227
9,402
12,887
20,180
EBITDA (INR mn)
2,088
2,690
3,708
6,009
Net profit (INR mn)
611
859
974
2,304
Diluted EPS (INR)
5.3
7.7
11.6
25.7
Diluted PE (x)
29.1
20.3
13.5
6.1
EV/ EBITDA (x)
13.2
9.5
7.6
4.8
ROE (%)
5.1
6.8
7.4
15.9
Aashiesh Agarwaal, CFA

+91 22 4063 5491
aashiesh.agarwaal@edelweissfin.com
Akshay Rao
+91 22 6623 3313
akshay.rao@edelweissfin.com
February 9, 2015
SECTORUPDATE
IT
Besttimetobuy
IndiaEquityResearch|IT
TheITsectorisataninflectionpointspurredbypalpabletailwindslike:
(1) robust US recovery; (2) surging outsourcing from Europe; (3) strong
uptick in key verticals (which contribute ~75% to revenue); (4)
commendablepickupindiscretionaryspending;and(5)credibletraction
in digital technologies and shortage of skill set therein. In light of these
positivetrends,wedeemvaluationsofthetop5IndianITcompaniesat
14.017.0x as inexpensive (historically, multiples have expanded 5080%
when growth has bounced back; refer table 7), providing a compelling
buyingopportunityfor investors.Our confidenceisfurtherbolsteredby
Top 5 companies and Cognizants Q3FY15 commentaries, which
unanimouslyhintedatrobustgrowthfromkeygeographiesandverticals,
alongwithtacticalshifttowardsdigitaltechnologies.Weexpectalllarge
capITcompaniestoridethesignificantdemanduptickwaveandprefer
Infosys,HCLTechnologies(HCLT),Wipro,TataConsultancyServices(TCS)
andTechMahindra(TECHM),inthatorderandhaveaBUYonall.
US,Europeoutsourcinginaccelerationmode
GrowthinUSandEuropehadtaperedmeaningfullyinFY13after2strongyearsFY11
and FY12. However, these geographies revived palpably in FY14 and the momentum
hassustainedin9mFY15aswell.WhiletheUSresurgenceisbeingdrivenbyrunthe
business(RTB)thrustanddigitaltechnologies,abeleagueredEuropeisbeingpropelled
by cost & infrastructure optimisation and vendor consolidation. Recovery in these
geographiesbenefitsIndianITindustryaswasevidentduringQ2FY10Q2FY12.Asper
theISGOutsourcingIndex,annualcontractvalueofUSD5mnplusdealsisup16.1%
toUSD23.1bninCY14versusafallof15.7%inCY13(referchart3).
Keyverticalsinoverdrive
Interestingly, key verticals of BFSI, manufacturing and retail are driving deals. This is
also reflected in the growth rates of these verticals over the past 6 quarters (refer
tables3to6).This,alongwiththestronganticipateduptickinhealthcarevertical,will
propel Indian IT players revenue momentum. These verticals, cumulatively,
contribute~75%torevenuesoftheTop5IndianITplayers.
Digitalbrighteningtraditionaldemandpalette
As per Cisco, mobile data traffic will clock 57% CAGR over 201419 to 24.3exabytes/
monthby2019.This,alongwithdatafromothersources,willdrivetheneedfordata
management and other components of SMAC technologies. However, shortage of
relevant manpower in key geographies will trigger off shoring (a McKinsey study
indicatespotentialshortageinUSofupto190,000datascientistsby2018).
SandipAgarwal
Outlook:Demanduptick;BesttimetoBUY
WeexpectalllargecapITcompaniestoridethesignificantdemandmomentum.We
preferInfosys,HCLT,Wipro,TCSandTECHM,inthatorderandhaveaBUYonall.
+912266233474
sandip.agarwal@edelweissfin.com
OmkarHadkar
+912266203147
omkar.hadkar@edelweissfin.com
February05,2014
GDP
Growthrecoverypuzzlecontinues
IndiaEquityResearch|Economy
The Ministry of Statistics and Programme implementation (MOSPI) has

releasedquarterlyestimatesofGDPandadvanceestimatesforFY15GDP
onrevisedbaseyear201112.Thedatacontinuestoremainpuzzling.Not
onlyavsharprecoveryintheeconomyinthepast2yearsisinconsistent
with the high frequency indicators (auto sales, bank NPLs, corporate
profitability) but significantly higher level of growth rates also cloud the
underlying trend/potential growth rate of the economy. Going by RBIs
approximatepotentialgrowthrateof6.57.0%(basedonoldseries),the
economyisalreadyat/abovepotentialinthepast2years.Thisisatodds
withtrendofdecliningcoreWPI(proxyforcorporatepricingpower)and
fallingcapacityutilizationoverthisperiod.Tothatextent,policymakers,
perhaps,willhavetowaitformoredetailsonthenewmethodology.
Highergrowthlevelscloudunderlyingpotentialofeconomy
RealGDPgrowthimprovedto7.4%(FY15advanceestimates,marketprices)from
6.9%inFY14.Thisimprovementissomewhatconsistentwithjumpingrowthrates
expectedintheoldseriesfrom4.7%reportedinFY14to5.4%anticipatedinFY15.
However, the level of growth rates is vastly divergent and this clouds the
underlyingtrend/potentialgrowthrateoftheeconomy.
Going by RBIs broad assessment of potential growth of 6.57.0% (based on old

series),theeconomyseemstobealreadygrowingabovepotential.Thisisunlikely
givenlargeidlecapacityinthemanufacturingsector(at4yearlowof72%asper
RBIsurvey),weakpricingpower,elevatedandrisingbankingsectorNPLs.Tothat
extent,policyimplications,especiallyonthemonetaryfont,areunclear.Perhaps,
policymakerswillwaitformoredetailsonthenewmethodology.
Quarterlyestimatesthrowupstrangetrends
SharpdivergencebetweenrelatedindicatorssuchasfinancialservicesGDPgrowth
versus credit growth and public administration/services GDP versus government
expenditureishardtoreconcile.
Basedonadvanceestimates,theimpliedQ4FY15growthisexpectedtopickupto
7.8% YoY, up from 7.5% in Q3FY15. But, what is striking is that manufacturing is
forecasted to surge from 10.6% YoY from less than 5% in the previous quarter,
even when exports are under pressure, rural demand is slowing and fiscal
tighteningisunderway.
Similarly,itissurprisingthatprivateconsumptionwillacceleratetocloseto12%in
Q4FY15(advanceestimate)from3.5%inQ3FY15undertheseconditions.
KapilGupta
+912240635406
kapil.gupta@edelweissfin.com
PrateekParekh
+912266233469
prateek.parekh@edelweissfin.com
February09,2015
1
Securities Lending and Borrowing Scheme (SLBS)

Daily Report
India Alternative Research
Yogesh Radke
Highlights of the day
+91-22-6620 3199
Total Notional Volume today - INR 19.91 Cr
yogesh.radke@edelweissfin.com
Total Notional Lending Fee - INR 0.04 Cr
Total Open outstanding INR 345.07 Cr
Sriram Velayudhan
Top traded counter by lending fee was AXISBANK with annualized yield of
+91-22-6620 3100
~6%
sriram.velayudhan@edelweissfin.com
Top Active Counters

Sr
Counter
no
1
2
3
4
5
6
7
8
9
10
AXISBANK
SIEMENS
SUNPHARMA
INFY
RECLTD
WIPRO
CAIRN
RCOM
HDFC
HINDALCO
February 9, 2015
Expiry
5-Mar-15
5-Mar-15
5-Mar-15
5-Mar-15
5-Mar-15
5-Mar-15
5-Mar-15
5-Mar-15
5-Mar-15
5-Mar-15
Lending Fee
Traded (INR)
190,896
91,305
67,560
29,080
1,640
1,500
947
300
88
5
Shares
91,500
40,800
25,050
29,089
1,640
3,000
1,894
2,999
8,750
500
Avg Lending
Fee/shr (INR)
2.09
2.24
2.70
1.00
1.00
0.50
0.50
0.10
0.01
0.01
Equity
Close
553.60
1106.10
941.45
2248.90
315.90
647.80
255.45
67.70
1271.95
146.55
Abs
Yield
0.38%
0.20%
0.29%
0.04%
0.32%
0.08%
0.20%
0.15%
0.00%
0.01%
Days to Annualized
Expiry
yield
24
24
24
24
24
24
24
24
24
24
5.73%
3.08%
4.36%
0.68%
4.81%
1.17%
2.98%
2.25%
0.01%
0.10%
Open Int (Shares)

231,952
135,715
897,339
188,762
28,631
13,000
3,000
4,000
33,300
39,061
Note: - Average lending Fee per share is calculated as the total lending fee for the day divided by the number of shares traded
Annualized Yield is returns for 365 days. Most activity is in current and next month
st
st
SLBS contract expiry is scheduled for every 1 Thursday of the month. If 1 Thursday is a holiday, expiry is pre-poned to previous trading day
Expiry Series indicates the calendar month in which the contracts would expire; Eg. 1 indicates Jan; 10 indicates Oct.
Securities Lending and Borrowing Scheme - SLBS

Top OI (Value) Counter (Expiry wise)
Sr
Counter
no
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
SUNPHARMA
INFY
BHEL
KOTAKBANK
INGVYSYABK
TATAMOTORS
SIEMENS
AXISBANK
LT
COALINDIA
ADANIENT
ICICIBANK
HINDUNILVR
RELIANCE
ASIANPAINT
HDFC
PFC
ONGC
TCS
YESBANK
ITC
CIPLA
JUBLFOOD
RECLTD
WIPRO
BAJAJ-AUTO
M&MFIN
UPL
VOLTAS
M&M
Expiry
(Series)
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Mar-15
Top OI (Value) Counter (Aggregated for all Expiries)
OI
(INR Cr)
84.48
42.45
35.05
26.08
18.85
17.18
15.01
12.84
12.76
11.80
10.94
9.17
8.64
6.59
6.07
4.24
2.73
2.71
2.56
2.40
2.15
1.07
1.02
0.90
0.84
0.71
0.70
0.66
0.58
0.58
OI
(Shares)
Equity
Close
Sr
Counter
no
897,339
188,762
1,355,575
206,000
212,000
316,665
135,715
231,952
81,150
327,115
179,501
286,525
96,001
73,468
75,500
33,300
98,475
76,153
10,200
30,160
58,448
16,950
7,000
28,631
13,000
3,125
28,000
16,000
23,000
5,225
941.45
2,248.90
258.55
1,266.25
889.35
542.65
1,106.10
553.60
1,572.45
360.65
609.20
320.05
900.15
896.70
803.65
1,271.95
277.15
356.35
2,512.90
796.55
367.90
629.65
1,456.25
315.90
647.80
2,269.15
250.65
413.60
253.25
1,113.40
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
SUNPHARMA
INFY
BHEL
KOTAKBANK
INGVYSYABK
TATAMOTORS
SIEMENS
AXISBANK
LT
COALINDIA
ADANIENT
ICICIBANK
HINDUNILVR
RELIANCE
ASIANPAINT
HDFC
PFC
ONGC
TCS
YESBANK
ITC
CIPLA
JUBLFOOD
RECLTD
WIPRO
BAJAJ-AUTO
M&MFIN
UPL
VOLTAS
M&M
OI
(INR Cr)
84.48
42.45
35.07
26.08
18.85
17.18
15.01
12.84
12.76
11.80
10.94
9.17
8.64
6.59
6.07
4.24
2.73
2.71
2.56
2.40
2.15
1.07
1.02
0.90
0.84
0.71
0.70
0.66
0.58
0.58
OI
(Shares)
Equity
Close
897,339
188,762
1,356,575
206,000
212,000
316,665
135,715
231,952
81,150
327,115
179,501
286,525
96,001
73,468
75,500
33,300
98,475
76,153
10,200
30,160
58,448
16,950
7,000
28,631
13,000
3,125
28,000
16,000
23,000
5,225
941.45
2,248.90
258.55
1,266.25
889.35
542.65
1,106.10
553.60
1,572.45
360.65
609.20
320.05
900.15
896.70
803.65
1,271.95
277.15
356.35
2,512.90
796.55
367.90
629.65
1,456.25
315.90
647.80
2,269.15
250.65
413.60
253.25
1,113.40
Transaction Value
Jul-14
Oct-14
Apr-14
Oct-13
Jan-14
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
Jan-12
(INR Cr)
Jul-14
Oct-14
800
700
600
500
400
300
200
100
0
Jul-11
Monthly OI in Value
Apr-14
Oct-13
Jan-14
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
Jan-12
Jul-11
(INR Cr)
Monthly Transaction Value

800
700
600
500
400
300
200
100
0
Open Positions
Transaction Value = Quantity*(Underlying price in Cash Segment + Lending Fee)
Average Monthly Annualized Yield

Expiry
7-Feb-14
7-Mar-14
9-Apr-14
6-May-14
6-Jun-14
7-Jul-14
11-Aug-14
4-Sep-14
22.0%
8.0%
14.0%
9.8%
12.7%
4.1%
13.7%
4.6%
1.3%
3.2%
4.0%
1.2%
1.0%
3.1%
0.6%
1.0%
1.1%
1.3%
ULTRACEMCO
3.0%
2.9%
3.5%
TCS
0.6%
BHEL
Market wide
SBIN
10-Oct-14 11-Nov-14
11.0%
4-Dec-14
11.2%
3.0%
1.7%
3.1%
2.5%
1.7%
1.6%
1.3%
2.0%
0.5%
0.4%
0.8%
0.8%
4.9%
0.7%
0.6%
1.5%
38.4%
27.3%
34.8%
32.0%
29.5%
22.5%
5.8%
17.9%
12.2%
21.3%
25.7%
LT
0.5%
0.9%
0.9%
0.8%
0.6%
0.5%
0.5%
0.5%
0.5%
0.4%
0.5%
ITC
7.4%
1.1%
0.8%
1.1%
0.9%
1.0%
2.7%
1.4%
1.2%
3.9%
4.6%
1.1%
1.1%
0.4%
0.5%
HEROMOTOCO
1.9%
1.6%
MARUTI
HDFCBANK
3.2%
4.4%
2.3%
BAJAJ-AUTO
4.9%
1.4%
0.6%
GRASIM
1.1%
0.4%
AXISBANK
1.8%
RELIANCE
1.4%
4.5%
9.1%
9.5%
0.9%
0.6%
HINDUNILVR
HDFC
1.3%
3.5%
GAIL
3.6%
BANKINDIA
2.8%
3.4%
0.4%
0.8%
9.7%
8.4%
8.6%
0.5%
0.6%
4.5%
1.1%
1.2%
HAVELLS
INFY
1.2%
1.1%
0.8%
1.3%
4.9%
0.8%
1.5%
4.3%
2.7%
0.5%
0.6%
0.7%
1.2%
1.2%
0.9%
0.6%
0.8%
0.6%
0.5%
0.4%
7.7%
4.2%
5.5%
4.7%
9.9%
5.0%
8.0%
1.0%
0.4%
0.4%
0.8%
1.5%
1.3%
1.4%
4.0%
4.7%
1.3%
0.8%
Yield represents the Volume Weighted Annualized Yield (VWAY); Trades with 7 days to expiry are not included as these form the part of
unwinding/reversal leg trade.

SLBS Structure
Exchange
Equity Transferred
by Custodian
Lender
To
T1
Equity Transferred
to Borrower (T+1)
Borrower
Lender w ill receive fee on the

next day and has to release
the equity by IST 4:30 pm
Lending fee margin w ill be levied

on Borrow er's account. Borrow er
can sell the share on T0
If Lender opts to release the

equity on T+1 than margin of
Borrow er has to give a margin of
25% has to be kept for 1 Day

and equity has to be given
before market open on T+1
Lending Fee
In betw een if Lenders need

back the equity, early recall is
permitted at market prevailing
rates
T20
Dividend w ill get credited
Expiry Day share w ill be

T31 credited back (Split adjusted if
any)
125% in the form of Cash / Cash

Equivalent before market open.
Borrow er w ill receive the shares
by 11:30 am
Early payback is permitted w ithout

any lending fee recovery; margin
w ill be free
Dividend Amount
Dividend amount w ill be debited
Equity
Expiry Day share w ill be debited

(Split adjusted if any) margin w ill
be released
NoteAny corporate action other then Dividend or Spilt, the contract will be pre-closed / expired on the 2 days prior to the
ex data. The lender has to pay back the residual lending fee which would be on the proportionate basis, but the
borrower may receive back the fee (more or less) as per the best matching of Lenders outstanding.
# Margin is predefined by exchange which varies from 12.5% to 25% depending on VAR & ELM (Value at Risk &
Extreme Loss Margins) Contracts available from 1 month till 12 months (Expiry every first Thursday on the month)
Disclaimers The structure given above is a simplified version; for detailed information please visit nseindia.com
BOND VECTOR
Fixed Income Daily
India Fixed Income Research
Gilts trade slightly weak but range remains narrow and volumes dry up
Yield Curve
The market awaits key domestic triggers this week in the form of GDP and CPI inflation
data and hence the trading was expected to be cautious. It turned out to be very much so
as the range was narrow and participation was very subdued.
However there was an element of weakness at opening itself as stronger than expected
US jobs data and uptick in US treasury yields rubbed off on the rupee and domestic gilt
yields too. The rupee opened below the 62 mark and weakened further to close the day
at 62.17 vs 61.70.
The 10Y benchmark opened around the 7.72% mark and traded in a range of 7.71-7.73%
through the day. It ended the day at 7.73% vs 7.70%. The participation levels fells
significantly and total traded volume in G-Secs failed to cross INR 200bn.
9-Feb
6-Feb
Change*
1Y T-Bil l (Ind.)
8.00%
8.00%
8.27% 2020
7.73%
7.71%
8.40% 2024
7.73%
7.70%
8.60% 2028
7.73%
7.71%
5 yrs
8.37%
8.35%
10 yrs
8.34%
8.32%
Govt. Bonds
Corp. Bond
Corp. Bond (Non-PSU)
The 1-Y OIS ended the day at 7.64-7.71% vs 7.61-7.68%, while the 5-Y OIS closed at 6.926.99% vs 6.91-6.98%.
8.80%
8.80%
5 yrs
8.66%
8.65%
10 yrs
8.62%
8.60%
3 mth
8.70%
8.60%
10
6 mth
8.70%
8.65%
1 yr
8.75%
8.70%
3 mth
9.00%
8.90%
10
6 mth
9.05%
8.95%
10
1 yr
9.10%
9.00%
10
1 Yr
7.68%
7.64%
2 Yr
7.26%
7.23%
5 Yr
6.95%
6.93%
Change
CD
Non-SLR Market
L&T Finance placed 2M CP worth INR 1.5bn @ 9.25%. Sundaram Finance Limited placed 3M
CP worth INR 2bn @ 9.25%.
Money Market
CP
Money market rates which had spiked on the weekend returned to normal levels today and
call borrowing WAR settled at 7.77% vs 7.75%. The RBI conducted a variable rate repo
auction for a much higher quantum of INR 300bn and this was almost fully subscribed.
Swap
India Yield Curve G-Sec & OIS

8.2
8.0
7.8
* Cha nge i n ba si s poi nts
7.6
%
2 yrs
7.4
Other Indicators*
7.2
7.0
6.8
1-Y
2-Y
5-Y
10-Y
30-Y
G-Sec (T)
OIS (T)
Source: Edelweiss research, CCIL, Bloomberg
G-Sec (T-10)
OIS (T-10)
Liquidity Situation MSF borrowing was INR 4bn

Daily Borrowing - INR bn
1,600
1,200
Latest Borrowing (INR bn)

LAF Repo
134
LAF Rev Repo
-25
MSF Window
Term Repo
644
Total
757
800
400
9-Feb
6-Feb
Crude (USD/bbl)
58.0
57.8
0.4%
Gold (USD/Oz)
1241
1234
0.6%
USDINR
62.17
61.70
-0.8%
1Y INR NDF Prem.
5.55%
6.14%
-0.59%
Dollar Index
94.68
94.70
0.0%
Nifty
8526
8661
-1.6%
MIBOR (o/n)
8.13%
7.64%
0.49%
LIBOR (1mth)
0.17%
0.17%
0.00%
* Figures as on 17:30 hrs IST
Source: Edelweiss research, Bloomberg, CCIL
Jagdeep Kannarath
+91 22 6620 3083
jagdeep.kannarath@edelweissfin.com
February 09, 2015

0
Aug-14
Sep-14
Oct-14
Nov-14
Source: Edelweiss research, Bloomberg, RBI
Dec-14
Term Repo
Jan-15
MSF
LAF

Bond Vector
G-Sec Activity
Daily Volume - INR bn
800
700
600
500
400
300
200
100
0
29-Jan
30-Jan
2-Feb
3-Feb
4-Feb
GSec Total Vol
5-Feb
6-Feb
8.60 2028
9-Feb
8.40 2024
Source: Edelweiss research, CCIL
Overnight Money Market Yields

10.0
9-Feb
6-Feb
CBLO
7.86%
7.74%
Repo
8.03%
7.85%
Ca l l
7.76%
7.75%
9.0
WAR
8.0
7.0
Call
Repo
CBLO
Overnight Money Market Activity

1,000
9-Feb
6-Feb
CBLO
842.2
440.9
Repo
341.3
650.5
Ca l l
143.6
184.5
900
Volume
(INR bn)
800
700
600
500
400
300
200
100
0
29-Jan
30-Jan
2-Feb
3-Feb
4-Feb
Call
5-Feb
6-Feb
Repo
9-Feb
CBLO
9-Feb
5-Feb
3-Feb
30-Jan
28-Jan
23-Jan
21-Jan
19-Jan
15-Jan
13-Jan
9-Jan
7-Jan
5-Jan
1-Jan
6.0
Bond Vector
5Y Corporate Bond Spreads
AAA
AA+
AA
160
1Y
54
58
91
140
5Y
46
77
114
120
10Y
46
73
107
Spread in bps
Tenor
*AA+ and AA spread as per Bloomberg

As per previous session yields
100
80
60
40
20
5Y AAA
Source: Edelweiss research, Bloomberg
5Y AA+
6-Feb
4-Feb
2-Feb
29-Jan
27-Jan
22-Jan
20-Jan
16-Jan
14-Jan
12-Jan
8-Jan
6-Jan
2-Jan
31-Dec
5Y AA
Short-term Debt Activity CDs & CPs
CD Pri mary
9-Feb
6-Feb
35
2.75
11.75
30
CP Pri ma ry
9.00
5.00
Tota l
11.75
16.75
Volume (INR bn)
25
20
15
10
5
0
29-Jan
30-Jan
2-Feb
3-Feb
4-Feb
CP Prim ary
5-Feb
6-Feb
9-Feb
CD Prim ary
Net Debt Flows FII + MF

1,200
6-Feb
5-Feb
JAN
FII
0.86
4.97
231
MF
30.37
4.54
331
1,000
800
INR bn
INR bn
600
400
200
0
-200
Apr-14 May-14 Jun-14
Source: Edelweiss research, Bloomberg
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15
FII
MF
Bond Vector
Event Calendar India & Global
9-Feb
12-Feb
Events & Updates

IN - GDP YoY Q3
IN - GDP Annual Estimate YoY
IN - IIP (YoY) DEC
IN - CPI (YoY) JAN
US - Initial Jobless Claims
Expected
6.60%
1.60%
5.50%
288K
Actual
7.50%
7.40%
-
Prior
6.90%
3.80%
5.00%
265K
First Call
INSIDER TRADES
Company Name
Geojit BNP Paribas Financial
Acquirer/Seller
Rekha Jhunjhunwala
Hinduja Ventures Ltd
Hinduja Properties Ltd
Buy
22930
Dabur India Ltd
Mr. Sunil Duggal
Sell
25000
Dabur India Ltd
Mr. P D Narang
Sell
34000
Edelweiss Financial Services Ltd
Subramanian Ranganathan
Sell
25000
Educomp Solutions Ltd
Citigroup Global Markets Mauritius
Sell
24647
Jaiprakash Associates Ltd
Shri Sarat Kumar Jain
Sell
20000
B/S
Buy
Qty Traded
207000
First Call
BULK DEALS
Date
Company Name
Acquirer/Seller
B/S
9-Feb-15
ADC India Communications

Ltd
Alfavision Overseas Ltd
Rajasthan Global Securities Ltd
Buy
37,760
236.17
Buy
40,380
114.18
Buy
Buy
Sell
Sell
Buy
Buy
126,000
385,000
923,547
200,000
224,046
550,222
23.30
23.30
23.30
22.07
64.02
251.07
9-Feb-15
9-Feb-15
9-Feb-15
9-Feb-15
9-Feb-15
9-Feb-15
9-Feb-15
Bhagyarekha Capital Market Pvt

Ltd
Avon Organics Ltd
Anish P Bhatia
Avon Organics Ltd
Shivajirao S Jondhale
Avon Organics Ltd
Arch Pharamalabs Ltd
Dhabriya Polywood Ltd
Indu Jain
Nyssa Corporation Ltd
Arch Pharamalabs Ltd
Shaily Engineering Plastics Ltd R.B.A. Finance& Investment Co.
Qty Traded
Price
9-Feb-15
Shaily Engineering Plastics Ltd Haresh Babubhai Shah
Sell
50,000
251.12
9-Feb-15
Shaily Engineering Plastics Ltd Motika Ltd
Sell
431,779
252.28
9-Feb-15
Shaily Engineering Plastics Ltd Shailesh Pritamlal Gadhia
Sell
75,000
257.02
9-Feb-15
9-Feb-15
9-Feb-15
9-Feb-15
Shaily Engineering Plastics Ltd

VCU
Yamini Investment Company
Yamini Investment Company
Sell
Sell
Buy
Sell
52,500
102,000
8,356
5,000
251.10
34.00
523.38
523.40
Sunil Chinubhai Vakil

Kalpesh Ugarchand Gadhecha
Mkr Trading Pvt Ltd
Gopal Bansal (Huf)
First Call
TECHNICAL UPDATES
Markets extended decline for a seventh straight session as the Nifty lost 1.56% to close at 8500.
The index has breached the crucial 8650-8600 support zone with a gap down open on account of
Delhi elections exit poll pointing to victory by the Aam Aadmi Party (AAP) triggering a sell-off
coupled with nervousness in global indices. After 77 points down gap, the index traded in a range
only to attract selling in the final hour. Despite the large bearish impact, volumes clocked at below
average levels and the market breadth ended 3:11 in favor of decliners. Nifty has closed below its
21 day EMA of 8638 which will now offer resistance on the way up. Volatility (India VIX) has
climbed up to a 9-month high of 22.02% and is likely to remain elevated on global & domestic
uncertainties. Momentum studies like RSI has entered and oversold state on hourly charts whereas
MACD has rolled bearish on daily scale indicating a corrective phase. As long as 50 DEMA at 8488
remains inviolate on closing basis, we prefer to maintain our neutral short-term bias as the recent
decline is corrective in nature and is likely to end between 8450-8500 and resume the upward
journey.
A secular down day was witnessed in markets yesterday led by steep losses in Cap Goods (-4.31%),
Realty (-2.73%) and Metals (-2.54%) indexes; whereas relative outperformance was seen in IT (0.04%) and healthcare (-0.26%) indices. Broader market Mid-cap and Small-cap indices traded in
line with their frontline peer with losses of -1.41% and -1.5% respectively.
Bullish Setups: CAIR, INFO, ITC, JUBI
Bearish Setups: RCAPT, SBIN, MM, TATA
* CNX NI FTY (8,584.40, 8,605.55, 8,516.35, 8,526.35, -134.700)
9100
9050
9000
8950
8900
8850
8800
8750
8700
8650
8600
8550
8500
8450
8400
8350
8300
8250
8200
8150
8100
8050
8000
7950
7900
7850
7800
7750
7700
7650
50 DEMA
8488
250000
200000
150000
100000
x1 050000
00
Re l a ti ve Stre n gth I n d e x (45.2858)
15
8
te mbe r
22
29
7
13
Octobe r
20
27
3
10
17
Nove mbe r
24
1
8
De ce mbe r
15
22
70
60
50
40
30
29
5
2015
12
19
27
2
9
Fe brua ry
16
23
2
M
Nifty Index
Nifty Index
Bloomberg Code
Spot Price
Resistance 1
Resistance 2
Support 1
Support 2
Nifty 20 SDMA
Nifty 50 SDMA
Nifty 200 SDMA
Adv : Dec [NSE]
Turnover Rs Crs.
BSE+NSE cash
NIFTY Index
8,526
8,563
8,605
8,480
8,445
8,662
8,449
7886
361 : 1140
18,234
Indicator
Candlestick
Stochastic
Moving Avg
RSI
ADX
MACD
Aggregate
Outlook
Positive
Positive
Negative
Neutral
Neutral
Neutral
Positive
Points*
1
1
(1)
0
0
0
1
First Call
EYE CATCHERS
Futures Snapshot
`2
2.51
2
Top OI Rises
Scrip
Top OI Falls
% OI Chg
% Price
OI
Chg
% Future
Vol Chg
UNIONBANK
17
11,818
(6.7)
31
APOLLOTYRE
13
12,890
(12.4)
196
CESC
12
1,245
(3.4)
14
WOCKPHARMA
Scrip
% OI
Chg
OI
% Price
Chg
% Future
Vol Chg
(50)
MINDTREE
(7)
303
1.0
FEDERALBNK
(6)
14,658
0.8
HAVELLS
(6)
6,556
1.0
34
12
3,965
6.4
121
DRREDDY
(6)
1,621
1.8
ORIENTBANK
5,680
(6.1)
(19)
TATACHEM
(5)
5,584
0.8
(83)
RELINFRA
8,575
(8.6)
21
INDIACEM
(5)
20,014
(3.2)
(62)
BANKINDIA
13,875
(5.9)
19
PETRONET
(5)
4,894
(1.2)
(66)
BANKNIFTY
2,351
(2.0)
(23)
ACC
(5)
1,488
0.1
(39)
Tata Steel
500
0
0
Larsen & Toubro
600
240
120
Dec-14
Jan-15
Feb-15
Feb-15
Sep-14
Aug-14
Jan-15
Dec-14
50
Nov-14
100
Nov-14
150
Oct-14
200
Oct-14
480
Oct-14
VA Tech Wabag
Oct-14
Sep-14
500
Aug-14
1,500
Jul-14
1,500
Jun-14
2,000
Jul-14
2,000
Brigade Enterprises
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Jun-14
Jet Airways
May-14
180
May-14
360
Apr-14
240
Apr-14
480
Apr-14
300
Mar-14
600
(INR)
240
Feb-14
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Sep-14
Aug-14
Jul-14
Jun-14
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Apr-14
Mar-14
Feb-14
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
May-14
Apr-14
20
Apr-14
Apr-14
Apr-14
Mar-14
(INR)
800
Apr-14
60
Apr-14
60
Mar-14
120
Mar-14
Feb-14
(INR)
40
Feb-14
1,000
(INR)
Feb-14
(INR)
1,000
Mar-14
360
(INR)
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Apr-14
Mar-14
Feb-14
(INR)
80
Feb-14
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Apr-14
Mar-14
Feb-14
(INR)
First Call
600
400
200
0
IPCA Laboratories
120
Kalpataru Power Transmission
1,000
Feb-14
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Mar-14
(INR)
Feb-14
1,400
1,400
1,000
1,000
2,200
2,200
1,800
Tata Consultancy Services
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Nov-14
Dec-14
Jan-15
Feb-15
Sep-14
Aug-14
Jul-14
Jun-14
Sep-14
1,800
Oct-14
Infosys
Sep-14
Sep-14
2,600
Jul-14
HCL Tech
Aug-14
3,000
2,600
Jun-14
1,000
Apr-14
1,000
May-14
1,300
Apr-14
1,200
May-14
1,900
Mar-14
1,600
Mar-14
2,200
Mar-14
1,800
(INR)
1,400
Feb-14
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
2,500
Mar-14
3,000
(INR)
Feb-14
Mar-14
(INR)
2,000
Feb-14
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Mar-14
(INR)
First Call
1,600
Tech Mahindra
650
600
550
500
450
400
Wipro
First Call
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First Call
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resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement
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findings in relation to their charges of non registration as a broker dealer. Research reports are distributed as per Regulation 22(1) of
the Regulations. An application is filed for obtaining registration under Regulation 3 of the Regulations.
Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved
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DAILY

February 10, 2015

Net Inv (INR Bn)

Value Traded - India (INR Bn)

Chambal Fertilisers and Chemicals - Delivering on expectations; Hold

Ipca Laboratories - Big miss, recovery to take time; Hold

Jet Airways - Turnaround plan in progress; Buy

Kalpataru Power - Matches expectations; Bright prospects; Buy

'BRAVEHEART SERIES' Larsen & Toubro - Profitability takes a breather;

Brigade Enterprises - Firing on all cylinders; company update; Buy

IT - Best time to buy; sector update

GDP - Growth recovery puzzle continues

Securities Lending Borrowing (SLB) Daily

Bond Vector - Gilts hold steady; Auction cutoffs in line

Commodities (USD/Mt ton)

Put Call Ratios

Edelweiss Securities Limited

Sales Traders Commentary

Insider Trades & Bulk Deals

RESULTS FOR THE DAY

Zuari Agro Chemicals

Edelweiss Securities Limited

ABB India Limited.

Cadila Healthcare Ltd.

Edelweiss Securities Limited

CHAMBAL FERTILISERS AND CHEMICALS

Chambal Fertilisers and Chemicals (Chambal) standalone Q3FY15 sales

MARKET DATA (R: CHMB.BO, B: CHMB IN)

52-week range (INR)

Share in issue (mn)

M cap (INR bn/USD mn)

Avg. Daily Vol. BSE/NSE (000) : 976.3

Robust trading volumes drive the quarter

Outlook and valuations: Awaiting policy actions; maintain HOLD

* Promoters pledged shares

PRICE PERFORMANCE (%)

Dil. EPS (INR)

* Annual numbers are on consolidated basis

Manoj Bahety, CFA

IT business incurred loss of USD9.3mn in CY14 at PAT level. Chambal is planning to

Edelweiss Securities Limited

Chambal Fertilisers and Chemicals

Gross debt stood at INR27.3bn, as on Sept 30, 2014.

Shipping business outlook has improved. However, it continues to remain challenging.

The company has invested INR0.3bn in 12% non-convertible preference shares of

Table 1: Fertiliser sales volume

Q3FY14 Y-o-Y (%)

Q2FY15 Q-o-Q (%)

YTDFY14 Y-o-Y (%)

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Edelweiss Securities Limited

Chambal Fertilisers and Chemicals

8.7 On account of higher traded

On account of higher traded

Edelweiss Securities Limited

Edelweiss Securities Limited

Chambal Fertilisers and Chemicals

Repo rate (exit rate)

Urea sales (mn MT)

Depreciation and amortisation

Traded fertiliser sales volume (MT)

P2O5 sales growth (%)

Other Subsidiaries sales growth (%)