PRIVATE CLIENT RESEARCH

INITIATING COVERAGE
NOVEMBER 10, 2017

Sumit Pokharna
Sumit.pokharna@kotak.com QUESS CORP LTD
+91 22 6218 6438
PRICE: RS.820 RECOMMENDATION: BUY
TARGET PRICE: RS.1010 FY19E PE: 32.5X
Stock details Quess corp is one of the India’s leading integrated business service providers
Stock details (People & Services, Global Technology Solutions, Integrated Facility
BSE code : 539978 Management and Industrial asset management) with an exceptional track
NSE code : QUESS record-Sales/PAT grown at a 6 year CAGR of 57%/101% respectively. It is
Market cap (Rs bn) : 114
promoted by Fairfax Financial Holdings through its Indian subsidiary, Thomas
Free float (%) : 18.11
52 wk Hi/Lo (Rs) : 1068/516
Cook India Ltd (TCIL) and Mr. Ajit Isaac (Chairman and CEO). It operates in nine
Avg daily volume (nos) : 91,455 countries (across North America, the Middle East and South East Asia) with
Shares (o/s) (mn) : 138.3 1700 clients’ base and an employee strength of 189,200. With 18
acquisitions/investments, Quess added new service line capabilities, client
acquisition, and geographical expansion. Considering, highly fragmented
Summary table
service market, its small size and huge growth opportunities, we expect that
(Rs mn) FY17 FY18E FY19E
a large part of Quess’ growth will be driven by inorganic mode. Further,
Sales 41,574 56,084 70,994 Quess’s management has a strong pedigree of successful acquisition with 4-5
Growth (%) 21.0 34.9 26.6
years of payback period. As Quess has created a strong platform in the large
EBITDA 2,225 3,353 4,737
EBITDA margin (%) 5.4 6.0 6.7 business service space, so we expect growth momentum to continue and
PBT 1,652 2,951 4,341 estimate Sales/PAT CAGR of 31%/75% between FY17-19E.
Net profit 1,118 3,099 3,494
EPS (Rs) 8.2 22.3 25.3 We initiate coverage on Quess Corp Ltd with a BUY rating and a target price
Growth (%) 39.7 172.4 13.1 of Rs.1010/share, valuing the company at a P/E multiple of 40x on FY19E. We
CEPS (Rs) 10.1 24.7 28.3 have assigned a higher PE multiple to Quess compared to its peers considering
BV (Rs/share) 60 149 174 higher growth predictability, headroom for margin improvement, strong
DPS (Rs) - - -
growth history, thrust on acquisitions, large size and huge growth
ROE (%) 18.8 21.4 15.6
ROCE (%) 13.6 17.6 15.4 opportunities. In India, every month ~ 1 million people are entering the
Net cash/(debt) (3,014) (7,290) (8,433) workforce, generating sustainable employment becomes an imperative which
NW Capital (Days) 65 62 62 opens huge growth opportunities for Quess. We believe that given the secular
EV/Sales (x) 2.8 1.9 1.5 organic growth in the business, strong promoter financial commitment and
EV/EBITDA (x) 52.3 31.7 22.2
P/E (x) 100.0 36.7 32.5
track record of the management, a multiple of 40x will likely sustain. From a
P/Cash Earnings (x) 81.1 33.2 28.9 long term perspective, we believe Quess is a compelling investment as
P/BV (x) 13.6 5.5 4.7 numbers (FY19 onwards) do not factor in incremental upside from acquisitions
Source: Company, Kotak Securities – Private Client which remain fundamental to business model. Recently, it raised Rs. 8.74 bn
Research by way of institutional placement (@ Rs.800/share) for acquisitions.

Share holding pattern Key Investment Rationale

Corp Public  Leverage scale to bring in operating efficiency: The staffing industry requires
bodies 5%
minimal capital investment but sees disproportionate increase in profitability
DII 6%
2% and return ratios on gaining scale/volume. The company’s management is
FII strategically focusing on client acquisition, mining existing clients (catering
5% wider services to existing clients) to achieve scale and improving operating level
Promoter
82%
efficiency (such as higher associate to core employee ratio, reduction in
receivable days). This is helping the company to grow its organic business,
expand operating margin and improve return ratios. The Company has guided
Source: Capitaline for EBITDA margin of 8% in the medium term supported by margin expansion
in the recent acquisitions like Brainhunter, MFX, profit contribution from
One-year performance (Rel to Sensex) Manipal Integrated Solutions, and Comtel but we have conservatively assumed
6%/6.7% operating margin in FY18E/FY19E, respectively from 5.4% in FY17.
 Structural growth story: The evolution of Quess from an HR outsourcing
company to a business services juggernaut reveals that there exists a strong
structural growth opportunity. Further, with the rise in GDP, shift from
unorganized to organized sector, and continued consolidation in business
service sector, we expect Quess to grow exponentially. With GST, unorganized
players are unable to undercut the organized sector on pricing resulting in
Source: Capitaline improving prospects of market share gains by organized players.

Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The
views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group
of Kotak Securities Limited.
 INITIATING COVERAGE November 10, 2017

 Aggressive inorganic venture supporting growth: We believe inorganic

expansion is the back-bone to Quess to attain diversification, client penetration
and quick scaling up for growth/operating leverage (turnaround and increased
profitability in acquired companies). With this, the company got exposure to
high margin segments such as GTS, IFM, and IAM. There is further scope for
margin expansion with turnaround of Brainhunter, MFX, Manipal intergrated
solutions, and Comtel. To fuel its growth, Quess has so far done 18
acquisitions/investments in various ventures. Acquisition of Comtel has set the
“next stage of growth” – Quess has established IT staffing footprint in
Singapore and gained market-leading presence in SE Asia, a key geography.
We are optimistic (considering sound track record on integration of
acquisitions) that meaningful value will emerge for Quess from aggressive
inorganic expansion which are opening multiple avenues of growth and
bottom-line expansion.
 Healthy Financials: Quess has grown its revenues and PAT at a CAGR of 57%
and 101% respectively over FY11-FY17. On a consolidated basis, we expect
Quess’s Revenue/EBIDTA/PAT to grow at a CAGR of 31%/46%/75%
respectively between FY17-19E supported by both organic and inorganic
growth.

Key Risk and Concerns:

 Acquisition and integration of future businesses remains the key risk.
 Diversification of business verticals and optimal utilization is necessary to
sustain strong growth
 Any major slowdown in economy can impact our growth assumption.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 2
 INITIATING COVERAGE November 10, 2017

BUSINESS BACKGROUND
Quess Corp Ltd. (erstwhile IKYA Human Capital Solutions) is one of India’s leading
integrated business services providers. The company offers comprehensive
solutions including recruitment, temporary staffing, technology staffing, IT
products and solutions, skill development, payroll, compliance management,
integrated facility management and industrial asset management services.
Incorporated in 2007 and headquartered in Bengaluru, the Company has strong
presence in India, North America, the Middle East and South-East Asia. Quess Corp
is promoted by Fairfax Financial Holdings through its Indian subsidiary, Thomas
Cook India Ltd (TCIL) and Mr. Ajit Isaac (Chairman and CEO). The Company got
listed on exchanges in 2016.

Diversified business segments and revenue streams

Quess has key four business segments - People & Services, Global Technology
Solutions, Integrated Facility Management and Industrial asset management. The
company has a strong team of 189,200 people (54% yoy, including manipal
integrated services (MIS) and terrier security services (Terrier)) serving more than
1700 clients in nine countries.
Four key business verticals
Quess
Revenue: Rs. 41.57 bn
EBIDTA: Rs. 2.23 bn

Industrial Asset Managment

Global Technology Solutions
(GTS)
People & Services(P&S) 1). Leader in IT Staffing in
1). >1,00,000 associates in general India and Singapore
staffing 2). >10,000 technology
professionals deployed
2). 16,000 students trained in India's 66
training centers 3). Insurance platform
processes P&C policies ~$3 bn
pa premium
Integrated Facility Managment
(IFM)
1). Managing two airports, 17
hospitals (~10,000 beds) and six
universities
2). Catering business serves 3.5
mn meals per month
(IAM)
1). Serving 3,750 MW of
power, 22 mtpa of Steel and
1.7 mtpa of non-ferrous
metals
2). Maintain 21,000 telecom
towers
3). Managed 2 mn electrical
meters pa

Recruitment, Staffing RPO and IT Solutions, Services and Integrated Maintenance of Industrial Asset O&M and
Skill deveopment Products Facilities managed services

Source: Company. RPO: Recruitment process outsourcing. P&C: Policy & Claims

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 3
 INITIATING COVERAGE November 10, 2017

Quess has expanded its wings to nine countries

Source: Company

Details about Key acquisitions

I). Manipal Integrated Services Private Limited (MIS) – IFM
In Nov’16, Quess acquired the facility management and catering businesses of
Manipal Integrated Services Private Limited (MIS).
Key benefits for Quess-
With this acquisition, Quess got access to the rapidly growing healthcare and
education FM space. It has also developed a strategic partnership with the Manipal
Group. MIS had a headcount of ~17,000 associates. The FM business of MIS has
a revenue of Rs. 4.59 bn and an EBITDA of Rs. 510 mn. MIS is expected to add Rs.
6 bn to revenue and has operating margin of 10-11%.
In addition to Manipal Group entities, MIS serves more than 120 clients with
presence in healthcare, education and BFSI sectors.
Financial details of acquisition-
Interestingly, the acquisition was structured as a cash-cum-stock deal with an initial
investment of Rs. 2.2 bn by Quess to subscribe to Compulsorily Convertible
Preference Shares (CCPS) of MIS for securing an interest in the FM business.
Revenue visibility-
Quess and Manipal Education & Medical Group (MEMG) have further entered into
a long-term partnership under which Quess will provide facility management,
catering and security services to all MEMG affiliated entities for a minimum period
of five years.
II). Comtel Solutions Pte Limited (Comtel) – GTS
With 64% stake in Comtel, Quess attained market leadership in the Singapore IT
Staffing market. In Feb’17, Quess acquired 64% in Comtel (enterprise value of
~SGD 41.95 million) with the balance stake to be acquired in a phased manner by
FY 2021-22. In FY17, Comtel booked a revenue of SGD 96 million and an EBITDA
of SGD 8 million.
Comtel is one of Singapore’s largest independent staffing companies. It offers
services across staffing solutions, managed services solutions, and recruitment and
search services with operations across Singapore, Malaysia and Indonesia. Going
forward, it is expected to serve as a springboard for expansion of other Quess’
services, such as general staffing, managed services for technology, training and
skill development, and facility management in Singapore.
Comtel serves more than 60 clients, including marquee names in BFSI, engineering
and IT sectors. Comtel has more than 1,200 associates.
III). Terrier Security Services (India) Private Ltd (Terrier) - IFM
To venture into manned guarding space, Quess invested Rs.720 mn (in Dec’16) to
acquire 49% stake in Terrier. Post regulatory clearances, Quess will acquire
additional 25% stake in Terrier.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 4
 INITIATING COVERAGE November 10, 2017

With a track record of over 28 years, Terrier is among the leading providers of
manned guarding services in India. Headquartered in Bengaluru, Terrier has a pan-
India footprint with presence in over 14 states across 60 cities.
The acquisition marks Quess’ entry into the manned guarding space. It cements
Quess’ market leading presence in facility management with the addition of
manned and electronic security services.
IV). Inticore VJP Advance Systems Private Limited (Inticore) - IAM
In December 2016, Quess acquired 74% stake in Inticore with an investment of
Rs. 35 mn (as subscription to fresh equity shares of Inticore). With this acquisition,
Quess acquired the capability to provide design and advance engineering solutions
to the Industrials business segment.
Inticore strategic fit with Industrials business - to boost capability to develop
engineering solutions
Inticore, based in Coimbatore, is an engineering design and solutions company
focused on aerospace, engineering, defence, and oil & gas sectors. The investment
is envisaged to boost Quess’ capability in developing engineering solutions.
V). Heptagon Technologies Private Limited - GTS
Quess Corp has acquired 43.81% stake in Heptagon Technologies Private Limited
("Heptagon") with an investment of Rs 89.404 mn and accordingly Heptagon has
become an associate of the Company. Heptagon develops and offers software
working with machine learning and automation technologies. It offers the best
digital transformation services for business leveraging mobile, IoT & Data Analytics.
The company was incorporated in 2015 and is based in Coimbatore, India.
VI). Simpliance Technologies - Simpliance
Simpliance, uses a digital labour law compliance management tool, helps
organizations to comply, manage and monitor the health and risk status of labour
legislations in their country. The company have been able to cut down the time
taken on labour compliance related activities significantly which is helping
corporates to lower its cost. Simpliance, an associate of Quess Corp, is looking at
an international expansion opportunity on the labour laws front. It is a Google-
integrated company which will help them go global and map all the labour laws
of the globe. This will help global companies identify the particular laws in every
location that they operate in.
The company is also looking at providing solutions for environmental health and
safety as that is an area of concern for Indian companies. Currently, it has more
than 120 clients that includes both startups and very large companies.
Quess Corp acquired 45 percent stake in Simpliance in 2016. Quess investment
was focused on helping develop and ramp up the Simpliance technology platform
which is aimed at providing a one stop comprehensive solution for meeting the
labour compliance requirements of corporates.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 5
 INITIATING COVERAGE November 10, 2017

Key driving force – Management details

Name Designation Experience Details
(years)
Ajit Isaac Chairman, Managing Director & CEO 25 MBA from University of Madras and is a British Chevening
Scholar from the University of Leeds, UK. CEO at Quess since
April 2009 and Chairman & Managing Director since May 2013.

Pratip Chaudhuri Non-Executive, Independent Director 40 MBA from Punjab University and is a member of the Indian
Institute of Bankers. Chairman of State Bank of India. Director
at Quess since July 2015.

Pravir Kumar Vohra Non-Executive, Independent Director 39 Masters in Economics from University of Delhi and is a Certified
Associate of the Indian Institute of Bankers. He was previously
the Group Chief Technical Officer at ICICI Bank Limited. Director
at Quess since July 2015.

Revathy Ashok Independent Director 30 Post Graduate Diploma in Management from the Indian Institute
of Management, Bangalore. EX-Director – Finance and
Administration of TSI Ventures and the CFO of Syntel Limited.
Director at Quess since July 2015.

Sanjay Anandaram Independent Director 28 Post Graduate Diploma in Management from the Indian Institute
of Management, Bangalore. Director at Quess since December
2015.

Chandran Ratnaswami
Non-Executive Director 26 Mr. Ratnaswami is the CEO of Fairfax India Holdings
Corporation and MD of Hamblin Watsa Investment Counsel.
B.Tech. (Civil Engineering) from Indian Institute of Technology,
Madras and a Master’s degree in Business Administration from
Rotman School of Management, University of Toronto, Canada.
Mr. Ratnaswami has been a director of Thomas Cook India since
August 22, 2012, and a director of India Infoline Limited since
May 15, 2012. He also serves as a director on a number of
insurance and non-insurance companies in India and abroad.
Director at Quess since January 2016.

Madhavan Menon Non-Executive Director 35 Director at Quess since May 2013.

Subrata Kumar Nag Executive, Whole-time Director & CFO 28 MBA, ICWAI, ICSI and AICPA. Ex-vice president–Finance and
Company Secretary of Ilantus Technologies Private Limited.
Director at Quess since July 2013.
Source: Company

Shareholding pattern
Thomas Cook (India) Limited has become the parent company and Fairfax Financial
Holdings Limited has become the ultimate holding company of Quess corp., w.e.f
14 May 2013. Fairfax Financial Holdings Group invested USD 172.7 mn in Thomas
Cook, purchasing shares from Thomas Cook UK and others.
Shareholding pattern (%) Promoters holding (%)
FIIs
9% Thomas
Cook India
Limited
Domestic 70%
Promoters Institutions
82% 4%

Corporate
Net
bodies
Ajit Isaac Resources
1%
Public 16% Investments
4% Pvt. Ltd.
14%

Source: BSE

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 6
 INITIATING COVERAGE November 10, 2017

Structure of the company

Structure Company Name
Ultimate Holding Company Fairfax Financial Holdings Limited
Holding Company Thomas Cook (India) Limited
Subsidiaries (including step subsidiaries)
Coachieve Solutions Private Limited Brainhunter Companies LLC, USA
MFX Infotech Private Limited Quess (Philippines) Corp.
(formerly known as Magna Ikya Infotech Inc., Philippines)
Brainhunter Systems Ltd., Canada Quess Corp (USA) Inc. (formerly known as Magna
Infotech Inc.)
Mindwire Systems Ltd., Canada Quesscorp Holdings Pte Ltd, Singapore
(formerly known as
ZYLOG SYSTEMS (OTTAWA) LTD.)
Brainhunter Companies Canada Inc., Quessglobal (Malaysia) SDN. BHD.
Canada (formerly known as Brainhunter SDN. BHD., Malaysia)
Aravon Services Private Limited Ikya Business Services (Private) Limited
(formerly known as ARAMARK
India Private Limited)
MFXchange (Ireland) Limited MFXchange Holdings Inc., Canada
MFXchange US, Inc. MFX Roanoke Inc., USA (merged with MFXchange US,
Inc. effective 31 December 2015)
Quess Lanka Private Limited Dependo Logistics Solutions Private Limited
(formerly known as Randstad Lanka
Private Limited)
Inticore VJP Advanced Solutions Comtel Solutions Pte Ltd
Private Limited
Excelus Learning Solutions Private Limited CenterQ Business Solutions Private Limited
Source: Company

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 7
 INITIATING COVERAGE
Stellar performance - Quess
revenue and PAT grown at a CAGR
(6 years) of 57% and 101%
respectively over FY11-FY17.
Business functions that are ‘non-
core’ to an entity’s business are
‘core’ to Quess
Key focus areas:
1). Growth
2). Margin improvement and
3). Better return ratio’s
Kotak Securities – Private Client Research
November 10, 2017
INVESTMENT ARGUMENTS
Quess, India’s one of the largest integrated service providers, has a diversified
portfolio of business services for its 1700 clients. Considering, the wide
diversification in service offerings across multiple industries (i.e. e-commerce,
technology, banking and financial services, insurance, real estate, infrastructure
facility management, power, energy, oil and gas, chemicals, metals, automotive,
engineering, telecom, healthcare, FMCG and retail) we believe the business risk is
low even if there is a slowdown in one sector. During the last five years (FY13-
FY17), Quess’s revenue growth is 7x, EBITDA growth is 8x and PAT growth is 14x
supported by a mix of organic and in-organic growth. Quess has grown its
revenues and PAT at a CAGR of 57% and 101% respectively over FY11-FY17.
Structural shift - Clients switching to asset light model, opens great business
opportunity
In today’s digital world, competitive intensity has increased, traditional supply chain
has been disrupted, and clients switching to asset-light business models, reflecting
companies (startups and others) intent to remain flexible to fast changing market
conditions. As a result, corporates are outsourcing non-core activities to
professional service providers like Quess corp. In this regard, Quess acquired
technology and digital capabilities across businesses to “variabilize” fixed costs for
its clients, transition internal businesses and manufacturing processes into
managed services and providing flexibility of pay-per-use for common business
service requirements.
Increased acceptance of outsourcing non-core activities and sustained
commercial/office space absorption have been significant growth drivers for facility
management services in India. In FY16, the IFM market size has grown at a five
year CAGR of ~15% to Rs.104 bn and management believes the is expected to
grow at a 25% CAGR over the next three years reflecting huge growth potential
for integrated service providers like Quess corp.
Leverage scale to bring in operating efficiency
The company’s management is strategically focusing on client acquisition, mining
existing clients to achieve scale and improve operating level efficiency (such as
higher associate to core employee ratio, reduction in DSO days). This is helping the
company to grow its business, expand operating margin and improve return ratios.
Tripod – Spectacular growth, Margin expansion and Better returns
Operational efficiency
Client acquisition Mining existing clients
Source: Company and Kotak Securities - Private Client Research
Despite six acquisitions done in FY17, Days Sales Outstanding (DSO) have reduced
by four days to 39 days reflecting management’s focus on keeping leverage under
control. A key observation is that Quess extends funding for 40% of its general
staffing revenues (rest being ‘collect and pay’) with the same metric being 20%
for Team lease. However, we don’t see funding increase further from the current
levels for Quess. We believe that improvement in working capital and cash
conversion will be critical for the company.
Please see the Disclosure/Disclaimer on the last page For Private Circulation 8
 INITIATING COVERAGE
Shifting consumer preferences and
far reaching technological changes
opens business opportunity for
Quess
Focus to grow high margin
business
Kotak Securities – Private Client Research
November 10, 2017
Reduction in DSO days
(Rs. mn) FY16 FY17
Consolidated Receivables 4053 4468
Receivables days 43 39
Source: Company and Kotak Securities - Private Client Research. Note Does not include unbilled revenue
Structural growth story of Quess
We have seen a paradigm shift in Quess business operations. It has evolved from
a normal HR outsourcing company to a business services juggernaut, reflecting
sound structural growth opportunity. On a micro level, large corporate are
outsourcing ancillary services as they believe that professionals are more efficient,
effective, and competitive to do the same. Also, in a volatile economic landscape,
with shifting consumer preferences and far reaching technological changes
companies are focusing on its core competency and outsourcing ancillary activities.
Business functions that are ‘non-core’ to an entity’s business are ‘core’ to Quess
On the macro front, with the rise in GDP, shift from unorganized to organized
sector, and continued consolidation in business services sector, we expect Quess
to benefit and expect it to grow exponentially. With GST, unorganized players are
unable to undercut the organized sector on pricing resulting in improving
prospects of market share gains by organized players.
Revenue diversification lowers risk
Quess has a de-risked business model-no concentration in terms of segmental and
sectoral exposure. Currently, the company has divided its business operates into
four key segments namely a). People & Services (P&S), b). Global Technology
Solutions (GTS), c). Integrated Facility Management (IFM), and d). Industrials.
Key business verticals (Revenue)
Integrated facility Industrials
management 5%
10%
Global technology
solutions
29% People and
services
56%
Source: Company
All of these areas have been witnessing high growth and we expect the trend to
continue going forward, as well. The company’s intend is to grow GTS, IFM and
IAM businesses faster, which are relatively high margin businesses compared to
P&S business. It also has focus on managed services offerings in the e-commerce
ecosystem. Predictability of growth is higher for Quess given that it operates across
segments, which makes the company less reliant on growth from any one segment
of the economy.
Please see the Disclosure/Disclaimer on the last page For Private Circulation 9
 INITIATING COVERAGE November 10, 2017

Quick sum-up of services under different verticals

Services Description Comments
People and Services (P&S) Search, Recruitment and Recruitment process Quess’ Training and Skill Development business (branded
outsourcing (RPO), general staffing, training and as Excelus) is among the largest skilling partners under
skill development, payroll & compliance and retail the public private partnership (PPP) model. In FY17, the
solutions company trained 16k students. Currently, the company
have 23 ongoing projects at 66 centers across 15 states.

Global Technology Services (GTS)
Three key areas: a) IT Staff Augmentation,
b) Solutions and c) Products.
In IT Staff Augmentation, Quess is the largest
independent player in India and Singapore
(after the acquisition of Comtel), with a rapidly
growing presence in the ASEAN markets.
In FY17, Brain hunter and MFX turnaround at operating
level.
Brain hunter (Quess’ vehicle into the North American IT
Staff Augmentation market) and MFX (Solutions and
Products business).

Integrated Facility Management Soft services (housekeeping), hard services (HVAC One-stop shop for all facility management needs
(IFM) and electrical maintenance), food and hospitality IFM associate headcount increased to ~22,300,
(corporate catering), pest control and manned 13% yoy growth.
guarding (security personnel, bodyguards).

Industrials (IAM) Plant Asset Management-offering comprehensive
solutions in industrial operations and maintenance
along with managed services (in Utilities/Telecom).
Source: Company
Quess is among the leading players in the Plant Asset
Management
Provides technology and consulting business (high
margin in nature) to oil and gas companies.

Inorganic expansion will also boost growth

Globally, staffing firms gained scale, diversified in ancillary services and expanded
wings to various geographies by mergers and acquisition. Quess corp is following
the same foot prints.
Growth strategy

General staffing Gain Scale Business Geographical Conglomerate

diversification expansion (M&A)

Source: Kotak Securities – Private Client Research

Inorganic expansion is the back-bone to Quess to attain diversification, client

penetration and operating leverage (turnaround and increased profitability in
acquired companies). Quess acquired couple of loss making companies like
Brainhunter, MFX, etc and turn them around. The management identified the key
issues (like high SGA, onsite-heavy teams and operational inefficiencies) with
Brainhunter, MFX and fixed them by optimizing costs, tweaking the business
model and increasing offshoring.
Acquisitions across business segments
Global Technology Solutions People & Services Integrated Facility Management Industrial Asset Management
MFX IKYA Avon Hofincons
Brainhunter Coachieve Aravon Maxeed
Magna Infotech excelus Terrier Security Transfield
Mindwire Styracorp Manipal Integrated Services Inticore
Randstad Lanka Vedang
Comtel Solutions
Source: Company

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 10
 INITIATING COVERAGE November 10, 2017

To fuel growth, Quess has made six acquisitions in FY17 out of a total 18
acquisitions and investments in various ventures till now. This has helped in moving
to high margin segments such as GTS, IFM, and IAM. We would like to highlight
that there is a further scope for margin expansion with turnaround of Brainhunter,
MFX, Manipal integrated solutions, and Comtel. Recently, it has acquired Vedang
cellular services having an operating margin in the range of 11-12%. The
acquisition should be margin accretive for Quess, we opine.
Quess margin expansion chart (%)

5.5% 5.4%

5.0%

4.5%

4.0%
3.5%
3.5%

3.0%
FY11 FY17

Source: company

Further, these acquisitions have helped Quess to add new service line capabilities,
expand client base and operate in new geographies. The recent acquisition of
Manipal Integrated Services (MIS) and Terrier Securities have strengthened its
position in the facility management space, manned guarding and electronic
security adding depth to integrated facility management offerings, respectively.

Quess portfolio expansion with recent acquisition

Recent acquisitions

Manipal
Terrier Security Vedang cellular
Integrated Services Comtel Solutions Heptagon Simpliance
Services services
(MIS)

A). Manned guarding 1). Among top 5 telecom network

1) Manages Manipal Software
and otimization space player
Education and Medical A). Singapors's largest development
Group's food services, security solutions independent IT Technology 2). Complements existing capabilities
company working of telecom network O&M
facility management and business staffing company
with platform for
B). Adds to
hostels business B). >400 clients like labor compliance 3). FY17, revenue is Rs. 782 mn (2%
Quess' presence in machine learning of Quess total revenue)
2). Revenue visibility of Infosys, and requirements
Malaysia
Rs 24 bn and gross TCS, ITC, HCL, ABB, 4). Operating Margin: 11-12%
C). Headcount >1,500 automation
margin of Rs 4 bn over Robert technologies %). Margin accetive acquistion
next 5 yrs
Bosch, TYCO, Hinduja
Group
C). Headcount >18,000

Source: Company

Autonomy, Guidance and Connectedness are the key pillars

Strong and professional The Company’s management has clearly defined that all its business will be
management lays foundation for decentralized and run by respective presidents independently. The management
trust doesn’t get involved in day-to-day operations. Road-map is regularly discussed with
the subsidiaries and strategic direction is decided by the owner management of
the target company. The corporate office is involved only in capital allocation,
performance goal-setting and leadership planning. Quess follows open and
collaborative communication approach between corporate office and its service
businesses. We believe that this approach ensures that on one end the focus will
not be lost and on the hand opportunities (small or big) are optimally grabbed.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 11
 INITIATING COVERAGE
Contract staffing is rising
rapidly in India
Kotak Securities – Private Client Research
November 10, 2017
Flexi-staffing is in rising trend – IT Sector:
With higher business volatility in IT industry, slowdown in project flows, and lower
project duration (average duration reduced from 15 months to 8-9 months in the
last two years) tech companies are increasing flexi or contract staffing as it is easier
to shed staff in difficult times. Employee cost is the biggest cost factor for tech
companies. The companies are opting for `just-in-time' IT staffing models for
smaller projects with their new clientele. On a monthly basis, IT services companies
have hired more than 1,000 people reflecting rising flexi job demand.
Off late, the traditional bench models of IT companies under which full-time
employees are kept on standby in the expectation that a project will come - are
difficult to sustain. Now a days, the staffing companies maintain a large database
of potential hires and based on their requirements people bring them on their rolls,
deploy them on client sites, and manage the payroll and other matters related to
the hire. In fact, the number of IT contract employees have increased ~10% yoy.
Flexi staffing is not restricted to IT sector. India’s biggest ecommerce companies
Flipkart and Amazon alone contributed to the creation of over 42,000 temporary
jobs with their festive season sales. Temp staffing typically peaks in September -
October and declines in December. Flipkart has hired over 20,000 temporary staff
to ramp up its delivery and logistics service. Amazon is adding over 22,000
temporary staff.
In FY18, the huge demand for entry-level temp jobs is led by consumer goods,
electronics, retail, ecommerce and telecom. As per industry sources, ~1.3 lakh
seasonal jobs are likely to be created in the festive period, across industries such as
demand from Samsung has gone up as it is increasing its presence in smaller cities,
and fintech companies including Paytm, Mobikwik and Aditya Birla Money.
Please see the Disclosure/Disclaimer on the last page For Private Circulation 12
 INITIATING COVERAGE November 10, 2017

FINANCIAL ASSUMPTION
Overall summary of our key assumptions
We are positive on Quess’s growth story and expect it to witness a sea-change in
its financial performance over FY17-19E driven by steady expansion, improvement
in operating margins and turnaround of loss making acquisitions.
We base our estimates on a detailed analysis as reflected in the following sections:
Steady revenue growth –
We believe currently Quess has merely scratched the surface of an immense
opportunity in business services emerging from shift of unorganized to organized
players, and consolidation of the vendor base. In the last 3 years, Quess has posted
a spectacular sales and PAT CAGR growth of 61% and 78%, of which 24% and
53% has been organic.
We expect revenue growth of 35% yoy to Rs.56 bn in FY18E and 27% yoy to
Rs.71 bn in FY19E supported by additional revenues from seven recent acquisitions
and growth from core businesses. Just to highlight, majority of the acquisitions
and investments were made in H2FY17, with the exception of MIS and Vedang,
which is in FY18. Hence, revenue from these ventures will be reflected in FY18E
and onwards, we opine.
Segment wise revenue break-up
Revenue (Rs. Mn) 2017 2018E 2019E
People and services 23,454 27,441 32,655
Growth (%) 20 17 19
Global technology solutions 11830 15970 21240
Growth (%) 28 35 33
Strong all-round Integrated facility management 4,046 9,711 13,207
performance Growth (%) 9 140 36
Industrials 2,244 2,962 3,892
Growth (%) 17 32 31
Source: Company, Kotak Securities - Private Client Research

In FY17, Quess booked gross sales of Rs 41 bn, driven by strong organic growth
of 21% yoy. Revenue growth of 21% yoy was driven by 28% yoy growth in GTS,
20% yoy growth in P&S, 17% yoy growth in IAM, and 9% yoy growth in IFM.

Quess’s revenue has grown at a CAGR of 57% (FY11-17) Revenue Mix (%) FY17
80,000
Integrated Industrials
70,000
facility 5%
60,000 management
10%
50,000
40,000
30,000 Global
20,000 technology People and
solutions services
10,000 29% 56%
-
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Source: Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 13
 INITIATING COVERAGE November 10, 2017

Segment revenue growth

Revenue (Rs. Mn) FY11 FY12 FY13 2014 (9M) 2015 2016 2017 CAGR (%)
(15 Months)
People and services 1,835 3,626 6,220 6,188 14,036 19,498 23,454 53%
Growth (%) 98 72 (1) 127 39 20
Global technology solutions 462 2049 2687 2623 7372 9211 11830 72%
Growth (%) 344 31 (2) 181 25 28
Integrated facility management 462 713 1,123 1,258 3,021 3,719 4,046 44%
Growth (%) 54 58 12 140 23 9
Industrials - 1,274 1,922 2,244 33%
Growth (%) 51 17
Source: Company, Kotak Securities - Private Client Research; Note: Numbers for 2014 and 2015 are reported numbers

Employee cost - higher associate to core employee ratio

The key cost to the company is the employee expenses which includes salaries,
wages and bonus payments to associate employee as well as to its own permanent
employees. Employee benefit expense constituted 85.2% of the revenue in FY17.
We expect employee cost to increase by 33% yoy to Rs.47.2 bn in FY18E and 27%
yoy to Rs.59.7 bn in FY19E due to recent acquisitions. The company made addition
of ~38K associates in FY17 to ~159,200 associates, up 30% yoy. It is worth noting
that associate/Core employee ratio has improved across verticals.

EBIDTA Outlook (Rs. Mn)

We expect FY18E EBIDTA to be Rs.3.4 bn (higher by 51% yoy) and FY19E EBIDTA
to be Rs. 4.7 bn (higher by 41% yoy) as against Rs.2.2 bn in FY17 driven by both
organic/inorganic revenue growth and better operating efficiency.

Margin Outlook
Margin improvement, led by turnaround in acquisition - During FY11-17, Quess
has expanded EBIDTA margin from 3.5% to 5.4% supported by venturing into
higher margin businesses (GTS, IFM and IAM), economies of scale to bring in
operating efficiencies (higher associate to core employee ratio), and turnaround
of loss making businesses. The Company has guided for EBITDA margin of 8% in
the medium term supported by margin expansion in the recent acquisitions like
Brainhunter, MFX, Manipal Integrated Solutions (operating margin 10%-11%),
and Comtel. However, on a conservative note we have modeled an operating
margin of 6% in FY18E and 6.7% in FY19E.
Operating margin improved constantly (%)
7.0%
6.7%
6.5%
6.0% 6.0%
5.5%
5.4%
5.0% 5.1%
4.6% 4.7%
4.5%
4.2%
4.0% 4.0%
3.5% 3.5%
3.0%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Source: Kotak Securities - Private Client Research

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 14
 INITIATING COVERAGE November 10, 2017

Depreciation
The staffing industry requires minimal capital expenditure and sees
disproportionate increase in profitability and return ratios on gaining scale (i.e.
economies of scale). Quess also follows asset light model.
The company follows Straight Line Method (SLM) of depreciation. We expect
depreciation cost of Rs. 330 mn in FY18E and Rs. 426 mn in FY19E as against
Rs.264 mn in FY17.
Implied depreciation rates
Category Useful life (years) Implied depreciation %
Leasehold improvements Lease term or estimated
useful life whichever is lower
Plant and machinery 3 33.33%
Computer equipment 3 33.33%
Furniture and fixtures 5 20%
Office equipment 5 20%
Vehicles 3 33.33%
Source: Company, Kotak Securities - Private Client Research

Goodwill
Under Ind AS, acquired goodwill is not amortized as it has indefinite useful life and
tested for impairment annually and when there is an indication of impairment the
same is impaired whereas in Indian GAAP, purchased goodwill was amortized over
5 years. Therefore, on Ind AS transition the amortization of goodwill as per IGAAP
has been written back. As on 30th September 2017, Goodwill stands at Rs.3.9 bn

Income Tax
Sec 80 JJAA benefits availed: Quess average tax rate is lower because it enjoys
income tax benefits under Sec 80 JJAA. In Q2FY18, Quess enjoyed income tax
benefit of Rs.66 mn related to FY17 and Rs.130 mn for H1FY18. We expect the
tax benefit to continue which will keep its average tax rate lower.
Key extract of Sec 80 JJAA: With effect from 1st April’17, deduction in respect of
employment of new employees. Companies will be allowed a deduction of an
amount equal to thirty per cent of additional employee cost incurred in the
previous year, for three assessment years including the assessment year relevant to
the previous year in which such employment is provided.

Earnings Outlook
In FY18E, we expect Quess’s PAT to be Rs. 3.1 bn and Rs. 3.5 bn in FY19E mainly
on account of turnaround of acquired companies and improved in margins. We
expect Quess to have an EPS (on fully diluted equity) of Rs. 22.3 in FY18E (172%
yoy growth) and Rs. 25.3 in FY19E (13% yoy growth) as against Rs.8.2 in FY17.
Quess’s bottom-line has grown at a CAGR of 102% (FY11-FY17)

3500
3000
2500
2000
1500
1000
500
0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Source: Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 15
 INITIATING COVERAGE November 10, 2017

PAT margins (%)

We forecast PAT margin of ~5.5% in FY18E and 4.9% in FY19E as against 2.7%
in FY17. Improvement in net margin is mainly due to tax benefits under Sec 80JJAA
and improvement in operating profit.

Return on Equity (ROE)

In FY18E, we expect ROE of ~21% and for FY19E we expect ROE to be 16% as
against 19% for FY17. In FY18, Quess raised Rs. 8.74 bn by way of institutional
placement.

Debt to equity ratio

We expect debt to equity ratio to improve going ahead supported by higher
revenue/cash flows from new acquisitions/core business. In FY18E, we expect debt
to equity ratio of 0.24x and 0.19x in FY19E.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 16
 INITIATING COVERAGE November 10, 2017

INDUSTRY DETAILS
In India, every month ~1 million people are entering the workforce, generating
sustainable employment has becomes an imperative which opens huge growth
opportunities for service providers. India has one of the largest flexible staffing
workforce numbers in the world, next only to China and the US. The government
employs a temporary workforce of about 12.3 million. The retail sector is expected
to witness growth to the tune of 10% to 12% per annum, making it the most
lucrative option for a massive growth in flexible staffing. The penetration of
contract staff in the IT and IT-enabled services industry is also likely to increase from
10% to 20% in the next few years. According to the Indian Staffing Federation,
there are at present 1.3 million temporary workers in the organised sector, which
is likely to increase to 9 million workers in the next 10 years.
Further, in today’s digital world, competitive intensity has increased, traditional
supply chain has been disrupted, and clients switching to asset-light business
models, reflecting companies (startups and others) intent to remain flexible to fast
changing market conditions. As a result, corporates are outsourcing non-core
activities to professional service providers. In response, service providers in the
industry has acquired technology and digital capabilities across businesses to
“variabilize” fixed costs for its clients, transition internal businesses and
manufacturing processes into managed services and providing flexibility of pay-
per-use for common business service requirements.
Temporary or contract-based work is on the rise as many of the top talents are
taking up freelancing or on contract jobs, in this process, staffing firms will play a
pivotal role in easing the relationship between freelancers and their clients.
Training is the starting point for developing a temporary work-force. A company
with training facilities has an edge in terms of an employment-ready and local
temporary workforce.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 17
 INITIATING COVERAGE November 10, 2017

VALUATIONS & RECOMMENDATIONS

We initiate coverage on Quess Corp Ltd with a BUY rating and a target price of
Rs.1010/share, valuing the company at a P/E multiple of 40x on FY19E.
Why we like Quess? Predictability of growth, headroom on margins, strong growth history, thrust on
acquisitions and huge growth opportunities drive premium valuations. In India,
every month ~1 million people entering the workforce, generating sustainable
Structural
growth story
employment becomes an imperative which opens huge growth opportunities for
Quess. We believe that given the secular organic growth in the business and track
record of the management, a multiple of 40x will likely sustain. Apart from growth,
Favourable valuations would be driven by potential headroom, breadth of services, return
macro Sustainable
economic performnace ratios and cash generation. From a long term perspective, we believe the stock is
factors a compelling investment as numbers (FY19 onwards) do not factor in incremental
upside from acquisitions which remain fundamental to business model.
Source: Kotak Securities – Private Client Research Valued Quess after considering….

Growth

Strong
Margin
track
head room
record

Wide
Return
breadth of
ratio
service

Source: Kotak Securities – Private Client Research

We view this sector to be on a structural growth path led by favorable

macroeconomic factors. Growth pillars are likely to make performance sustainable
over the longer term, we opine.
Valuation multiple
FY19E
EPS 25
TARGET PE 40
Target Price (Rs/Share) 1010
CMP 820
Upside 23%
Source: Kotak Securities – Private Client Research

Peer Comparison
Company Name Mkt Cap PE (x) PB (X) ROE (%) EPS
Rs. Bn FY18E FY19E FY18E FY19E FY18E FY19E CAGR (%)
FY17-19E
Quess Corp 114 36.7 32.5 5.5 4.7 21.4 15.6 76%
Team Lease 32 41.4 31 7.1 5.8 18.2 19.5 25%
Source: Kotak Securities – Private Client Research; Bloomberg

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 18
 INITIATING COVERAGE November 10, 2017

KEY RISK AND CONCERNS

 Weak cash conversion cycle
 Acquisition risk
 Losing clients
 Slowdown in IT sector
 Employee is the key to success – Inability to recruit, train and retain qualified
associates

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 19
 INITIATING COVERAGE November 10, 2017

FINANCIALS
Profit and Loss Statement Balance Sheet
(Rs mn) FY16 FY17 FY18E FY19E (Rs mn) FY16 FY17 FY18E FY19E
Revenues 34,350 41,574 56,084 70,994 Cash and cash equivalents 1,115 4,609 10,439 10,167
% Change YoY 21 35 27 Accounts receivable 6,926 8,337 10,986 13,907
EBITDA 1,607 2,225 3,353 4,737 Inventories 18 57 62 68
% Change YoY 38 51 41 Loan and Advances 1,245 1,896 2,557 3,237
Other Income (5) 157 332 348 Others - - - -
Depreciation 144 264 330 426 Current Assets 9,304 14,899 24,045 27,379
EBIT 1,457 2,117 3,355 4,658 Deferred tax assets/(Liabilities) 322 (848) (804) (757)
% change YoY 45 58 39 LT Investments 37 2,976 3,085 3,085
Interest cost 310 465 404 318 Net Fixed Assets 2,546 4,448 4,718 4,868
Profit before Tax 1,147 1,652 2,951 4,341 Total Assets 12,209 21,476 31,044 34,575
% change YoY 44 79 47 Payables 674 631 885 1,037
Tax 335 518 (140) 846 Others 3,737 4,397 5,774 6,913
as % of PBT 29 31 - 20 Current liabilities 4,411 5,029 6,659 7,949
Net Income 812 1,134 3,091 3,494 Provisions 337 452 610 773
% change YoY 40 172 13 Debt 3,894 7,624 3,149 1,734
Shares outstanding (mn) Adj. 138 138 138 138 Others - 9 - -
EPS (reported) (Rs) 5.9 8.2 22.3 25.3 Equity 1,133 1,268 1,383 1,383
CEPS (Rs.) 6.9 10.1 24.7 28.3 Pref. Capital
DPS (Rs) - - - - Reserves 2,433 7,094 19,242 22,736
Source: Company, Kotak Securities - Private Client Research Total Liabilities 12,209 21,476 31,044 34,575
BVPS 31 66 149 174
Cash Flow Statement (Rs mn) Source: Company, Kotak Securities - Private Client Research
(Rs mn) FY16 FY17 FY18E FY19E
Ratio Analysis
EBT 1,147 1,652 2,951 4,341
Depreciation 144 264 330 426 (Rs mn) FY16 FY17 FY18E FY19E
Change in working capital (938) (197) (1,572) (2,201) EBITDA margin (%) 4.7 5.4 6.0 6.7
Taxes Paid (335) (518) 140 (846) EBIT margin (%) 4.2 5.1 6.0 6.6
Operating cash flow 18 1,201 1,849 1,720 PAT margin (%) 2.4 2.7 5.5 4.9
Capex (1,411) (2,167) (600) (576) Receivables + Unbilled (days) 73.6 73.2 71.5 71.5
Change in Investments (37) (2,940) (109) 0 Inventory (days) 0.2 0.5 0.4 0.3
Dividends 0 0 0 0 Sundry creditors (days) 7.2 5.5 5.8 5.3
Cash flow from investments (1,448) (5,107) (709) (576) Advances from customers (days) 2.7 3.6 4.0 5.0
Proceeds from issue of equities 64 3,670 9,164 0 Sales/assets (x) 5.5 3.5 2.8 2.9
Increase/(decrease) in debt 1,659 3,729 (4,474) (1,416) Debt/equity ratio (x) 1.1 0.9 0.2 0.1
Deferred tax credit /other adj. 0 0 0 0 ROE (%) 28.4 18.8 21.4 15.6
Cash flow from financing 1,722 7,399 4,690 (1,416) ROCE (%) 13.6 17.6 15.4 17.5
Opening cash 823 1,115 4,609 10,439 EV/ Sales (x) 3.4 2.8 1.9 1.5
Closing cash 1,115 4,609 10,439 10,167 EV/EBITDA (x) 72.3 52.3 31.7 22.2
B/S check 1,115 4,609 10,439 10,167 Price to earnings (P/E) (x) 140 100 36.7 32.5
Source: Company, Kotak Securities - Private Client Research Price to book value (P/B) (x) 32 14 5.5 4.7
Price to Cash Earnings (x) 119 81 33 29
EBITDA margin (%) 4.7 5.4 6.0 6.7
Source: Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 20
 INITIATING COVERAGE November 10, 2017

RATING SCALE
Definitions of ratings
BUY – We expect the stock to deliver more than 12% returns over the next 9 months
ACCUMULATE – We expect the stock to deliver 5% - 12% returns over the next 9 months
REDUCE – We expect the stock to deliver 0% - 5% returns over the next 9 months
SELL – We expect the stock to deliver negative returns over the next 9 months
NR – Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for
information purposes only.
RS – Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there
is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing,
an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock
and should not be relied upon.
NA – Not Available or Not Applicable. The information is not available for display or is not applicable
NM – Not Meaningful. The information is not meaningful and is therefore excluded.
NOTE – Our target prices are with a 9-month perspective. Returns stated in the rating scale are our internal benchmark.

FUNDAMENTAL RESEARCH TEAM

Sanjeev Zarbade Ruchir Khare Amit Agarwal Nipun Gupta K. Kathirvelu
Capital Goods, Engineering Capital Goods, Engineering Logistics, Paints, Transportation Information Technology Production
sanjeev.zarbade@kotak.com ruchir.khare@kotak.com agarwal.amit@kotak.com nipun.gupta@kotak.com k.kathirvelu@kotak.com
+91 22 6218 6424 +91 22 6218 6431 +91 22 6218 6439 +91 22 6218 6433 +91 22 6218 6427

Teena Virmani Ritwik Rai Jatin Damania Jayesh Kumar

Construction, Cement FMCG, Media Metals & Mining Economy
teena.virmani@kotak.com ritwik.rai@kotak.com jatin.damania@kotak.com kumar.jayesh@kotak.com
+91 22 6218 6432 +91 22 6218 6426 +91 22 6218 6440 +91 22 6218 5373

Arun Agarwal Sumit Pokharna Pankaj Kumar Ashini Shah

Auto & Auto Ancillary Oil and Gas Midcap Midcap
arun.agarwal@kotak.com sumit.pokharna@kotak.com pankajr.kumar@kotak.com ashini.shah@kotak.com
+91 22 6218 6443 +91 22 6218 6438 +91 22 6218 6434 +91 22 6218 5438

TECHNICAL RESEARCH TEAM

Shrikant Chouhan Amol Athawale
shrikant.chouhan@kotak.com amol.athawale@kotak.com
91 22 6218 5408 +91 20 6620 3350

DERIVATIVES RESEARCH TEAM

Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas, CMT
sahaj.agrawal@kotak.com malay.gandhi@kotak.com prashanth.lalu@kotak.com prasenjit.biswas@kotak.com
+91 79 6607 2231 +91 22 6218 6420 +91 22 6218 5497 +91 33 6625 9810

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 21
 INITIATING COVERAGE November 10, 2017
Disclosure/Disclaimer
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house.
Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock
Exchange of India Limited (MSE). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like
mutual funds and fixed deposits, depository services and Portfolio Management.
Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities
Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual
Fund Advisor registered with Association of Mutual Funds in India (AMFI). We are registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However
SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise/warning/deficiency letters/ or levied minor penalty on
KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration
been cancelled by SEBI at any point of time.
We offer our research services to clients as well as our prospects.
This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons
into whose possession this document may come are required to observe these restrictions.
This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or
the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Kotak Securities
Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.
We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed.
Neither Kotak Securities Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their
own investigations and take their own professional advice. Price and value of the investments referred to in this material may go up or down. Past performance is not a guide for
future performance. Certain transactions -including those involving futures, options and other derivatives as well as non-investment grade securities - involve substantial risk and
are not suitable for all investors. Reports based on technical analysis centers on studying charts of a stock's price movement and trading volume, as opposed to focusing on a
company's fundamentals and as such, may not match with a report on a company's fundamentals.
Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this
material, there may be regulatory, compliance or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements
are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with
the recommendations expressed herein.
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group.
The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research
Group of Kotak Securities Limited.
We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short positions in,
and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor or lender / borrower to such company
(ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of Research Report
or at the time of public appearance. Kotak Securities Limited (KSL) may have proprietary long/short position in the above mentioned scrip(s) and therefore may be considered as
interested. The views provided herein are general in nature and does not consider risk appetite or investment objective of particular investor; readers are requested to take
independent professional advice before investing. This should not be construed as invitation or solicitation to do business with KSL. Kotak Securities Limited is also a Portfolio
Manager. Portfolio Management Team (PMS) takes its investment decisions independent of the PCG research and accordingly PMS may have positions contrary to the PCG
research recommendation. Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business group in any
manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take professional advice
before investing.
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or
their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
No part of this material may be duplicated in any form and/or redistributed without Kotak Securities' prior written consent.
Details of Associates are available on our website ie www.kotak.com
Research Analyst has served as an officer, director or employee of subject company(ies): No
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months: No
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months.
We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject
company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the
research report. Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report - No
Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication
of Research Report.
Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date
of publication of Research Report: No.
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of
publication of Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
"A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from
the list on the browser and select the "three years" icon in the price chart)."
Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22
43360000, Fax No.: +22 67132430. Website: www.kotak.com/www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya
Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSE INE 260808130/INB
260808135/INF 260808135, AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97. Our research should not be considered
as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to
risk return profile and the like and take professional advice before investing. Investments in securities market are subject to market risks, read all the related documents carefully
before investing. Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative
contracts. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 8484, or Email: ks.compliance@kotak.com.
 Level 1: For Trading related queries, contact our customer service at 'service.securities@kotak.com' and for demat account related queries contact us at ks.demat@kotak.com
or call us on: Online Customers - 30305757 (by using your city STD code as a prefix) or Toll free numbers 18002099191 / 1800222299, Offline Customers - 18002099292
 Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at ks.escalation@kotak.com or call us on 022-42858445 and if you
feel you are still unheard, write to our customer service HOD at ks.servicehead@kotak.com or call us on 022-42858208.
 Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Mr. Manoj Agarwal ) at
ks.compliance@kotak.com or call on 91- (022) 4285 8484.
Level 4: If you–have notClient
received a satisfactory response at Level 3 within
Please 7see
Kotak working days, you may alsoonapproach CEO (Mr. Kamlesh For
Rao)Private
at ceo.ks@kotak.com or call on 22
91-
Securities Private Research the Disclosure/Disclaimer the last page Circulation
(022) 4285 8301.