SPARK STRATEGY

Uttar Pradesh – Breaking free from the shackles of the ‘BIMARU’ tag

 GAUTAM SINGH

Page 1
SPARK STRATEGY
Uttar Pradesh – Breaking free from the shackles of the ‘BIMARU’ tag

We travelled over 1000Kms across the length and breadth of Uttar Pradesh over a period of 7 days meeting various businesses each day to
gauge the pulse on what’s changing in the state. We conclude that UP is breaking free from the shackles of infamous ‘BIMARU’ tag and is SPARK STRATEGY
emerging as a major demand driver for many sectors such as Auto, Consumer durables, FMCG, Retail and NBFCs. We believe five epochal 22 May 2018
changes in UP in recent years have put the state at a juncture where other developed states like Gujarat, TN, Maharashtra etc. were a decade
ago. These changes are: 1) Change in law and order situation and the resultant peace dividend 2) Change in road infrastructure 3) Change in BSE Sensex 34,616
availability of electricity supply 4) Youngest population among major states, and 5) Per capita income crossing the $1000 mark, an important NSE Nifty 10,516
threshold which was crossed by other developed states Gujarat, Maharashtra, TN and Karnataka a decade ago. These changes should result in
20%
a disproportionate growth for UP heavy businesses over a medium term. Most B2C companies are realigning their distribution to ride this
theme ahead. From Spark coverage universe, recent commentary from Hero, Maruti, MMFS, V-Mart and Britannia are reinvigorating the same. 15%
Why Uttar Pradesh matters? If UP were a separate country, it would be the 5th
most populous country in the world after China, India, USA and 10%
Indonesia. With 224mn population, UP is comparable with Brazil (208mn) and in terms of GDP, UP ($219bn) is comparable with Bangladesh
($221bn). With 27% y-o-y growth in motorcycle sales and 23% y-o-y growth in Passenger Vehicles (PVs) during in 9MFY18, UP has emerged the 5%
fastest growing market for Auto companies. Moreover, UP’s share in total motorcycle sales in India has jumped from 15% in FY17 to 17% in 0%
9MFY18 and share of PVs has increased from 7.3% in FY17 to 8.4% in 3QFY18. Britannia has posted 15.2% y-o-y growth in biscuit sales in UP in
FY18, making it one of the fastest growing markets for the company. -5%

Jun-17

Nov-17
Dec-17
Jul-17

Oct-17
Sep-17

Feb-18

Apr-18
May-17

Aug-17

Mar-18

May-18
Jan-18
What is changing in UP? There are five major changes which, we think, are pivotal in putting UP on higher growth trajectory:
#1: Law and order: The state has launched a massive crackdown on criminals in the last 12 months. As per UP Police, 50 most wanted criminals Sensex BSE 200
have died in various encounters in the last 12 months, ~4,881 criminals have been arrested and ~5,500 criminals have applied for bail
cancellation. We believe that the peace dividend can have palpable prospective impact on UP. Performance (%)

#2: Improving road infrastructure. After our 1000Km+ road trip in UP, we are convinced that UP today has the best road infrastructure in the 1m 3m 12m
country. Total state govt. spends on roads & bridges at Rs 708bn in the last four years (FY14-FY17) is 1.4x the combined spend in the previous ten
Sensex -2.1% 0.2% 10.8%
years (Rs. 505bn).
BSE200 0.6% 2.3% 13.6%
#3: Improvement in electricity supply: Electricity availability in rural areas has seen three-fold jump from 5hrs of availability in 2012 to 18hrs of
availability in 2018, while it is up 2x in urban areas from 12hrs in 2012 to 22hrs in 2018. Despite electricity demand going up, the power deficit has RESEARCH ANALYST
fallen down to 2% in FY17 down from 22% in FY10. GAUTAM SINGH
#4: Demographic dividend: UP has the youngest population among major states with median age of 20 years which is quite low as compared to
the matured states like Kerala (31 years), Tamil Nadu (29 years), Andhra (27 years) and Karnataka (26 years). Notably, adult population (age 10-19
years) comprises of ~25% of total population of Uttar Pradesh, which is the highest among major States.
#5: Increase in per capita income: At $1000 per capita income, UP has reached an important threshold where Gujarat, Maharashtra, TN and
Karnataka were a decade ago. Further, in a state where 23% of the GDP is constituted by agriculture, Govt. focus on doubling farmers’ income
would lead to improvement in rural cash flows. We expect UP’s per capita income to grow at a CAGR of 11.2% from $1006 in FY19 to $1900 by
FY25E, resulting in disproportionate growth for durable goods, clothing & footwear, entertainment, medical products & services categories.
find SPARK RESEARCH on Page 2
(SPAK <go>)
Ears on the Ground – Takeaways from our on road trip in UP

#1: Improvement in cash Cash flows in rural UP has improved in last few months led by pick up in non-farm activities and higher realization for
flow situation in rural UP potato and sugarcane farmers. Potato price are up ~100% in last two months.

There is a clear pickup in tractor demand mainly from agriculture, construction and haulage segment. Labour shortage
#2: Sharp pick-up in
and need for replacement for old trucks aided by easy availability of finance are some of the major factors that are
demand for Tractors
driving tractor sales.

#3: Two Wheelers Hero is the market leader in <125cc bike category, however, in the higher cc segment craze for Enfield is on the rise.
demand on the rise Improving affordability is one of the key reasons driving the sales of premium segment bikes.

There was a massive demand for HCVs in UP mainly led by Infra spend until Mar’18. However, Govt, in Apr’18, had
#4: MHCV sales
relaxed the overloading limit in UP, leading to demand shifting towards lower tonnage trucks.

GST had its impact on the business while it is on a recovery mode now. The frenzy for Patanjali products has come
#5: FMCG and retail
down in non-medicine products now. V-Mart has been doing very well in this region.

Inverter ACs are gaining huge acceptance due to power saving feature as it saves upto 50% electricity. Frequent
#6: Consumer Durables
fluctuations in electricity makes stabilizer a must in this region

#7: Cement demand has With Ultratech coming into this market, there has been major thrust on full capacity utilization. Cement demand is
picked up but price
good but prices have remained very weak this year. Sand prices have now fallen 15-20% due to availability of mines.
remains the key concern

#8: Muted demand for

Despite so much infra development, real estate prices are still muted. Potential buyers want to wait for further
building materials; real
correction in prices.
estate remains very week

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 A) Why Uttar Pradesh matters?

#1: If Uttar Pradesh were a country, it would be comparable with Brazil in population and with Bangladesh in GDP

#1: If UP were a separate country, it would be the 5th most populous country #2: Every country in Africa, Europe, and South America has fewer people than UP

1600 Population (mn)

1,370
1400 1,282 In terms of population,
UP is marginally bigger
1200 than Brazil
1000
800
600 USA China
400 323
261 224 208 193 186 Indonesia
200 India
0
China India United Indonesia UP Brazil Pakistan Nigeria
States
Countries less populous than UP

Source: World Bank, Spark Capital Research Source: World Bank, Spark Capital Research

#3: In terms of GDP, UP is comparable with Bangladesh #4: Key Statistics: UP vs. all states

GDP ($ bn) Parameters Uttar Pradesh All States

GDP size ($bn) 219 2577
297.0 296.5 295.5 282.5 278.9 Share in India's GDP (%) 9% 100%
247.0 238.7
221.4 219.0 Per capita GDP ($) 1,006 1,975
Total population (mn) 224 1,282
Population density (persons/sq km) 829 382
Sex ratio (females per 1,000 males) 912 940
Literacy rate (%) 67.7% 73.0%
Installed power capacity (MW) 24,434 3,34,161
National highway length (km) 9,017 1,22,432
Malaysia
Singapore

UP
Colombia

Bangladesh
South Africa

Chile
Pakistan

Finland

FDI equity inflows ($ mn) 652 3,67,900

PPP projects (No) 537 9068
SEZ (No) 12 222
Capital Lucknow -
No. of districts 71 662
Source: World Bank, Spark Capital Research Source: GoI, Economic Survey, Spark Capital Research

Page 4
 A) Why Uttar Pradesh matters?

#2: UP is emerging as a major demand driver for many sectors like Auto, FMCG, Retail etc. indicating a palpable surge in consumer demand in UP
UP has emerged as the fastest growing market for two wheelers whereas rich UP’s share in total Motorcycle sales in India has also jumped from 15% in FY17 to
states TN, Karnataka and Maharashtra are witnessing fatigue in demand 17% during 9MFY18
27 26 25 Motorcycle sales during 9MFY18 (%, yoy) 18% Share in total Motorcycle sales in India (%) 17%
23 22 21 16%
18
14% 13% 15%
10 10 9 12%
6 6 12%
5 10%
1 1 9%
8% 9%
6%
6%
5%
-6 -7 4% 5%
Bihar

Assam

TN
Delhi
UP

Jharkhand
Orissa

MP

Maharashtra
Gujarat
Chattisgarh

Kerala
Rajasthan

WB

Karnataka
Punjab
2%
All States

FY11 FY12 FY13 FY14 H1FY15 FY16 FY17 9MY18

UP Maharashtra Karnataka TN

Source: SIAM, Spark Capital Research Source: SIAM, Spark Capital Research

Britannia has posted 15.2% yoy growth in biscuit sales in UP in FY18, making it one
For passenger vehicles also UP has seen the highest growth during 9MFY18
of the fastest growing markets for the company
23 22 20 Passenger vehicle sales during 9MFY18 (%, yoy) 30
19 Britannia's sales growth (%, yoy) 26.3
17 16
15 14 25 22.8
11 11
8
7 20
4 16
15.2 15.6 14.6
15 12.7

9.4 9.3
10
-4
-8
-11 5
Assam

Delhi
UP

Jharkhand

Bihar
Orissa

Maharashtra
Gujarat
Chattisgarh

WN

Kerala

Karnataka
Rajasthan

Punjab

Tamil Nadu
All States

0
UP MP Gujarat

FY16 FY17 FY18

Source: SIAM, Spark Capital Research Source: Company presentation, Spark Capital Research

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 B) What is changing in Uttar Pradesh?

#1: Law and order: UP, which is notorious for its poor Law & Order situation, has launched a massive crackdown on criminals…
#2: Around 5000 criminals have been arrested and 5,500 have applied for bail
#1: UP govt. has opted for a massive crackdown on criminals in the last 12-months
cancelation in last one year

50 wanted  50 most wanted criminals have died in various

criminals are dead encounters in last 12 months
The police has
launched 4,881 criminals
‘Operation  4,881 criminals have been arrested from the state
arrested
Clean’ in Uttar
Pradesh to deal 5,500 criminals  Around 5,500 criminals have applied for bail cancellation
with the applied for bail in last 12 months as they fear police encounter outside
wanted cancelation jail
criminals.
A big rise in  A large number of criminals are either surrendering or
surrendering have fled to neighbouring states.

Source: Dainik Jagran, Spark Capital Research Source: Media reports, Spark Capital Research

#3: Local people told us that there has been a significant change in intensity of #4: Mobile police patrolling (100 number) has been the most effective in
vigilance in most of the places in the last few months controlling crimes

 “Within ten minutes

of call, we aim to
reach the doorstep
of the caller in
trouble.”
 “Strict instructions
are there from the
top to control not
only crime but to
strop any form of
extortion, eve
teasing etc.”

Source: Media reports, Spark Capital Research Source: Spark Capital Research

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 B) What is changing in Uttar Pradesh?

…the peace dividend on its economy can be be understood from Sri Lanka’s Peace Dividend
#1: Winds of change: We noted a toll plaza on inner ring road Agra that is now fully #2: Winds of change: Jaswant Prajapati , a food vendor in Lucknow now doesn’t
operated by only women employees – a completely unthinkable deed in old UP have to pay Rs. 600 weekly bribe to cops; a saving of Rs. 2,400 per month

Jaswant Prajapati,
who is a food
vendor in Lucknow
“He earns ~Rs.
1200 per day and
saves half of it.
Overall, activities
have picked up as
many new offices,
five star hotels etc.
have opened up
recently”

Source: Spark Capital Research Source: Spark Capital Research

#3: Sri Lankan economy witnessed a sharp rebound post the decisive end of the #4: Night traffic and economic activities have increased - Takeaways from our
civil war in May 2009 interaction with Sateesh Kumar, a taxi driver in UP
10.0
9.0 i. Never took any travel booking involving night travel in UP until recently
8.0 9.1 because of fear of car being stolen or loot on the way.
7.0 8.0
6.0
ii. Rise in night traffic in UP in last 6 months because the UP 100 mobile police
5.0 patrolling has been very active at night.
4.0
3.5 iii. Every 10 Km, he sees a police patrol car UP 100, which has brought down
3.0
2.0 criminal activities.
The Peace Dividend example from Sri Lanka
1.0 iv. He has started taking overnight bookings in UP. His cashflow has improved
0.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
by 20% in last few months.
v. Have bought one more car on finance and put it in Orix.
Real GDP growth (%): Sri Lanka

Source: IMF, Spark Capital Research Source: Spark Capital Research

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 B) What is changing in Uttar Pradesh?

#2: A sea change in road infra: UP now has the best road infrastructure in the country
#1. Total state Govt. spend on roads & bridges at Rs 708bn in the last four years #2. UP’s roads have seen the biggest transformation in the country in the last
(FY14-FY17) is 1.4x the combined spend in the previous ten years three years both in urban and rural areas
250 Agra-Lucknow expressway is the Even rural areas now are well connected
Spend on roads & bridges in FY14-FY17= Rs 708bn 220
Spend on roads & bridges in FY04-FY13 = Rs. 505bn longest expressway in India with nearby cities through good roads
200 188
Total spend in last 4 yrs = 1.4x the combined spend in 169
the previous ten years
150 131

100 85
56 57 63 56 63 64
50 39
16

-
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

UP Govt. spend on road & bridges (RS. bn)

Source: RBI, Spark Capital Research Source: Spark Capital Research

#3: MHCV sales in UP have seen massive jump during 9MFY18 #4: Takeaways from our interaction with leading CV financer in UP

85 i. There was a sharp jump in demand for MHCVs in UP during Apr’17-Mar’18,

MHCV sales during 9MFY18 (%, yoy)
mainly led by infra spend by Govt.
55
ii. Strict laws against overloading and high infra demand led to the pick up in
33
28 27 27 demand for CVs. Govt relaxed the overloading limit in UP leading to demand
21 20 17 14 10
5 1 0 tapering off for higher tonnage CVs and down trading to lower tonnage.
iii. Tata Motors, Ashok Leyland, Bharat Benz and Eicher motors (in this order) are
-2
-9 the leading players in MHCV market with Tata Motors being the leader with
-16
50%+ market share. Tata Motors has lost market share in this region.
TN
Assam

Bihar

Delhi
UP

Jharkhand

Orissa

MP

Maharashtra

Gujarat
Chattisgarh

WB

Kerala

Karnataka
Rajasthan

Punjab

All States

iv. Ashok Leyland has been very aggressive in this market during last year and it
has gained market share from 24% a year ago to 37% now.

Source: SIAM, Spark Capital Research Source: Spark Capital Research

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 B) What is changing in Uttar Pradesh?

#3: Electricity availability in rural areas has seen three-fold jump while it is up 2x in urban areas vs. 2012

#1. Sharp improvement in availability of electricity in last 2 years #2. Energy deficit has tapered down to 2% in FY17 down from 22% in FY10

25 Number of hours availability of electricity in UP

22 120 25%
20 18 18 100 22%
20%

15 80 17%
12 15% 16% 15%
14% 107
10 60 13%
10 11% 103 106 106
92 95 10%
40 81 82 87
5 76 76 72 76
59 65 93
5 5%
20 2%
0 0 0%
2012 2015 2018 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Energy Required (BU) Energy availability (BU) Energy Deficit (%)

Rural areas Urban areas

Source: Spark Capital Research Source: GoI, Spark Capital Research

#3: State Govt. aims to provide 24x7 power supply by Mar’19: Huge savings for
What people said on power supply and electricity tariff hikes
industries and small establishments
#1: Enhanced power supply: UP, which used to have prolonged power i. Most cities have been receiving ~22 hours
outages, has seen a remarkable improvement in last couple of years. This a day power supply.
should help saving for industrialists and households spending on power ii. Demand for inverter and battery has
gensets, inverters, batteries etc.
taken a massive hit because of enhanced
electricity supply.
#2: Crackdown on power thefts: Vigilance teams have been added, frequent
raids on power thieves, replacing traditional meters with smart meters are iii. Electricity tariffs have been increased
the key measures the State Govt. has taken to stop power thefts. around 3x for un-metered connections
for non-agriculture use.
iv. Rural people were complaining about
#3: Bodes well for demand for meters, transformers, cables and durable the surge in electricity price
goods. Negative for genset, inverter and battery industries.

Source: Spark Capital Research Source: Spark Capital Research

Page 9
 B) What is changing in Uttar Pradesh?

#4: Demographic dividend: UP has the youngest population among major states with median age of 20 years
Inter-state median age comparison of India

1) Median age of Uttar Pradesh is the lowest in India at 20, which is

quite low as compared to the matured states like Kerala (31 years),
Goa (30 years), Tamil Nadu (29 years), Andhra (27 years) and
Karnataka (26 years).
2) Proportion of population with age group (10-19 years) at ~25%~, is
the highest in India among major states.
3) UP has the lowest share of elderly population (60 years or more)
(7.7%) among major states.
4) UP is set to reap the benefits of its young population ahead.

Age group between 10-19 years account for ~25% of total population of
Uttar Pradesh, which is the highest among major States

Name of the State % Adolescent Name of the State % Adolescent

Top 5 Bottom 5

UTTAR PRADESH 24.5 KERALA 16.3

RAJASTHAN 22.9 TAMIL NADU 17.2

UTTARAKHAND 22.5 KARNATAKA 18.9

BIHAR 22.5 MAHARASHTRA 19

Source:JHARKHAND
Census 2011 22.2 ANDHRA PRADESH 19.3 A A

Source: Census 2011

Page 10
 B) What is changing in Uttar Pradesh?

#5: At $1000 per capita income, UP has reached an important threshold where Gujarat, Maharashtra, TN and Karnataka were a decade ago…
UP has crossed the $1000 per capita income mark this year which is very important The richer states - Gujarat and Maharashtra crossed the $1000 per capita mark in
for discretionary consumption; India crossed the $1000 mark a decade ago in FY08 FY06, Tamil Nadu did it in FY07 and Karnataka crossed this mark in FY08
1,960 3,500 Uttar Pradesh is where Gujarat,
1,900 In terms of per capita GDP, UP is
Maharashtra, TN and
following India with a decade lag. 3,000
1,700 Karnataka were a decade ago.
1,500
2,500
1,300
1,061 2,000
1,100
900 1,006 1,500
700
1,000 1,049
500
FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18
500
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
India UP (T+11Yrs) Gujarat Karnataka Maharashtra Tamil Nadu

Source: GoI, RBI, Spark Capital Research Source: GoI, RBI, Spark Capital Research

Agriculture accounts for 23% of the state GDP. Centre Govt. focus on doubling
Rural cash flow has improved – takeaways from interactions with farmers in UP
farmers income would have a direct impact on the state’s rural economy

i. Cash flow in rural area has increased in recent months in sugarcane/potato

Agri, 23% belts
ii. Pick up in non-farm activities in rural areas have also resulted in better cash
flow for rural people. Wage rate has been on the rise.
iii. This season potato prices are higher (up around 100% in last one month) due
Services, 51% to lower production. This year farmers’ realization has gone up.
iv. Farmers are complaining about highly volatile prices of agri commodities.
They want assured prices so that they can be sure of future income
Industry, 26% v. Sugarcane output has been higher this year due to ~20% higher output
leading to fall in sugar prices.

Source: GoI, Spark Capital Research Source: GoI, Spark Capital Research

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 B) What is changing in Uttar Pradesh?
…further rise in UP’s per capita income to $1900 by FY25E would mean big demand delta for durable goods, clothing & footwear, entertainment &
medical and HH products & services categories
…and proportion of non-food categories like durables goods, clothing & footwear
As per-capita income grows, proportion of food in overall HH spend comes down…
and other HH products & services goes up
Share in HH expenditure in India (%) Key category-wise share in HH expenditure in India (%) Food

Fuel & light

41.5 46.8 Tobacco & intoxicants

51.9 53.5 48.1 43.0
57.0
HH products & services

8.3 Clothing & footwear

10.0 1.9
2.1
58.5 53.2 21.4 Durable goods
48.1 46.5 43.0 19.8
7.0 Education, entertainment &
5.0 6.2
3.8 medical
11.1 12.1
1993-94 1999-00 2004-05 2009-10 2011-12
Food Non-food 2004-05 2011-12

Source: NSSO, Spark Capital Research Source: NSSO, Spark Capital Research

We estimate rise in per capita income in UP from current $1000 to $1900 by …which should result in big demand delta for durable goods, clothing & footwear,
2025… Education, entertainment & medical and HH products & services
1900 Key category-wise share in HH expenditure in UP (%)
2000 Food
1800
Fuel & light
1600
1400 41.3 Tobacco & intoxicants
48.0
1200 1006
1000 HH products & services
749
800 6.1
1.7 Clothing & footwear
600 8.1
325 2.0 17.8
400 Durable goods
16.0
200 9.5
7.2 Education, entertainment & medical
0 7.4
4.3
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY25

14.5 16.2
Per capita GDP of Uttar Pradesh ($) Estimate
2011-12 2024-25E

Source: CSO, Spark Capital Research Source: NSSO, Spark Capital Research

Page 12
 B) What is changing in Uttar Pradesh?

Uttar Pradesh: Then & Now

Earlier (until FY15) Now

Road Law and Road Law and

Infra order Infra Order

GDP Power GDP Power

Growth Supply Growth Supply

Dependency on Dependency on
Income per Income per
Agriculture Agriculture
capita capita

Services Demography Services Demography

sector sector
Positive

Negative

Neutral

Page 13
C) Ears on the Ground – Takeaways from our road trip in UP in Apr’18

1,000 kms + 200 plus channel checks in urban and rural pockets of Uttar Pradesh
Spark Ears on the Ground Juggernaut

The Spark strategy team traversed more than 1000 kms across the length and breadth
Visited more than 50 major urban and rural pockets of Uttar Pradesh with
of the Uttar Pradesh over a period of 7 days doing varied channel checks each day to
an objective to understand the current demand scenario and to identify
judge the general demand scenario
emerging trends

500+ touch points across key urban and rural pockets of UP were covered

Saharanpur
Our channel checks included:
• Apparels shops
• Auto & Auto ancs. dealers Shamli
Meerut
• Bank & NBFC branches Ghaziabad
• Bureaucrats, Media generalists Delhi Noida

• Cement dealers, tiles & building materials Hathras

• Construction sites Agra
• Consumer durable outlets Barabanki
Lucknow
• Four wheeler dealers Etawah

• Farmers, labourers Unnao

• Pharmacy Kanpur

• Real estate developers, agents etc.

• Regional sales-head, wholesalers
• Toll plazas, luxury stores
• Truck operators
• Two wheeler dealers

Page 14
 #1: Rural: Improvement in cash flow situation in rural areas
Horticulture farmer from Bisalpur
village, near Agra city
Magma Fincorp (Lucknow)
Source: Spark Capital Research
• He had suffered massive losses in the last potato season due to low prices. However, this season potato
prices are better (up ~100% in last two months) due to lower production.
• Had to take crop insurance due to the loan he had taken for the crop and premium of 5% was too high.
• Want assured prices so that he can be sure of his future income.
• Sugarcane output has been higher this year due to better yield, this has lead to fall in sugar prices. Lower
sugar prices have led to increase in cane arrears.
• Many farmers have complaints for not been able to send their sugarcane to mills because mills are not
sending cane demand slip to farmers.
• This could possibly delay kharif sowing this year.
• Cash flows in Rural area has increased in recent months in sugarcane belts, potato belt etc.
• UP govt. had lifted ban from digging land for brick factories in beginning March, which led to an increase in
activities in rural, tractor use and higher tractor sales.
• Demand for JCB has gone up. For example, Tata Hitachi was selling 7-8 units a month 6 months back, it has
now doubled to 14-15 a month.
• 82000 tractors have been sold in UP in FY18 vs. 72000 in FY17, it can go up to 90000 + this year.
• There has been lots of announcements related to infra, road construction, etc. 70% of the tractors which have
been bought on finance are partially or fully involved in commercial use. If that’s not the case it would be
difficult for farmers to pay monthly EMIs.
• Magma’s collection efficiency has improved sharply to 98.7% in Mar’18 in UP, after a while. In western UP, it
is 100% and east UP, it is 98%. Rural market is clearly picking up.
• In disbursement, UP has become number one market for Magma in FY8.
Page 15
 #2: Non-agri usage of tractor is on the rise: Tax advantage, expensive labour are the key reasons

…tractor and trailer as the latter has tax advantage and carries larger quantity with
#1: Old trucks which were used for sugarcane haulage are being replaced by…
lesser fuel costs; Even cops don’t stop tractors for checking

This is being replaced by tractor

and trolley

However, any regulation on

overloading on tractors can be a
spoil sport for tractor demand

Source: Spark Capital Research Source: Spark Capital Research

#2: Expensive labour and non-availability of labour at peak season are the key
…so is the case in earth moving, construction, sand mining activities
reasons why the tractor usage is on the rise for non-farm activity…

Source: Spark Capital Research Source: Spark Capital Research

Page 16
 #3: Sharp pick up in demand for Tractors – Mahindra is the market leader
Mahindra Tractor dealer – Shivrajpur
Village, near Kanpur
Surge in use of Tractors – labour
substitution
Source: Spark Capital Research
• Sales Situation: Sells 20-25 tractors per month vs 15 tractors same time last year.
• There has been a clear pickup in tractor demand mainly from farmers, construction and haulage segment.
Farmers segment account for 70% of the sales currently. Company has taken two price hikes since Jul’17.
• Key Demand Driver: The potato crop price has been good hence the pick up in demand. Expect this season to
be good.
• Purpose: Around 30% of the sales is for non-agri – mainly construction and haulage purpose.
• Financing: 80% of the tractors sales are through financing. M&M Finance, Magma and Tata capital are the
leading players.
• Bank financing is very low due to documentation issues and farmers also avoid it because they find it
cumbersome.
• Market Leaders: Swaraj leads the tractor market here followed by Mahindra, Eicher, TAFE and Sonalika.
• Tractors are replacing trucks: Old trucks have been largely replaced by tractors for haulage purpose.
• People are using tractors for transporting sugarcane, sand, dust etc. because they don’t have to pay tax.
• Labour Shortage: Labour shortage is another issue why people are shifting to tractors.
• Eg. Around 20-30 labourers were needed to load sugarcane in a truck/ trolley to transfer it to the mills. Now,
tractor usage to transport sugarcane in truck/ trolley with the help of a special crane attached to it. Same is the
case for sand
• Strong Brands: Mahindra is the strongest brand in this region in the premium category and Eicher tractor of
TAFE in the economy category.
Page 17
 #4: Two Wheelers demand on the rise – Hero rule this market in <125cc bike category…
Hero Dealer: Pratap Pura, Agra
Hero Motors dealer, Kanpur
Source: Spark Capital Research
• Current Sales Scenario: Sells around 600 bikes/month. Of that, 100cc bike is the maximum selling with ~55-
60% share (350 units). Then comes 125cc which is 25% of the sales and scooter accounts for ~10-15% (80-100
units). The 150cc category has very few takers (sells only 10-15 bikes per month).
• Hero is a clear leader in rural because of mileage, resale value, availability of parts, service etc. Sales for this
showroom is mainly dependent on rural, agri and low to middle income class customers.
• Pulse of the market: Gets 50-60 enquiries per day and sells around 20 bikes a day. 65% sales are in cash.
People ask questions like Helmet is free or not or someone else is offering xyz free etc.
• Last two years sales have been bad due to lower prices for potato, which is the main crop for farmers in this
region. But recently, prices of potatoes have firmed up. Some sequential pick up in sales is there but it is still
low for >125cc category.
• Scooter sales is marginally picking up. Honda Activa remains the first choice for customers but Hero is trying
to be number 2 in scooter. Company has launched two new products in 110cc – Passion Pro and Passion xPro
and the response has been good so far.
Sales Scenario:
• Sells 1000 bikes/month
• In Bikes, Hero is clearly a market leader with around 50% market share, followed by Bajaj.
Competition:
• In scooter segment- we are running a carnival now. Want to increase awareness of the product as most people
only know about Activa.
Financing:
• Around 30% of the buyers take the bike on finance from Hero fincorp, Tata Cap, HDFC bank etc
Key Driver:
• Sales have recovered (15% yoy growth), mainly due to the ongoing marriage season.
Page 18
 …but in the higher cc segment preference for Enfield is on the rise
Enfield showroom – Shamli – Newly
opened showroom
Eicher Motors- Kanpur
Source: Spark Capital Research
• Overview on Shamli : Shamli is a small town on the Delhi–Saharanpur highway. (Population: 1.9Lakhs)
• Sales Targets and Achievements: We had three sales guys with the target of selling 25 bikes each in the first
month. But one sales person left in the middle of the month. Yet, we have booked 130 bikes in the first month
vs. a target of 75 bookings.
• Pulse of the market: Get ~12-14 Enfield bikes per day for servicing. Have a booking run rate of 3-4bikes per
day. Booking amount for all the bikes is Rs. 5,000.
• Competition: There is no other bike in this category. People are not aware of other competitors’ bike like
KTM. Life of Bajaj Pulsar is around 3-4 year after which bike starts giving lots of trouble whereas life of Enfield
bike is around 8-9 years
• Marketing Push: From May’18promotional activities like putting canopies, arranging bike ride events etc. is
expected to begin.
• Outlook: Confident of selling around 200 bikes per month by same time next year. Enfield craze has picked
up pace in the last six months in this region.
• Improving affordability: The buying capacity has increased. The customer feels that by adding few thousands,
he can upgrade from a plastic built scooter to a bike.
• Sales scenario: Peak season here is Navratri – the store could sell 150 bikes in those 9 days. Avg. monthly sales
is 150. Sales growth is around 55%, this store is just 2 years old.
• Comments on management: The management is doing revolutionary changes in designs; new model of
thunder bird is very appealing.
• What the customer thinks!: Indian mind-set is to possess that vehicle (2W or 4W) which is seen more on
roads. Example: Though Tata is coming with world class products, people still buy Maruti and Honda cars since
they see these cars the most on the road.
Page 19
 #5: Sharp pick up in demand for Passenger cars and MHCVs
Maruti showroom, Lucknow
MHCV demand scenario: Head (HCP) –
Kanpur
Source: Spark Capital Research
• Sales Scenario: Sells between 100-110 cars per month.
• Sales growth has been ~15% in last six months. Waiting period has come down.
• Standard variants are readily available until or unless customer demand for some specific colour.
• Break up of the customer pie:
• Servicemen account for the larger share of total sales (50%), followed by businessmen 30% and farmers 10%.
• Financing Options: Quite a few financing options are available from HDFC bank, M&M Finance and Magma
among others in this area.
• Expect that high oil prices can play a spoil sport for demand if they go further up.
• A sharp jump in demand for CV in UP for last six months.
• It’s mainly for MHCV and it’s infra led.
• Tata Motors, Ashok Leyland, Bharat Benz and Eicher motors (in this order) are the leading players in MHCV
market with Tata Mot being the leader with 50%+ market share.
• UP has been predominantly a Tata Mot’s market, but it has lost market share in this region.
• Sensing the big opportunity, Ashok Leyland has been very aggressive in this market during the past one
year and it has gained market share from 24% a year ago to 37% now.
• Strict laws against overloading and high infra demand led to the pick up in demand for CVs.
• In his words, “CV demand mei shailabh aaya hai UP mei in last one year".
• Govt, in Apr’18, has relaxed the overloading limit in UP because they are not able to supply enough CVs.
It would be reinforced later.
Page 20
 #6: Auto Ancillaries : Exide has become very aggressive in sales and servicing

Exide battery dealer: Hazratganj, Takeaway from dealer interaction

Lucknow • Sales Scenario: Sells around 2300 batteries per month now vs, ~1900-2000 per month 1 year ago.
• Impact of GST: Price difference with the other smaller players have come down post GST as they had to take
steep price hikes.
• Demand is looking up in inverters and automobile categories.
• Improving Demand: There has been pick up in solar applications also. Our focus is to gain share in the
replacement market. So we have been aggressively working in this direction.
• Sales force: We go door to door as well to promote the batteries.

A large Amara Raja battery dealer Takeaway from dealer interaction

(Lucknow) • Market leader in this region: Sells around 3000 batteries per month. Exide is the market leader in this region
followed by Amaron and Luminous.
• There is no big promotional activities by Amaron whereas Exide is becoming very aggressive in promotional
activities and is gaining market share.
• Key promotion: He said “if any new shop gets inaugurated , Exide’s person would be here next moment to
promote Exide.
• Not selling batteries to e-Rickshaw now because almost all batteries (100%) have come back for claims. The
failure ratio has been high. So, we have decided not to sell any fresh batteries to this segment.
•

Source: Spark Capital Research Page 21

 #7: FMCG and retail: GST had hit the business but it’s back on track now

Bata showroom: MG road Agra Takeaway from dealer interaction

• Sales Scenario: Sales have picked up in last three months. In Mar’18 quarter, sales growth has been 14% vs. 9%
growth in CY17.
• New Schemes: Company has been aggressive in launching various schemes in last 6 months to attract the
customers. Sales take place mostly in cash (70-80%).
• Increasing brand consciousness: People are becoming more brand conscious due to awareness.
• It’s a 12 year old showroom. There was some concerns regarding business taken away by online platform, but
the online business has shifted back to retail. Customers want touch and feel of the product before buying.
• Automation: Company had tried to automate the supply chain but it did not work properly and took more time
to supply. Hence our business suffered. But now it has picked up.

Retailer – Garments, MG road, Agra Takeaway from dealer interaction

• GST has impacted sales: Sales have been weak since GST launch in Jul’17. Earlier, he used to have Rs. 7lakh per
month sale, of which he used to show Rs. 1 lakh as sales and used to pay 5% VAT on that.
• Now, 90% of his purchase is invoiced and he pays GST. Only 10% is non-invoiced. With the implementation of
e-WAY bill, he would be shifting to 100% invoiced business.
• He had to increase the prices to offset GST tax impact but it led to lower sales. Sales are down to ~Rs. 4 lakh
per month now. Due to fall in volumes, he had to cut down his total sales people from 5 to 2.
• People moving to premium brands: People gradually shifting to premium brands. Those who specifically ask
for Jockey product do not settle for any brand below that. People below Jockey, do not differentiate among
Dollar, Lux or Rupa etc. For them price is the most important factor.
• What is driving this change in consumption pattern? People are becoming aware of brands. Smart phones,
internet, social media etc have changed the way people look at things. Especially the younger generation is
more pro consumption and less focussed on savings.

Source: Spark Capital Research Page 22

 #7: FMCG and retail: GST had hit the business but it’s back on track now

V-Mart store - Kanpur Takeaway from dealer interaction

• V-Mart targets those customer who prefer neither very costly nor a cheap material. Those customers who do
not prefer specific brands. Good customer service is a key to retain them.
• 650 –700 footfall per day, weekend it increases to 1200. 70% of sales come from apparels, other categories
like footwear. Out of 171 showrooms, 31 stores have FMCG products in the stores.
• A new store has been opened in Unnao. There is a good pace of expansion.
• Over three years old store. There has been very good traction in footfall (around footfall of 800 per day, with
an average ticket size of Rs. 550.
• The store has an advantage as its catchment area constitutes various segments of society that are price
conscious and are a ready demographic for value products.
• While online penetration is good in Lucknow, there is no immediate threat from ecommerce, as it is one way to
take the family out rather than sitting at home.
• The store is expected to break even in 1.5-2 years and is expected to grow at 10%-15%

Patanjali Mega store, Agra Takeaway from dealer interaction

• There are 5 mega stores of Patanjali in Agra.
• But he wasn’t happy with the fact that even Kairana (retailer) stores are allowed to sell the products.
• The frenzy for Patanjali products has come down in non-medicine products now.
• The reason could be launch of products in all categories, which might be diluting the brand Patanjali.
• Toothpaste, Ghee and Honey have been the best selling products.
• People compare prices with the Kairana stores. Demand for many categories have come down in case of
cereals, Pulses, etc

Source: Spark Capital Research Page 23

 #8: Cement demand has picked up but price remains the key concern

Ultratech Cement –Zonal Head Takeaway from dealer interaction

• Geographical Presence: Ultratech had no presence in central and eastern UP before JP acquisition. So, the
acquisition was part of the broader strategy to be present PAN India.
• Increasing capacity utilisation: With Ultratech coming into this market, there has been major thrust on full
capacity utilization. So the asset utilization has increased from 20% to now 85%.
• In Nov’17, we have broken even on operational level (debt servicing). Did 0.5m ton of sales in Mar’18 in east
and central UP, which is highest in a month. Now, other major companies are looking at Ultratech as a major
threat so they have not taken any price hikes this season despite having strong volume growth.
• On 3rd April, we had taken Rs. 5 per bag price hike and another similar hike would be announced in mid-
Apr’18. On possibility of a production discipline in North market, he said ‘the recent Rs. 5 per bag hike move is
the outcome of that effort. But the trust factor is not there in this region.
• Even if price increases, they give cash discount over the counter. Hence it is a difficult geography from that
aspect unlike South market.

Takeaway from dealer interaction

• Sand prices have now gone down 15-20% due to availability of mines. It should help us take price hikes
before Monsoon.
• Rail is major bottleneck in this region. Railways impose restrictions on moving cement from central part to
eastern UP because of very busy route.
• Infra demand has been robust in this region. India One lakh tonne sales for Ultratech alone in Mar’18, which is
the highest in India.
• Don’t have last year base to calculate growth. So that’s not the right indicator for us as we have increased
utilization here.

Source: Spark Capital Research Page 24

 #8: Cement demand has picked up but price remains the key concern
A mason from Barabanki, near
Lucknow
Cement dealer – Kanpur
Source: Spark Capital Research
Takeaway from our interaction with the mason
• Cement demand has been good and growing at 8% yoy
• However, despite better demand this year, prices have fallen by Rs. 10 per bag in Mar’18.
• Demand has been led by rural housing and government projects.
• Ultratech commands around Rs.20 per bag premium over other companies
• People used to use wet mud to fix bricks to construct walls of a house.
• That time the size of the wall used to be thicker (14 inch and above) to make the walls strong.
• But that trend is changing now. People use mixture of sand and cement instead.
• The reason for this change is that labour and mason costs have gone up sharply in last few years.
• So instead of constructing thicker walls (14 inch +) with wet mud, which take time to be constructed, resulting
in higher wage cost of mason and labour, people are constructing thinner but equally strong walls using
cement and sand.
Takeaway from dealer interaction
• Prices in last couple of months were lower than same time last year despite pick up in demand.
• Over supply has been the key reason for lower prices
• He has pending orders for another 4-5months. Works all 7 days a week. Labour shortage is a big challenge.
• Ban on sand mining has been lifted.
• Of the total 700 sand mines in UP, 170 mines are now operational.
• Govt. is opening 2-3 mines per day now. It has led to a reduction in sand prices by 20-30% from the peak a
month ago.
• Demand from rural side has gained momentum in last few months. People like to pay in cash.
• Rural demand in next couple of months can decelerate as harvest season begins and labour availability
becomes an issue.
Page 25
 #9: Muted demand for building materials; real estate remains very week

Kajaria Showroom – Kanpur Takeaway from dealer interaction

• Poor demand from real estate sector: Real estate sector has been very weak post Demon and has not picked
up yet. The market has been dominated by small builders, which are selling 40-50 flats, redeveloping old
properties.
• Weakness in real estate sector has now impacted the volume growth for building materials including tiles.
Even discounts has not led to pick up in volume growth yet.
• Builders are trying to reduce cost of construction and purchase directly from Morbi, which is cheaper,
including transportation cost. Only for premium houses, builders buy it from Kajaria.
• Rural areas to drive demand: Expect demand for tiles to pick up due to incremental demand from rural
areas. Increasing application of tiles rural areas is a positive sign.
• Sales contribution is mainly from retail (60%), then builder (20%) and government (20%). Price difference in
branded vs. unbranded tiles is still high – 10-20% while in sanitary ware, it is 30-40%

Real estate agent: Kanpur Takeaway from dealer interaction

• Current Situation: Demon, RERA, and GST – have put tremendous pressure on new home sales.
• Post GST it is easy to sell an existing home than selling an under constriction house due to tax differential.
• Supply has been higher as compared to demand in as sales had come down due to RERA.
• This is a cash dominated market. There is fear in people’s mind that they will have to explain where they got
the money from. So demand for whatever called luxury is tepid now.
• Despite so much infra and development, prices have not moved up here. That’s why it’s difficult to convince
the buyer to purchase the house. They want to wait for price fall.

Source: Spark Capital Research Page 26

 #10: Consumer Durables: Demand on the rise – Split ACs are the flavour of the season
White Goods (multi-brand dealer) –
Wholesale market, Kanpur
Inverter dealer, Kanpur
Source: Spark Capital Research
Takeaway from dealer interaction
• Current demand scenario: Air-conditioners: Till now, weather is not very hot so demand has been healthy only
for fans so far. But since last one week, AC market is picking up.
• Power availability: Electricity availability has been good.
• Demand for inverter AC picking up: Inverter ACs is gaining huge acceptance due to power saving feature as it
saves upto 40-50% electricity.
• Invertor ACs account for 50% of the total split ACs sold.
• Sells Panasonic, LG, Lloyd, Voltas in that order.
• Stabilizer is needed even for the Inverter ACs barring for LG inverter AC. 70% of the customers who buy ACs
also buy stabilizers.
• Frequent power fluctuations: Fluctuations in electricity are very frequent, hence stabilizer is a must.
• Local competition: Bluebird account for 60% of total stabilizers sold while V-Guard accounts for 40%.
Takeaway from dealer interaction
• Demand has been very sluggish due to improved electricity supply in the region.
• It’s a double whammy for us as improved electricity supply halted entry of new buyers and lower
replacement demand due to prolonged replacement cycle on account of lesser load on batteries.
• Business centres, offices still keep a back up for electricity.
Page 27
 #10: Consumer Durables: Demand on the rise – Chinese phones rule the market

Mobile phone shop - Lucknow Takeaway from dealer interaction

Improving Sentiments:
• Good momentum in sales of smart phones with 25% yoy growth.
• Replacement cycle has been falling (~1-1.5 years)
• Vivo, Oppo and Lava are leading the smartphone market.
• Demand from the rural area is healthy
• People buy mobiles on EMIs. Bajaj Finance is available for funding.

GST Bhavan, Lucknow Takeaway from our interaction on E-way bill

• eWAY bill has been successfully implemented inter states from 1st April’18. It is running smoothly now. No
technical glitches.
• Intra-state would be launched in a phased manner. Karnataka has already launched e-Way bill since 1st
Apr’18.State Govts have put mobile check posts currently. Centre would also start soon.
• eWAY bill can be generated by the registered buyer or seller or transporter.
• Tax evasion has increased post the launch of GST. VAT had some flaws due to which there was maximum
evasion of tax.
• Now, fake VAT receipt would not work. eWAY bill implementation will reduce evasion.
• One VAT slip was used multiple times by multiple parties for multiple products. eWAY bill can be generated
through a message or online.
• Implementation of any new system takes time. There are many challenges unfolding every day. So this year is a
transit period for GST implementation. It would take time for people to get used to the new system.

Source: Spark Capital Research Page 28

Appendix: Uttar Pradesh – An overview

3rd largest state in

 Uttar Pradesh is the 3rd largest state of India. It contributed 10.1% to India’s GDP in FY17.
terms of GDP size

Strong agriculture  Uttar Pradesh is the largest producer of food grains in India and accounted for about 17.83% share in the country's total food grain output in 2016-17.
base  Food grain production in the state in FY17 stood at 49mn tonnes.

 With a population of 224mn, Uttar Pradesh is the most populous state in India.
Rich labour pool
 Uttar Pradesh has a large base of skilled labour, making it an ideal destination for knowledge-based sectors.

Hub of IT/ITeS
services and  Uttar Pradesh has emerged as a key hub for IT & ITeS industries, including software, captive business process outsourcing (BPO) & electronics.
semiconductor  The state has become a hub for the semiconductor industry
industry

 It also has good connectivity through 48 national highways, 6 airports & rail links to all major cities. The state has witnessed strong infrastructure growth in
Robust the recent past. .
infrastructure
 There are 12 exporting SEZs in the state

Leading tourist  The number of domestic and foreign tourist arrivals in the state has crossed over 2.37mn in 2017.
destination  An amount of US$ 124.17mn has been allocated in the State Budget 2017-18 for development of tourism

Page 29
 Appendix: UP Budget FY19: Market borrowings to jump 22.4% yoy to Rs. 671bn in FY19BE

Fiscal deficit and debt management

#1: Fiscal deficit has been budgeted to remain largely unchanged at 2.96% of GDP
#2: Market borrowings has been budgeted to increase by 22.4% in FY19
in FY9BE, within the FRBM limit
800 22.4% 0.3
6.0%
5.3% 0.2
700
5.0% 4.50% 0.2
600
6.8% 5.4% 0.1
4.0% 500 4.0%
2.95% 2.98% 2.96% 0.1
3.0% 400
0.0
300
2.0% -0.1
200 -15.0% -0.1
1.0% 100 -0.2
745 677 575 549 671
0.0% - -0.2
FY16 FY17 FY18BE FY18RE FY19BE FY16 FY17 FY18BE FY18RE FY19BE
Fiscal Deficit (% of GDP) Market borrowings (Rs. bn) Market borrowings (% of GDP)

Source: UP Budget, Spark Capital Research Source: UP Budget, Spark Capital Research

#3: Interest servicing as a % of expenditure has been budgeted to fall to 7.6% of #4: Govt. aims to gradually reduce outstanding debt, which stood at 29.8% of GDP
total expenditure in FY19BE in FY18RE
10% 30.2%
9% 30.0%
9.3%
8% 8.6% 30.0%
8.1% 8.2% 29.8% 29.9%
7% 7.6% 29.8%
6% 29.6%
5% 29.4% 29.5%
4% 29.2%
3%
29.0% 29.1%
2%
1% 28.8%
0% 28.6%
FY16 FY17 FY18BE FY18RE FY19BE FY16 FY17 FY18BE FY18RE FY19BE
Interest Servicing (% total expenditure) Outstanding debt (% of GDP)

Source: UP Budget, Spark Capital Research Source: UP Budget, Spark Capital Research

Page 30
 Appendix: UP Budget FY19: Key takeaways

Spending in irrigation has increased 31.6% in Fiscal deficit has been budgeted to remain
FY19BE over FY18RE to Rs. 142bn largely unchanged at 2.96% of GDP in FY9BE,
within the FRBM limit

Irrigation
Fiscal deficit
The total expenditure in FY19 is
Rs 16.5bn has been allocated for targeted at Rs. 4,3tn. This is
the Smart Cities Mission 16.3% higher than FY18RE
Urban Infra Total
Expenditure

Capex is budgeted to increase Market borrowings has been

by 30.5% in FY19 while revex is budgeted to increase by 22.4%
budgeted to increase at a to Rs. 671bn in FY19BE
moderate pace of 12.2% Capex vs. Market
Revex Borrowings

The state is estimated to spend Rs. UP witnessed a 15% fall in tax

455bn on pensions, a 22% increase revenue collections during
over FY18. Pension FY18 over the budget
Shortfall in estimates
own tax
revenue

Out of Rs. 197bn allocated for rural

development, Rs. 29bn will be spent
on roads and bridges, and Rs. 12bn Rural Fall in stamp Collections from stamp duty were
will be spent on housing. Spend 28% lower than the budget
duty estimates.

GDP Subsidies

The nominal GDP of UP for FY19 has been UP is expected to spend Rs. 116bn on subsidies
estimated to grow only at 8% yoy to Rs.14.9tn. in FY19BE, which is 15% higher than FY18BE

Page 31
 Appendix: Energy, irrigation and rural development grab the maximum delta in spending in FY19BE

Sectoral Spending – Major heads

Department-wise expenditure

Expenditure (Rs. bn) Growth (yoy)

Key Highlights

FY16 FY17 FY18BE FY18RE FY19BE FY18BE FY18RE FY19BE • The allocations for agriculture sector has
fallen 59% yoy in FY19BE because the
Agriculture 29 60 396 284 116 554.7% 369.5% -59.2% state had implemented a farm loan waiver
in FY18, resulting in higher spending
during the year.
Rural development 101 104 158 159 197 51.6% 52.8% 23.7%
• Out of the Rs. 197bn allocated to Rural
Irrigation and Flood Control 103 107 110 109 143 2.6% 1.6% 31.6% development, Rs. 29bn will be spent on
roads and bridges, and Rs. 12bn will be
spent on rural housing.
Energy 482 340 177 181 278 -47.8% -46.8% 53.7%
• While allocation for energy sector has
Education 401 490 624 570 632 27.2% 16.3% 10.9% seen 53.7% yoy jump, 62% of this
allocation is for revenue expenses (such as
Public Works 45 237 192 195 222 -19.0% -17.8% 13.8% payment of interests and subsidy), and
only 38% is on capital expenses.

Urban Development 52 62 134 131 135 114.6% 110.7% 2.6% • Rs. 16.5bn has been allocated for the
Smart Cities Mission. Cities selected under
Debt Repayment 176 203 220 220 305 8.4% 8.4% 38.8% the Mission are Lucknow, Kanpur, Agra,
Varanasi, Allahabad, Aligarh, Jhansi,
Moradabad, Bareli, and Saharanpur.
Interest payment 284 269 332 303 324 23.3% 12.4% 7.1%
• Allocation for various road projects:
Others 1406 217 225 225 278 3.6% 3.7% 23.6% Gorakhpur Link Expressway: Rs 5.5bn,
Purvanchal Expressway: Rs 10bn, Agra-
Lucknow Expressway: Rs 5bn.
Total Expenditure 3,039 3,334 3,847 3,685 4,284 15.4% 10.5% 16.3%

Source: UP Budget, Spark Capital Research

Page 32
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 Spark Disclaimer
Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, Spark Capital has
incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of interest statement Yes/No

Analyst financial interest in the company No
Group/directors ownership of the subject company covered No
Investment banking relationship with the company covered No
Spark Capital’s ownership/any other financial interest in the company covered No
Associates of Spark Capital’s ownership more than 1% in the company covered No
Any other material conflict of interest at the time of publishing the research report No
Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:
 Managing/co-managing public offering of securities
No
 Investment banking/merchant banking/brokerage services
 Products or services other than those above in connection with research report
Whether Research Analyst has served as an officer, director or employee of the subject company covered No
Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensations was, is
or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.
Additional Disclaimer for US Institutional Investors
This investment research distributed in the United States by Spark Capital Advisors (India) Private Limited and in certain instances by Enclave Capital LLC ('Enclave'), a U.S registered broker dealer, only to
major U.S. institutional investors, as defined under Rule 15a-6 promulgated under the US Securities Exchange Act of 1934, as amended, and as interpreted by the staff of the US Securities and Exchange
Commission. This investment research is not intended for use by any person or entity that is not a major U.S institutional investor. If you have received a copy of this research and are not a major U.S
institutional investor, you are instructed not to read, rely on or reproduce the contents hereof, and to destroy this research or return it to Spark Capital Advisors (India) Private Limited or to Enclave.
Analyst(s) preparing this report are employees of Spark Capital Advisors (India) Private Limited who are resident outside the United States and are not associated persons or employees of any US
registered broker-dealer. Therefore the analyst(s) are not be subject to Rule 2711 of the Financial Industry Regulatory Authority (FINRA) or to Regulation AC adopted by the U.S Securities and Exchange
Commission (SEC) which among other things, restrict communications with a subject company, public appearances and personal trading in securities by a research analyst. Any major U.S Institutional
investor wishing to effect transactions in any securities referred to herein or options thereon should do so by contacting a representative of Enclave Capital LLC. Enclave is a broker-dealer registered with
the SEC and a member of FINRA and the Securities Investor Protection Corporation. Its address is 19 West 44th Street, Suite 1700, New York, NY 10036 and its telephone number is 646-454-8600. Spark
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