Sector : Industrial Gases

26 Nov 2019

Company Name Linde India Ltd. Average Entry 612.50

Symbol NSE LINDEINDIA Target 900
Symbol BSE 523457 Stoploss 520
Closing Price 652 Downside Risk -15.1%
1st Entry 635 Upside Potential 46.90%
2nd Entry 590 Time Horizon 18-24 months

Observation from Linde India Ltd Weekly Chart :-

 Stock has given breakout earlier in year Oct 2018 and made life time high 819 odds however it was not
sustained and fell back into the triangle.
 Recently stocks has given breakout with vols. from multiple pattern.
 Ascending Triangle pattern
 Rounding bottom
 Also stock is sustained above its 50%~617 Fibbo. retracement level.(From 415 to 819)
 At current juncture stock is trading above its 50 SMA and 100 SMA, with Golden crossover.
 The 14 period RSI is also above 60 level which is suggest strength in current setup.
 Therefore for short term we are looking to buy 50% quantity around 635 and 50% quantity around
590.
 We expect upside potential is around 900 ~ 45%.
 The current setup will be failed if price has breakdown below 520.Therefore downside risk is around
520 ~ 15%.
FUSION (Techo+Funda) CALL : CASH BUY LINDEINDIA 50% Quantity AT CMP 635 AND 50%
Quantity AT 590 TGT 900 SL 520
Techno-Funda Linde India Ltd 1
Jainam Share Consultant Pvt Ltd Sector : Industrial Gases

About
Linde India Limited, formerly BOC India Limited, is a member of The Linde Group and the leading industrial
gases company in India. They own and operate India‘s largest air separation plant and run more than 20
production facilities and filling stations across the country. They supply more than 20,000 gases and
mixtures as well as provide a range of related services including the construction and installation of plants,
equipment, pipelines and associated engineering services catering to the needs of a wide variety of
industries. Linde India has the largest sales and distribution network in the country giving us a wide
geographic reach and placing us close to our customers in any part of India.

Particular 22-Nov-2019 Particular 22-Nov-2019

Latest Price (Rs) 651.15 EV/TTM EBIDTA(x) 19.77
52 Week High (Rs) 819.00 EV/TTM Sales(x) 3.02
52 Week Low (Rs) 403.00 Dividend Yield% 0.23
Face Value(Rs) 10.00 EV (Rs) 6617.57
Industry PE 15.23 Market Cap (Rs in Cr. ) 5553.28

Investment Rationale
 Established Market position : Linde India is one of the largest players in the domestic industrial
gas industry, with experience of more than 75 years, diverse product portfolio, and presence in
industrial, medical, compressed, and special gases. These are backed by brand equity and ability to
provide end-to-end solutions to customers in the tonnage segment.
 Improving Balance Sheet, Operations and Tax benefit : Company is consistently paying its
long term loan as on Dec 30, 2017 total long term loan was 776.35 crore it was reduced by 46% to Rs.
416.77 crore on December 31, 2018. During 2018 standalone TTM EBITDA margin of the company
increased to 24.75% and in coming year it is expected that significant improvement in the operating
profitability will be seen and with reduction in tax rate profit margin will also improve. In CY2019 and
CY2020 it is expected that balance sheet of the company will improve due to increase in cash and
reduction in long term and short term loan as Company had recently obtained approval of its members
to sell/ transfer and divest the Company's "South Region Divestment Business", together with surplus
land at Chennai and Hyderabad PGP sites and a decommissioned Air Separation Unit at Hyderabad site
with all related assets and liabilities all on a "slump-sale" and "as is where is basis" to Air Water India
Private Ltd., a company incorporated under the Companies Act, 2013 for an aggregate sale
consideration of Rs. 1380 crore in terms of the Business Transfer Agreement to be executed between
the Company and the aforesaid Air Water India Private Ltd .
 Support from parent company : Linde India receives strong support from its parent company,
Linde AG. As on December 31, 2018 long term debt outstanding was Rs.416.77 crores.. Of the total
outstanding debt as on December 31, 2018 about 75% is from Linde AG and Linde Engineering India
Private Limited.
 Merger : Praxair merger with Linde created them global leader in the industry in terms of both sales
and geographic footprint. Another attraction to the deal is that the companies’ in-house strengths are
also complementary. Praxair is considered a leading operator in the industry, and its plants and
processes generate high profit margins. Meanwhile, Linde has a lower operating margin but has one of
the leading in-house engineering groups. So, after merger it is expected that profit margin of the
company will also improve which was lower previously.
Techno-Funda Linde India Ltd 2
Jainam Share Consultant Pvt Ltd Sector : Industrial Gases

 Healthy business risk profile : A significant proportion of revenue in the gas segment comes from
installation/tonnage i.e revenue from on-site business, where the company enters into long-term
(15-20 years) take or pay contracts with customers, which provide stable cash flow and profitability
and prevent significant decline in revenues during downturn. Asia Specific revenue division:

 Special Situation : - Delisting

- Special Dividend

Risk
 Competition, cyclical business : The domestic industrial gas industry is intensely competitive
because of commoditised nature of products. The company has to compete with both organized
(other international players present in the Indian market) and unorganised players. Furthermore, the
onsite sales business is capital-intensive involving large capex, long gestation, and lengthy payback. If
implementation of onsite projects were to coincide with downturn in the industry, Linde India would
be adversely affected.
 Segment Concentration and Economy Slowdown : Auto, Steel and other metallurgical industries
account for around two-third of total revenue from the gases segment, which exposes the company to
inherent cyclicality and sluggish growth during economic downturns.

View
We expect as the economy, steel and auto sector will improve sales of the company will grow at a CAGR of
5% and the EBITDA margin will also improve to 17% due to merger which will provide it moat in domestic
market during CY21E. We anticipate improvement in its financials, we assign EV/EBITDA multiple of
19.18(TTM basis) in CY21E and arrive at a target price of Rs. 850.

Techno-Funda Linde India Ltd 3

Jainam Share Consultant Pvt Ltd Sector : Industrial Gases

Financial Information
Profit & Loss
Particular Dec-2016 Dec-2017 Dec-2018

Net Sales 1,825.31 2,033.06 2,191.65

Increase/Decrease in Stock -6.66 4.69 3.37

Raw Material Consumed 253.20 268.50 388.93
Power & Fuel Cost 818.11 922.49 890.12
Employee Cost 98.73 116.45 127.29
Other Manufacturing Expenses 101.27 111.59 110.75
General and Administration Expenses 34.56 32.67 69.81
Selling and Distribution Expenses 134.43 163.85 171.47
Miscellaneous Expenses 104.95 89.53 104.63

Total Expenditure 1,538.59 1,709.76 1,866.38

Operating Profit (Excl OI) 286.72 323.3 325.28
Other Income 31.47 7.76 9.48
Operating Profit 318.19 331.05 334.76
Interest 115.57 116.47 102.7
PBDT 202.61 214.58 232.06
Depreciation 195.4 201.93 199.14
Profit Before Taxation & Exceptional Items 7.21 12.66 32.92
Exceptional Income / Expenses -5.5
Profit Before Tax 7.21 7.16 32.92
Provision for Tax -3.2 -2.78 13.68
Profit After Tax 10.41 9.94 19.24

Techno-Funda Linde India Ltd 4

Jainam Share Consultant Pvt Ltd Sector : Industrial Gases

Balance Sheet
Particular Dec-2016 Dec-2017 Dec-2018
EQUITY AND LIABILITIES
Share Capital 85.28 85.28 85.28
Total Reserves 1,355.67 1,365.30 1,376.59
Shareholder's Funds 1,440.95 1,450.58 1,461.88
Long-Term Borrowings

Unsecured Loans 989.73 776.36 416.78

Deferred Tax Assets / Liabilities 95.86 92.18 88.09
Other Long Term Liabilities 31.98 28.40 33.27
Long Term Provisions 36.26 44.83 56.41

Current Liabilities
Trade Payables 301.63 260.79 314.97
Other Current Liabilities 586.81 579.69 735.35
Short Term Borrowings 100.00 150.00 240.00
Short Term Provisions 25.00 29.23 63.53

Total Liabilities 3,608.22 3,412.05 3,410.27

ASSETS

Non-Current Assets
Fixed Asset 2,572.75 2,497.55 2,161.55
Capital Work in Progress 80.29 35.91 44.46
Non Current Investments 60.63 57.89 0.03
Long Term Loans & Advances 99.95 126.97 155.22
Other Non Current Assets 25.13 18.75 18.34
Current Asset
Inventories 68.68 68.33 70.96
Sundry Debtors 356.85 352.72 355.05
Cash and Bank 106.14 38.64 125.40
Other Current Assets 66.29 41.66 326.83
Short Term Loans and Advances 171.51 173.64 152.42
Total Assets 3,608.22 3,412.05 3,410.27

Techno-Funda Linde India Ltd 5

Jainam Share Consultant Pvt Ltd Sector : Misc. Commercial Services

Disclaimer
Research Analyst Details

Name: Kiran Jani & Vandana Pareek

Email Id: kiran.jani@jainam.biz & vandana.pareek@jainam.biz Ph: +91 0261-6725518

Analyst ownership of the stock: No

Details of Associates: Not Applicable

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Analysis.

Techno-Funda Linde India Ltd 6

Jainam Share Consultant Pvt Ltd Sector : Misc. Commercial Services

Disclosure (SEBI RA Regulations) Yes / No

Whether the research analyst or research entity or his associate or his relative
has any financial interest in the subject company/companies and the nature of No
such financial interest
Whether the research analyst or research entity or his associates or his relatives
have actual/beneficial ownership of 1% or more securities of the subject
No
company (at the end of the month immediately preceding the date of publication
of the research report or date of the public appearance)
Whether the research analyst or research entity or his associate or his relative
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Whether it or its associates have received any compensation from the subject
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banking or merchant banking or brokerage services from the subject company in No
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services other than investment banking or merchant banking or brokerage No
services from the subject company in the past 12 months
Whether the subject company is or was a client during twelve months preceding
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Research Analyst Details:

Name Designation Email Id

Tejas Jariwala Research Head tejas.jariwala@jainam.in
Kiran Jani Technical Head Kiran.jani@jainam.biz
Vaishali Patel Sr. Technical Analyst vaishalip.patel@jainam.biz
Karan Agarwal Research Analyst karan.agarwal@jainam.biz
Vandana Pareek Research Analyst vandana.pareek@jainam.biz
Radhika Modi Research Analyst radhika.modi@jainam.biz
Shahrukh Nalbandh Sr. Research Executive shahrukh.nalbandh@jainam.biz
Prashant Sharma Jr. Research Executive prashant.sharma@jainam.biz
Dhruv Patel Jr. Research Executive dhruv.patel@jainam.biz

Techno-Funda Linde India Ltd 7