amit agarwal vip industries ltd (vip)...

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.

SEPTEMBER 21, 2017

PRIVATE CLIENT RESEARCH INITIATING COVERAGE

VIP INDUSTRIES LTD (VIP) PRICE: RS.248 RECOMMENDATION: BUY TARGET PRICE: RS.325 FY19E PE: 21.5X

We initiate coverage on VIP Industries (VIP) which is the market leader in the organized luggage industry in India with more than 50% market share, manufacturing and supplying a wide range of hard sided and soft-sided luggage. We expect the company to maintain a strong growth momentum with increasing penetration of luggage bags and back-packs, healthy GDP growth, improving disposable income, increased air and rail travel and with increased use of luggage as a gifting tool. We estimate revenue CAGR of 17% and earnings CAGR of 28% over FY17 to FY20E with improvement in operating margins and return ratios. We believe VIP would be one of the major beneficiaries of healthy GDP growth, rising income level, changing life style and implementation of GST. We initiate coverage on the stock with a TP of Rs 325 valued at 30x FY19 earnings.

Key Investment arguments

Increasing penetration of luggage bags - The penetration of luggage for travelin India is significantly low, while the comparable figure of developed countriesis much higher. We estimate the penetration of luggage to increase within thecountry with healthy GDP growth, growing income level, changing life-stylegrowing leisure and business travel, new luggage and backpacks advertisingcampaigns, strong new product launches by companies and new distributionschemes.

Shift towards branded products to propel growth - The Indian luggageindustry is currently valued at Rs 80 bn and is partially dominated by theunorganized sector with ~50% market share. As per Industry estimates, theluggage sector is expected to grow at a CAGR of ~11% over FY17 to FY20Ewithin which, the organized segment is expected to grow at a faster pace. Thiswould be on the back of implementation of GST, increase in disposableincome, improved brand visibility of established players and increasing fashionconsciousness and aspiration levels of people. All of the above would bebeneficial for branded players like VIP.

Substantial brand visibility with wide distribution network - VIP has beenconstantly working on improving its brand visibility and product reach for theentire range of products across various VIP brands and across price points. Ithas been spending around 5-6% of its sales on advertising and promotions toincrease its brand visibility and we expect the trend to continue over FY17 toFY20E. It also markets and sell its product through a wide network of dealersand stores, through modern trade, through various online platforms andthrough various canteens which has substantially improved the brand visibility,reach and sales of VIP.

Diversified product portfolio - VIP has a well-diversified product bouquet,which caters to consumers from all income groups. The company’s brands likeAristocrat and Alfa cater to the mass segments while, brands like Carlton,Caprese and VIP cater to the high-end segments. The company is alsotargeting the youth through its trendy brand – Skybags. The company’s VIPbrand contributes ~45% of net sales, followed by Skybags, which contributes~27%, brands like Aristocrat and Alfa contribute ~20% and the balance isfrom brands like Carlton and Caprese. Diversified product portfolio enablesthe company to cater to consumer of every age and every income group.

Amit Agarwal [email protected] +91 22 6218 6439

Stock details

BSE code : 507880 NSE code : VIPIND Market cap (Rs bn) : 35.7

Free float (%) : 47.5 52 wk Hi/Lo (Rs) : 266/ 112 Avg daily volume : 676,000

Shares (o/s) (mn) : 142.0

Summary table

(Rs mn) FY17 FY18E FY19E

Sales 12,752 15,581 17,734 Growth (%) 4.8 22.2 13.8

EBITDA 1,319 1,957 2,264 EBITDA margin (%) 10.3 12.6 12.8 PBT 1,244 1,874 2,177

Net profit 849 1,302 1,512 EPS (Rs) 6.0 9.2 10.7 Growth (%) 25.2 53.3 16.2

CEPS (Rs) 6.9 10.2 11.7 Book value (Rs/share) 28.6 34.2 40.6 Dividend per share (Rs) 2.2 3.0 3.5

ROE (%) 21.0 26.9 26.3 ROCE (%) 29.3 37.5 36.8 Net cash (debt) 60 128 582

NW Capital (Days) 77.2 71.2 74.4 EV/EBITDA (x) 23.1 15.8 13.7 P/E (x) 38.3 25.0 21.5

P/Cash Earnings 33.3 22.5 19.6 P/BV (x) 8.0 6.7 5.7

Source: Company, Kotak Securities – Private Client Research

Share holding pattern

Source: Capitaline

One-year performance (Rel to Sensex)

Source: Capitaline

Promoter52%

FIIs5%

Domestic Institutions

17%

Corporate bodies

3%

Public23%

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 2

September 21, 2017 INITIATING COVERAGE

Sourcing soft luggage from Bangladesh - The company wants to reduce dependency for soft luggage on China due to factors like rising labour cost in China and toughening environmental norms. It has setup a manufacturing facility in Bangladesh through its wholly owned subsidiary for soft luggage. China now forms 70% (down from 90% in FY15) of the soft luggage requirement, with Bangladesh forming 20% and the rest manufactured indigenously. Going forward, we expect the sourcing of soft luggage to fall further from China to 50% with share of Bangladesh increasing to 40%, which would aid margins going forward.

Outlook and valuation

We believe VIP would be one of the largest beneficiaries of lifestyle change in the country. With improving luggage penetration in a populated country like India, healthy GDP growth and increasing purchasing power, increasing leisure and business related travel and desire to use branded luggage, would drive the growth of VIP. We estimate volumes for VIP to grow at 12% CAGR and revenues at 17% CAGR over FY17 to FY20E with improvement in margins and return ratios. We value VIP at 30x FY19E earnings which is at 30% discount to consumer companies in the paint industry having similar earnings profile and growth. Initiate coverage with a BUY rating and a TP of Rs 325.

Risk and concerns

Unpredictable consumer behavior.

Continued competition from unorganized sector.

Depreciation of rupee.

Increase in prices of raw material like polypropylene and polycarbonate. Slow GDP growth and weak income levels.



COMPANY BACKGROUND VIP Industries, established in the year 1971, is a leading luggage maker in India offering a wide range of products in hard luggage and soft luggage segments including school bags, trolleys, backpacks, suitcases, executive cases, duffels and overnight travel solutions. Some of its brands include VIP, Caprese, Alfa, Aristocrat, Buddy and Carlton. The company is Asia’s No.1 luggage manufacturer and transforming its business strategy from time to time. The company has manufacturing facilities located at Haridwar in Uttarakhand, Jalgaon, Nagpur and Nashik in Maharashtra. The company has set up a subsidiary in Bangladesh to manufacture and market luggage and bags. The company is maintaining its market share of 50% in the organized luggage industry by offering wide range of product mix like Carlton and VIP catering to high-end segment, Aristocrat caters to mid-segment, Skybags cater to mid and sub-mid segment and Alfa for lower-end price segment. The company sells moulded furniture Moderna, which is of superior quality but the furniture business is declining due to intense pressure from competitors. The company is planning to restructure the moderna business to optimize sales.

Brands within the VIP ambit

Source: Company



INDUSTRY GROWTH POTENTIAL In recent years In India, luggage and handbags have managed to shed their traditional utilitarian tag and have now evolved as lifestyle products. Increasing business and leisure travels coupled with rising disposable income and organized retailing have led to increased demand for luggage. Within this category, the demand for brand names has grown, as consumers aspire for goods that are branded, durable and count as status symbol.

Several factors have provided impetus to the growth of luggage industry. We see the following as sector specific factors that would stimulate the growth of the industry:

a) As per Ministry of Tourism, India will account for 50 million outbound tourists by 2020, thereby presenting favourable prospects for the luggage industry

b) Indian economy is expected to grow at ~7% per annum over the next 3 years creating business opportunities both in the private as well as the public sector. This would stimulate business travel translating into demand for business related bags.

c) Big youth population in the country translate into healthy demand for backpacks and duffel bags

d) Modern retailing and new fashion trends are also expected to drive the sale of casual bags and travel luggage bags category over the next few years

e) Luggage has also become an important part of the wedding trousseau, with even people in tier II and III cities buying branded suitcases and strollers during the wedding season

f) Millennial who constitute a considerable portion of Indian population, travel and like to travel hands free, which in turn have initiated growth for the backpack-duffle bag category

g) Lower penetration of luggage bags within the country is estimated to increase the overall size of the market

Despite such strong prospects, the overall luggage market in the country stands at Rs 80 bn, according to market estimates and approximately 50 percent of this is dominated by organized players with VIP having a 50% market share, with fierce competition from Samsonite and American Tourister. It is imperative for all the luggage players to actively design their strategy to be part of the growth story of the luggage Industry and here we believe VIP has fundamentally done lot of things right.

As per Industry estimates, the luggage sector is expected to grow at a CAGR of ~11% over FY17 to FY20E within which, the organized segment is expected to grow at a faster pace. This would be on the back of implementation of GST, increase in disposable income, improved brand visibility of established players and increasing fashion consciousness and aspiration levels. All of the above would be beneficial for branded players like VIP.



INVESTMENT ARGUMENTS Up-trading to propel growth

Industry reports indicate that the luggage sector is expected to grow at ~1.5x GDP or at 11% CAGR over FY18 to FY22E, within which, the organized segment is expected to grow at a faster pace compared to the unorganized segment. With the implementation of GST, the pricing gap between the organized and unorganized players has narrowed down significantly, which has equated the pricing of organized and unorganized players creating a level playing field. With this we estimate the share of organized players to improve from current levels, which would help VIP to grow at faster pace over unorganized players.

Broadly, we believe that VIP is best placed to gain market share on the back of better product quality, strong brands, and wide distribution network. Currently, the company has 50% market share in the organized luggage industry.

For VIP, we estimate the volumes to grow at 12% CAGR over FY17 to FY20E with intermittent price hikes.

Hard luggage vs. Soft luggage (FY17) Organized vs. unorganized (FY17)

Source: Company

Level playing field post GST

VIP has been paying an effective indirect tax of 20% against our estimate of 12% paid by the unorganized players. GST of 28% is applicable now to the entire luggage industry, which would increase the indirect tax burden on all players. The impact would be more felt to the unorganized players who evade indirect taxes to the tune of 40%. To recover the same, VIP has already taken a price hike of 6% in Q1FY18 with further price increase expected in Q2FY18. We also expect unorganized players to take similar or larger price increase for its products to recover the increased indirect tax impact, which would reduce the pricing gap between the organized and unorganized players creating a level playing field. This is estimated to shift some volumes from the unorganized towards branded organized players like VIP for better product quality and established brands. This would help VIP to grow at faster pace over unorganized players.

GST vs. Indirect taxes Category of tax Rate for VIP Unorganized player

Excise duty (%) 12.5 8

Sales tax (%) 5 to 13 3 to 7

Effective indirect tax (%) 20 12

GST (%) 28 28

Source: Industry, Kotak Securities – Private Client Research

Hard luggage

30%

Soft luggage70%

Organised50%

Unorganised50%



Diversified product portfolio catering to all segment of customers

VIP has a well-diversified product portfolio which caters to consumers across different demographics. The company’s brands like Aristocrat and Alfa cater to the mass segments while, brands like Carlton, Caprese and VIP cater to the high-end segments. The company is also targeting the youth through its trendy brand – Skybags. The company’s VIP brand contributes ~45% of net sales, followed by Skybags, which contributes ~27%, brands like Aristocrat and Alfa contribute ~20% and the balance is from brands like Carlton and Caprese.

Positioning of VIP brands Brand Year Positioning

VIP 1971 Mass, mid-premium

Alfa 1971 Mass market, targeted to convert consumers purchasing unbranded luggage to VIP products

Carlton 2004 Premium international brand, targeted towards young professionals

Aristocrat 2007 Value for money

Skybags 2012 Youth oriented, stylish

Caprese 2012 Mass-premium, targeted towards fashion conscious urban women

Source: Company

Diversified product portfolio enables the company to cater to consumer of every age and every income group.

Substantial brand visibility with wide distribution network

VIP has been continuously focusing on strong brand visibility of its products. The company’s brands include Carlton, VIP Bags, Skybags, Aristocrat, Alfa and Caprese. Historically, the company has been spending around 5-6% (percentage of sales) on ad spends to increase its brand visibility and we expect the trend to continue over FY17 to FY20E.

Ad spends by VIP

Source: Company, Kotak Securities – Private client Research

In terms of sales and distribution, VIP is selling its product through a network of 3000 dealers, 225 exclusive stores, 260 franchise stores, military canteen, through all Supermarkets and hypermarkets and through E-com. This has improved the brand visibility and product reach for the entire range of products across various VIP brands and across price points.

Product reach of VIP brands Medium of sales Details

Dealers Exclusive dealer and distributor

Stores Owned and Franchise model

Modern trade Hyper markets, Super markets and departmental stores

Canteen Military canteen

E COM Flipkart, Amazon, Snapdeal, Own Portal

Source: Industry, Kotak Securities – Private Client Research

4.8

5.1

5.4

5.7

6.0

6.3

0

300

600

900

1,200

FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Advertising and promotion expenses (Rs mn - LHS)

% of sales (RHS)



Strategic decision to shift from China to Bangladesh

Soft luggage industry is a labour intensive industry with polypropylene as the key raw material. To save on cost, VIP has been sourcing 90% of its soft luggage from China (which is 70% of its revenues) with designing and quality control done by the company itself. Due to increasing labour costs and other reasons such as strengthening of the Yuan vs. INR and toughening environmental and labour laws, the company has decided to reduce dependency on China in the long run and has setup a manufacturing facility in Bangladesh through its wholly owned subsidiary for manufacturing soft luggage. It is also important to note that the Bangladesh subsidiary enjoys excise and sales tax holiday for a period of 6 years beginning FY15.

China now forms 70% (down from 90%) of the soft luggage requirement, with Bangladesh forming 20% and rest manufactured indigenously. Going forward, we expect the sourcing of soft luggage to fall further from China to 50% with share of Bangladesh increasing to 40% which would aid margins going forward.

Soft luggage sourcing (%) Country FY17 FY20E

China 70 50

Bangladesh 20 40

India 10 10




FINANCIAL ANALYSIS Revenue CAGR of 17% over FY17 to FY20E

Increased luggage penetration and shift of volumes from unorganized to the organized sector would drive the volumes at a CAGR of 12% over FY17 to FY20E. Company has already taken a price increase of 6% in Q1FY18 for its products to cover the impact of GST on the company and would take another similar hike in Q2FY18. This together with intermittent price increase/decrease in sync with demand supply situation would lead to a revenue CAGR of 17% over FY17 to FY20E

Trend in volumes and revenues for VIP Particulars FY16 FY17 FY18E FY19E FY20E

GDP growth 7.3 7.0 7.5

Volume growth 10.0 9.1 14.6 10.5 11.3

Revenue (Rs mn) 12,164 12,752 15,581 17,734 20,320


Favourable raw material situation – to aid margins

The 2 major categories of inputs - polypropylene (for hard luggage) and polycarbonate have softened in the last 2 years. Accordingly, VIP has renegotiated with suppliers in Q1FY18 fresh contracts for supply of these raw material at lower prices. The above two mentioned raw material are crude derivatives and we estimate them to remain at lower levels in near term due to excess supply in the market. This coupled with strong demand environment for end product should aid margins going forward for VIP.

Polypropylene - Asia price Index

Source: Bloomberg

EBIDTA margin trend for VIP (%)


800

950

1100

1250

1400

7.48.9

10.3

12.6 12.8 13.0

0.0

3.0

6.0

9.0

12.0

15.0

FY15 FY16 FY17 FY18E FY19E FY20E



Improving margins to improve the return ratios of the company over FY17 to FY20E

DuPont Analysis Parameter Ratio FY16 FY17 FY18E FY19E FY20E

EBIT margin EBIT/ Revenue 7.8 9.3 11.6 11.9 12.2

Asset Turn over Revenue /Capital employed 3.3 3.1 3.2 3.1 3.0

Financial Leverage Capital Employed/ Equity 1.0 1.0 1.0 1.0 1.0

Interest Burden PBT/EBIT 1.0 1.0 1.0 1.0 1.0

Tax burden PAT/PBT 0.7 0.7 0.7 0.7 0.7

ROE (%) PAT/Equity 19.0 21.0 26.9 26.3 25.8

EBIT Margin EBIT/ Revenue 7.8 9.3 11.6 11.9 12.2

Capital Turnover Revenue/ Capital Employed 3.3 3.1 3.2 3.1 3.0

ROCE (%) EBIT/Capital Employed 25.4 29.3 37.5 36.8 36.4

Source: Kotak Securities – Private Client Research

Modest capex of Rs 250 mn per annum over FY17 to FY20E to improve BS quality

The company manufactures hard luggage at Haridwar and Nashik and imports 90% of its soft luggage requirement. It is very difficult to measure the capacity of the plants in terms of no of units manufactured, as it involves a mix of multiple category of products. VIP currently operates at 70% utilization (can be increased to 100%) and capacity enhancement can be done by just putting up an additional machinery of around Rs 150 mn. Accordingly we estimate the company to spend around Rs 250 mn per annum over FY17 to FY20E toward capital and maintenance capex.

With Operational cash flow generation of Rs 1 bn, we estimate the BS quality of VIP to improve further going forward.

Balance sheet health analysis

Debt and cash-flow for VIP (Rs mn) FY16 FY17 FY18E FY19E FY20E

Gross Debt 158 3 0 0 0

Networth 3,569 4,046 4,834 5,747 6,818

Cash 345 73 131 582 1,031

Operating cash flow 660 989 749 1,203 1,384

Free cash flow 566 924 502 953 1,134

Capex 94 65 247 250 250


Company posted strong numbers for Q1FY18

VIP reported very strong set of numbers for Q1FY18 on the back of price hike taken in the month of June 2017 of 6% average across categories, 2) Renegotiated contracts for raw material at lower prices and 3) Strong demand momentum. Management indicated that there would be another price increase of similar quantum in Q2FY18, primarily to counter the impact of higher GST rate which should translate in higher revenue figure for the company in future quarters. We expect the strong quarterly performance to continue for the company with improving luggage penetration in the country, implementation of GST and soft raw material prices.



Consolidated quarterly performance (Rs mn) Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18

Net sales 3752 2854 3074 3080 3997

Raw material cost 2033 1533 1604 1590 2179

Employee cost 334 373 352 357 372

Other expenses 886 686 858 818 834

Total Expenditure 3253 2592 2814 2765 3385

EBIDTA 499 262 260 315 612

EBIDTA % 13.3 9.2 8.5 10.2 15.3

Depreciation 38 34 33 33 30

Other income 6 29 5 0 23

Interest cost 0 0 0 4 0

PBT 467 257 232 278 605

Taxes 155 75 75 88 195

Reported PAT 312 182 157 190 410

Source: Company

VALUATION AND RECOMMENDATION We believe VIP would be one of the largest beneficiaries of lifestyle change in the country. With improving luggage penetration in a populated country like India, healthy GDP growth and increasing purchasing power, increasing leisure and business related travel and desire to use branded luggage, would drive the growth of VIP. We estimate volumes for VIP to grow at 12% CAGR and revenues at 17% CAGR over FY17 to FY20E with improvement in margins and return ratios. We value VIP at 30x FY19E earnings which is at 30% discount to consumer companies in the paint industry having similar earnings profile and growth. Initiate coverage with a BUY rating and a TP of Rs 325.

Comparison with consumption companies in the paint sector Company MKt Cap PE (x) EV/EBIDTA (x) P/B (x) RoE (%) (Rs bn) FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E

Asian Paints 119.4 50.2 44.9 34.7 31.3 13.8 11.1 27.5 24.8

Berger Paints 256.5 50.7 44.6 32.9 29.1 12.3 10.3 24.3 23.1

Kansai Nerolac 263.5 47.0 42.6 31.3 28.2 11.5 9.9 24.4 23.2

VIP industries 35.7 25.5 21.5 15.8 13.7 6.7 5.7 26.9 26.3

Source: Kotak Securities – Private Client Research



FINANCIALS

Profit and Loss Statement (Rs mn) FY17 FY18E FY19E FY20E

Net sales 12,752 15,581 17,734 20,320 Raw material cost 6,759 7,946 9,026 10,323 Employee cost 1,415 1,636 1,844 2,113 Other expenses 3,259 4,042 4,599 5,245 - Operating expenses 11,433 13,624 15,469 17,681 Operating profit 1,319 1,957 2,264 2,640 + Other income 59 60 60 60 - Depreciation 128 143 147 157 - Interest 6 - - - - Tax 395 572 665 787 PAT 849 1,302 1,512 1,756 + (Associates-Minorities) - - - - Consolidated PAT 849 1,302 1,512 1,756

Source: Company, Kotak Securities - Private Client Research

Cash Flow Statement (Rs mn) (Rs mn) FY17 FY18E FY19E FY20E

Consolidated PAT 849 1,302 1,512 1,756 + Non-cash items 128 143 147 157 Cash profit 977 1,445 1,660 1,913 - Inc. in working capital (12) 695 456 529 Operating cash flow 989 749 1,203 1,384 - Capital expenditure 65 247 250 250 Free cash flow 924 502 953 1,134 - Dividends 371 514 599 685 + Equity raised - - - - + Debt raised (145) (10) (3) - + Inc. in minority interests - - - - - Investments 679 (79) (100) - - Miscellaneous items - - - - Net cash flow (271) 58 451 449 + Opening cash 345 73 131 582 Closing cash balance 73 131 582 1,031


Balance Sheet (Rs mn) FY17 FY18E FY19E FY20E

Equity Capital 283 283 283 283 Reserves 3,763 4,551 5,464 6,535 Networth 4,046 4,834 5,747 6,818 Debt 13 3 - - Minority interests - - - - Capital employed 4,059 4,837 5,747 6,818 Fixed Assets 615 719 822 914 Investments 679 600 500 500 Working capital 2,692 3,387 3,844 4,373 Cash 73 131 582 1,031 Capital deployed 4,059 4,837 5,747 6,818


Ratio Analysis (Rs mn) FY17 FY18E FY19E FY20E

Topline growth (%) 4.8 22.2 13.8 14.6 Bottomline growth (%) 25.2 53.3 16.2 16.1 Operating margins (%) 10.3 12.6 12.8 13.0 FDEPS (Rs/share) 6.0 9.2 10.7 12.4 CEPS (Rs/share) 6.9 10.2 11.7 13.5 DPS (Rs/share) 2.2 3.0 3.5 4.0 BV (Rs/share) 28.6 34.2 40.6 48.2 PER (x) 38.3 25.0 21.5 18.5 P/C (x) 33.3 22.5 19.6 17.0 Dividend yield (%) 0.9 1.3 1.5 1.7 P/B (x) 8.0 6.7 5.7 4.8 EV/Sales (x) 2.5 2.0 1.8 1.6 EV/ EBITDA (x) 23.1 15.8 13.7 11.8 Debt/Equity (x) 0.0 0.0 - - Working capital turn (days) 77.2 71.2 74.4 73.8 Dividend payout (%) 43.8 39.5 39.6 39.0 ROE (%) 21.0 26.9 26.3 25.8 ROCE (%) 29.3 37.5 36.8 36.4




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 [email protected] [email protected] [email protected] [email protected] [email protected] +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 [email protected] [email protected] [email protected] [email protected] +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 [email protected] [email protected] [email protected] [email protected] +91 22 6218 6443 +91 22 6218 6438 +91 22 6218 6434 +91 22 6218 5438

TECHNICAL RESEARCH TEAM Shrikant Chouhan Amol Athawale [email protected] [email protected] 91 22 6218 5408 +91 20 6620 3350

DERIVATIVES RESEARCH TEAM Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas [email protected] [email protected] [email protected] [email protected] +91 79 6607 2231 +91 22 6218 6420 +91 22 6218 5497 +91 33 6625 9810

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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 - Yes

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: [email protected].

Level 1: For Trading related queries, contact our customer service at '[email protected]' and for demat account related queries contact us at [email protected] 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 [email protected] or call us on 022-42858445 and if you feel you are still unheard, write to our customer service HOD at [email protected] 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 [email protected] or call on 91- (022) 4285 8484.

Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at [email protected] or call on 91- (022) 4285 8301.

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