db corp - edelweiss

1 Edelweiss Securities Limited

Abneesh Roy +91 22 6620 3141

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Prateek Barsagade +91 22 4063 5407

[email protected]

August 21, 2019

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MEDIA

Q1FY20 conference call highlights compendium

India Equity Research| Media

In this compendium, we have put together Q1FY20 conference call highlights for all the

companies under our sectoral coverage, which had conducted the conference call.

Dish TV DB Corp

Jagran Prakashan PVR

Sun TV Network Zee Entertainment Enterprises


Media

Dish TV Subscription revenue

• Subscription revenue of INR8,261mn – cricketing season and elections boosted

subscription.

• Net subscriber additions during the quarter -209 thousand

• Closing net subscriber base of 23.9mn.

• End-consumer (net of taxes) ARPU stands at INR270-275, net ARPU is INR116;

comparable ARPU stands at INR199-200.

• ARPU is volatile as of now, management will wait for some more time to understand

steady-state ARPU.

Merger and synergies

• Expect operating leverage due to synergies from the merger to continue positively

towards the business

TRAI tariff order

• Consumer behaviour – Initially, the customers were trying to understand the creation

of new packages last quarter; now consumers have got packages they wanted, which is

a combination of a-la-carte and bundled offerings.

• Dish has 50% customers paying less than the previous price and other half who are

paying pay more than the previous price.

• The order has created a level playing field, so no divergence between cable and

d2h/dish operators.

OTT

• ‘Watcho’ to continue to strengthen its position in the OTT space.

Other key takeaways

• Gross debt – INR21,500mn.

• Net debt – INR19,000mn.

• Licence fee to be less by INR2bn this year due to impact of new regime; cash savings on

licence fee of INR1,750mn in FY20 compared to last year.

• On payments to ZEE and Star – now things are settled and all outstanding dues will be

settled by September end.

• Comparable EBITDA is INR4,760mn, difference of INR600mn due to the licence fee and

content cost.

• Has saved on personnel cost and general admin costs to boost EBITDA.

• Made some changes to the model to gain benefit in personnel cost apart from

synergistic benefits.

• Comparable content cost stood at INR6.1bn.

• Churn rate – 0.9%.

• Carriage revenue stood at INR430mn.

• Other operating revenue stood at INR230mn.

• Guidance on net addition for the year – 0.8mn.


Q1FY20 Conference call highlights

• Licence fee around INR550mn in Q1FY20.

• Broadcasters withdrawing from FreeDish platform opens more opportunities for the

business.

• Licence fee provision stands at INR29.5bn for the full year.

• EBITDA guidance – INR22.5-23bn.

• Capex for the quarter – INR2.05bn, FY20 capex guidance INR6.5-6.75bn.

DB Corp Business performance

• Advertising revenue stood at INR4,420mn versus INR4,549mn in Q1FY19.

• Circulation revenue came at INR1,314mn versus INR1,345mn in the corresponding

period last fiscal.

• Total revenue stands at INR6,112mn in current period versus INR6,392mn in Q1FY19.

• EBIDTA stands at INR1,796mn (EBIDTA margin 29%) against INR1,749mn (EBIDTA

margin 27%) in Q1FY19. EBIDTA jumped by around INR85mn as per Ind-AS 116 -

"Leases", which is added in depreciation and finance cost and hence negative INR9mn

impact on PAT.

• Launched print media campaign with Salman Khan to increase circulation through high

visibility – only for one campaign; will do on-ground promotion and also digital.

• Will not disclose details of the digital business due to competitive reasons.

• No cover price increase and circulation numbers have dipped. Hence, circulation

revenue has decreased; could look at increasing cover prices if the customs duty appeal

does not go through.

• Indian mills cater to only 20% of the total consumption newsprint demand.

Advertising environment

Ad revenue declined ~2.8% due to decline in categories like auto, education, real estate

and lifestyle; though political advertising clocked decent growth, DBCL lost out on

government advertising for two months due to the moral code of conduct (single digit

growth in government advertising due to elections—3% YoY).

• 16% revenue contribution of political and government advertising.

• Coaching institutes were audited for safety in Q1FY20. Hence, education ads did not

pick up.

• Local and national advertisers were impacted.

• Overall ad environment was sluggish in Q1FY20.

• Advertising market share improved—stands at ~60% in Rajasthan, ~38% in Gujarat.

• Impact of DAVP rate hike in Q1FY20.

Newsprint

• DBCL has appealed to the government on the 10% customs duty imposed. It is hopeful

that the government will relook at the decision; if this happens, it’s likely in the next 30

days.


Media

• In Q1FY19 price of newsprint mix was ~INR40 per kg; in Q2FY19 it was INR44.5 per kg,

INR45.5 per kg in Q3FY19, INR44.5 per kg in Q4FY19; for Q1FY20 it was INR40.5 per kg.

DBCL expects it to fall by INR1-2 in Q2FY20.

• Spot price for the company stands at INR36 per kg for Indian newsprint; imported

newsprint price is around USD460; overall cost of newsprint stands at INR39 per kg on

blended basis.

• If newsprint duty stays. The company will have to negotiate with international

suppliers to absorb some of the additional burden.

Radio

• Radio business revenue grew 19% YoY to INR377mn against INR317mn in Q1FY19.

• Radio business EBIDTA grew 84% YoY to INR131mn (margin 35%) from INR71mn

(margin 22%) Q1FY19; increased by around INR13mn as per Ind-AS 116- "Leases",

which is added in depreciation and finance cost.

• Radio business PAT jumped 98% YoY to INR52mn (margin 14%) from INR26mn (margin

8%) in Q1FY19.

• Advertising impact was less in bigger cities for radio; election advertising was good for

the radio business.

Other takeaways

• Cost saving of INR240mn in Q1 over Q4 due to better cost control; impact of survey

expenses and on-ground expenses not present in Q1; level of expenses sustainable

going ahead as well.

• Circulation count for Q1FY20—5.581mn copies, Pagination—22.8 and average

realization per copy INR2.63.

• Buyback was done as a one-off; management refused to comment on the payout.

However, it believes in sharing wealth with investors.

• FY19 FCF: INR740mn.

• Currently, No. 2 position in the Bihar market; working to become No. 1.



Jagran Prakashan Ad revenue

Standalone advertisement revenue at INR 3423.3mn against INR3489.7mn.

Consolidated advertisement revenue at INR4313.4mn against INR4453.4mn (includes

print, radio and digital).

Local ad revenue continues to grow and a pickup in state government spends is

expected.

Central government advertising continues to decline.

Auto revenue has slid 30% YoY and was the largest previously, lost about INR150-

160mn from auto advertising alone.

Election-related ad revenue is less than expected.

July was just fine, expect some more pickup in government and national spend.

The education category did well in Q1FY20.

Real estate advertising declined too; however, it was a small category for print.

Education grew by 7–8% YoY.

Market is difficult currently, July would probably be the bottom and it should improve

hereon.

Expect some pickup from auto (mostly from September) with the festive season coming

in.

Expect August to be better than July.

o Had Auto picked up, results would have been very different.

Expect Q2 and Q3 to look much better; working extensively towards getting new

business.

Ex-elections, would have grown by 2–3%

Circulation revenue

Took price hikes in some locations, which impacted circulation growth

Unsold copies declined from 3% to 1.5%.

Might take further increase as and when required, and working on it.

Newsprint cost

Fixed imported newsprint price – USD500 per ton (INR41,000–42,000 per ton including

all expenses).

Newsprint prices have fallen more than expected, benefit to happen from Q2FY20

Will save money on newsprint despite the imposition of 10% customs duty.

Will save INR400–500mn on INR6,600mn newsprint cost incurred in FY19.

Newsprint cost in Q1– INR1,550mn; expect newsprint cost to be: Q2 – INR1,470-

1480mn; Q3– INR1,400mn; and Q4 – INR1,400mn.


Media

Other highlights

The group generated INR1bn in cash post tax; this was used to reduce borrowings.

The business continues to be net cash positive.

Per copy realisation increased for all the newspaper brands under Jagran.

Digital performed well this quarter; expect 15–20% growth over coming years.

Double-digit growth in the outdoor and activation segments.

Large part of saving will come from newsprint price decline; not much saving from

other areas.

Will return the money – can be either dividend or buyback.

Net cash position as on June — INR3bn.

Newsprint mix in Q1FY20—42% imported and rest domestic.

Standalone –

o Operating revenues at INR4887.8mn against INR5,002.6mn.

o Advertisement revenue at INR3,423.3mn against INR3,489.7mn.

o Circulation revenue at INR1,027mn against INR1,037.1mn.

o Other operating revenue at INR437.5mn against INR475.9mn.

o Digital revenue at INR103.3mn, up 14.5% YoY from INR90.2mn.

o Operating profit at INR1,150.1mn against INR1,326.6mn.

o PAT at INR594.5mn against INR758.4mn.

o EPS (non-annualised) of INR2.01 against INR2.44.

Consolidated –

o Operating revenues at INR5,842.8mn against INR6,025.7mn.

o Advertisement revenue at INR4,313.4mn against INR4,453.4mn.

o Circulation revenue at INR1,086mn against INR1,096.9mn.

o Other operating revenues at INR443.4mn against INR475.4mn.

o Digital revenue at INR 109.1 mn, up by 14.2% from INR 95.6 mn.

o Radio operating profit at INR223.7mn against INR260.5mn.

o Radio OPM at 32.05% against 34.42%.

o Operating Profit at INR1,411mn against INR1635.5mn.

o PAT at INR65.75mn against INR88.36mn.

o EPS (non-annualised) of INR2.17 against INR2.74



PVR Ind AS 116

All leases captured and capitalised in the balance sheet.

PAT down because of higher depreciation and interest charges recognised in

accordance with the new accounting standard (Ind AS 116).

Lease charges are higher in initial years and lower in the latter part; hence, PAT will be

higher towards the latter part

No impact on cash flows and economics of the business due the accounting change.

Numbers are not comparable due to the material change because of Ind AS 116.

Comparable PAT stands at INR440mn for Q1FY20.

Net box office & F&B

Net box office collections (NBOC) grew 19% YoY driven by 19% YoY growth in footfall

(including SPI and new screens opened).

Like-to-like (LTL) footfall dipped due to the cricketing season.

F&B revenue shot up 29% YoY due to 8% YoY growth at SPH.

Q2FY20 has started off on a strong note led by Kabir Singh and Lion King.

Q2 and Q3 are looking stronger than Q1 for FY20 in terms of content; the outlook is

definitely bright.

SPH grew due to a mix of value growth (change in product mix and up-selling) and

higher uptake; expect SPH growth to be good this year.

LTL box office growth is likely to be 5–7% on an annual basis, typically because of the

ticket price growth of 5–6%.

It takes 18–24 months for new screens to mature/hit steady-state.

No incremental update on the F&B issue – still waiting to hear from the Supreme Court.

Capital expenditure and screen addition

Screen addition was strong – opened 36 in Q1FY20 and on track to open 80-plus

screens in FY20.

Expect delays in real estate delivery; however, guidance takes into account such delays,

which could happen due to liquidity and slowdown issues.

Confident of achieving 1,000 screens over the next 24 months.

Have a good pipeline of screens that are undergoing fitouts; guidance will be revised, if

needed.

Capex for tier II/III markets tends to be INR20mn per screen and we are trying to cut it

to INR175mn

ATP for tier II/III markets is INR120–140, and management is satisfied as long as

occupancy is 25–30%; SPH for such markets is INR35-45 and management expects to

take it to INR50–60.

Advertising in tier II/III markets still needs to pick up, screen count in tier II/III is about

5% (about 40 screens).


Media

SPI Cinemas

Despite slower regional content, performed very well due to the advantage of screen

locations.

Hollywood helped to gain footfall.

Ad growth

Ad growth 28% YoY in Q1FY20.

Bagged a few big contracts in Q1FY20; blockbuster movies helped too.

Need to work harder going ahead to maintain growth given the slowdown in certain

categories.

Will also look to grow off-screen advertising revenue and protecting customer

experience – currently off-screen is below 10%.

VPF

CCI has dismissed the matter over the VPF issue, which had been filed by Mr. R

Screwvala; so there is no risk to the VPF income.

Other key takeaways

Comparable properties – expense growth was higher than revenue growth because of

lower LTL footfall, and higher expenses due to new fitting of tech/ambience in older

screens.

OTT – Despite so many players, we are seeing better footfall; this is positive for the

cinema exhibition business. Management thinks of multiplex as out-of-home

entertainment.

Employee expenses higher due to wage increase and due to certain one-off costs

incurred due to rebranding of certain properties.

Distribution business should see growth from Q2—both minimum guarantee and

commission based-deals will be considered. Advances to production houses are given in

a staggered form – two–three months to a few days before the movie release.

Distribution margins depend on timing of cash flow of investment – 5% (big budget); for

smaller-budget movies. fixed distribution fee (8.5–10%) is the target. Seek to generate

an IRR of 20%-plus in this business as well.

Net debt of INR13.25bn at end-Q1FY20; growth will be largely funded via internal

accruals.

Premium screens are 10% of the total screen portfolio.

Good experience with opening screens in different types of markets – still there are

certain pockets in bigger cities that are underdeveloped and do not have much options.

Positively surprised by the performance in a few small cities.

Impact of recession or slowdown on entertainment is relatively less as it offers

escapism to audience; besides, content, if good, gets consumed anyway.

Advertising though might see some impact.

QIP – Have not decided on either the timing or specific amount to be raised.



Sun TV Network

Overall growth

Overview

Revenue breakdown: Ad – INR3,680mn; broadcasting – INR100mn; international

subscription – INR410mn; pay channel – INR1,680mn; DTH – INR2,280mn; movie –

INR410mn; and IPL – INR2,240mn.

Subscription revenue jumped 28% for the quarter.

Ad revenue grew to INR3681mn.

Revenue (excl. IPL) was up ~16% at INR8569.7mn versus INR7385.9mn for the

corresponding quarter last year.

Advertising

Ad headwinds persist--- slowdown in advertising in auto, FMCG etc.

Do not expect any significant trigger in CY19; very challenging conditions, hence no

guidance can be given says management.

Will be fortunate if the company ends with mid-single digit ad revenue growth.

Macro-headwinds have slowed down ad revenue and management expects

challenges to persist, even local advertising has been impacted.

IPL

There was some IPL revenue in the Q4FY19 also; split between Q1FY20 and Q4FY19.

Overall distribution revenue from IPL operations was down by about INR700mn this

year, but will rise once again next year.

Subscription

Now seeing the pre NTO reach coming back and the team is working towards

ensuring that channels are carried by all the MSOs/DTH.

Very few subscribers have opted for a-la-carte options; most have taken bundles.

Normalisation post tariff regime to happen within next one-two quarters.

Analog TV sets in TN should be upwards of 35%; seeding of STBs is being done by

private cable operators and DTH players including Sun Direct.

ARPU has now become standardized in the new regime; does not make a difference

between cable operators.

~20% plus growth guidance for domestic subscription revenue.

Pay channel revenue jumped 70% and DTH grew around 8%; significant gap due to

catch-up revenue.

Sun NXT

INR1.50bn outlay (pure content investment) in the OTT platform for the next 1.5

years towards producing original content, making short-form content; does not

include buying digital rights; the platform has started making money.


Media

Plan to invest back the money to put out some good and appealing content for the

youth; something which has a regional flavour as well; also witnessing significant

downloads from Indian diaspora in other countries.

Will be announcing tie-ups with one large telco and one OTT soon.

Digital ecosystem has been a big boost; expects strong growth ahead.

Currently, digital revenue is captured under subscription revenue.

Content investment to impact margin, but will focus on driving growth for the

platform.

Others

Ratings in the Tamil region have improved considerably in the past four weeks;

improved by ~20%.

Ratings also grown well in Telugu and Kannada.

Expect market share gains to translate in to monetization.

Promoter compensation in FY20 will remain the same as in FY19/18.

Breakdown of D&A: Depreciation – INR210mn and Amortization – INR1370mn.

Still have exclusive contracts with Tamil content creators.

Promoter compensation will remain the same for FY20 as it has been the past two

years.

Dividend policy – Paying out ~45-50% of available profits; will be maintaining the

same this year.

Still continues to buy good amount of movies; purchases ~70% movies in the

Southern market.

One movie has been released; two in the pipeline. Will be releasing one movie

towards the end of September and towards end of March.

Content costs also increased because of new programming (daily non-fiction

Malayali show was launched).

Receivables as on Q1FY20 – INR11.93bn; ad receivables have gone up by 98-101

days, DTH receivables also now around 145 days.

Not eyeing Marathi GEC launch as of now.

Cumulative cost of movies under production – INR1.5bn.

Moving towards private production in the non-prime time slot.

No plan to do a buyback as of now; not looking to list the IPL franchise as of now.

Satellite right cost allocation of INR50mn (total INR350mn) of one movie which

released in April is left, will be done when aired.



Zee Entertainment Enterprises

Achieved growth despite operational challenges faced by the industry due to TRAI tariff

order.

Total revenue for the quarter was INR20,081mn, up 13.3% YoY. The growth was driven

by the strong performance of the domestic broadcast and digital businesses.

Advertising revenue came in at INR11,867mn, growth of 3.6% YoY. Domestic

advertising revenue grew by 4.2% YoY to INR11,322mn. International advertising

revenue was INR545mn.

Subscription revenue was INR5,653mn, up 3.4% YoY. Domestic subscription revenue

grew by 3.9% YoY to INR4,696mn. International subscription revenue was INR957mn.

EBITDA grew by 16.6% to INR6,598mn and EBITDA margin stood at 32.9%.

ZEE5 global MAUs and DAUs stood at 76.4mn and 6.6mn, respectively, in June.

ZEEL maintained its position as the #1 all-India television entertainment network.

Strong market share reinforced in southern regional markets.

Stake sale

One binding offer has been received; expect to receive another offer in a couple of

days.

Will get back soon with more details once we have evaluated both.

Will make an announcement in a few days.

If the expected offer does not come by, then we will go ahead with the offer on the

table.

ZEE5

Released 18 original shows and movies released during the quarter

On track to release 72 shows and movies during FY20.

Strong start seen in the APAC markets as well.

Mobile plans will have curated content – not all the content; will create different

bundles for consumers with different needs.

Revenue not significant enough as of now to impact the top line; investment in ZEE5

will peak out this year.

Advertising

Advertisers pulled back on ad spends due to the impact on reach and diverted to sports

in Q1FY20.

Expect ad spends to resume once normalisation is seen; festive season would aid ad

revenue growth.

Next quarter still looking soft, but we will beat industry growth.

Expect industry ad growth for FY20 to be high single to low double-digit.

Ad revenue growth for the industry in Q1FY20 (ex of sports) is negative 6% YoY.


Media

Broadcast & subscription

A pickup in the ZEE portfolio channels and more transparent regime lit up subscription

revenue.

Expect mid-20% YoY domestic subscription growth for FY20 supported by the tariff

regime and some migration of FTA to pay channels.

Subscription revenue growth muted due to multiple revisions of timelines and

implementation issues.

Carriage cost has come down under the NTO.

Tariff order provided an opportunity to re-price content/channels.

The previous quarter was impacted due to the implementation of the tariff order; in

1Q, a good part of stabilisation has happened though and is not yet complete.

For instance, ZEE’s one Tamil channel is now INR10 from INR0 now in the new regime

due to the tariff regime – tariff order-enabled monetisation of the viewership, which

has driven subscriptions.

Do not have deals with some DTHs and MSOs, but working towards it; this would boost

subscription revenue.

Other

Cash and treasury investment stands at INR21.4bn; INR17.6bn as of Q1FY20

Attribution for the dip in ad revenue growth is more towards the FTA p towards the

muted ad revenue growth[please rephrase for greater clarity] – 5–6% impact

Impact of IND AS 116 – adopted the standard this quarter and it has had marginal

impact—the INR140mn impact on EBITDA is offset by depreciation and interest, so

bottom line is not impacted.

FCF generation unlikely to be high in FY20; next year will see improvement.

Working capital could increase INR5-7bn in FY20.

Gross debt as on Q1FY20 is INR11bn – part of it is included in current liabilities

Debtors outstanding as of Q1FY20 – INR2,276mn; this has reduced since March 2019.

International subscription growth negative due to channel displacement in the MENA

region; expect growth to come back once traction increases for ZEE5.

Finance cost declined vis-a-vis Q4FY19, which included dividend payment of

preferential shares in Q4.



Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Aditya Narain

Head of Research

[email protected]

Coverage group(s) of stocks by primary analyst(s): Media

DB Corp, DEN Networks, Dish TV India, Hathway Cable & Datacom, Jagran Prakashan, PVR, Sun TV Network, Zee Entertainment Enterprises

Date Company Title Price (INR) Recos

Recent Research

20-Aug-19 Media Rattling the rattled; Sector Update

09-Aug-19 Sun TV Network

Subscription saves the day; Result Update

450 Buy

01-Aug-19 Jagran Prakashan

Bitten by slowdown; Result Update

84 Hold

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 161 67 11 240 * 1stocks under review

Market Cap (INR) 156 62 11

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to


Media

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Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk.

Research analyst has served as an officer, director or employee of subject Company: No

ESL has financial interest in the subject companies: No

ESL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report.

Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No

ESL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No

Subject company may have been client during twelve months preceding the date of distribution of the research report.

There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to their charges of non registration as a broker dealer.

A graph of daily closing prices of the securities is also available at www.nseindia.com

Analyst Certification:

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.

Additional Disclaimers

Disclaimer for U.S. Persons

This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.


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In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc. Disclaimer for U.K. Persons

The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Disclaimer for Canadian Persons

This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst. This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person. ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada. Disclaimer for Singapore Persons

In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.

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