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PRIVATE CLIENT GROUP

Investment & Precision Castings (IPCL IN) INDIA | MIDCAP| INITIATING COVERAGE REPORT About The Company: Investment and Precision Castings Limited (IPCL) is engaged in the manufacture of Investment Castings. The company was setup in 1975 under technical collaboration with Arwood Corporation, USA. IPCL is one of the leading manufacturers of investment casting products which find application in Automotive, Aerospace, Electronics, and Medical Devices and for other General Engineering applications. IPCL is a technology leader in India, producing very complex castings in a wide range of material specifications with a piece weight upto 200 kg. Investment casting derives its name from the pattern being invested (surrounded) with a refractory product. Materials that can be cast through investment casting process are – stainless steel alloys, brass, aluminum, carbon steel and glass. The material is poured into a cavity in a refractory material that is an exact duplicate of the required part. The advantage of the investment casting method is that it produces products with exceptional surface quality thereby reducing the need for any secondary machine process. Investment casting can produce complex shapes which are difficult to manufacture with other casting methods like die casting and sand casting. Although investment casting is a more expensive mechanism than the other processes of manufacturing; per unit cost reduce as volumes increase. Investment Rationale: Superior Quality Manufacturing Through Higher Focus on R&D & Automation: IPCL undertakes manufacturing of casting products through the investment casting process. Investment Casting enables the production of highly complex parts with sections as narrow as (0.4mm) which makes it suitable for manufacturing of critical parts for its customers. The company has been supplying to large auto OEMs till date and has now begun supply for aerospace and medical devices.

26 October 2018

BUY CMP Rs 339.00 TARGET Rs 556.50 (+64%) COMPANY DATA O/S SHARES (MN) : 5.0 MARKET CAP (RS BN) : 1.7 MARKET CAP (USD MN) : 2.3 52 ‐ WK HI/LO (RS) : 525 / 210.55 TRADING VOL. 3M (000) : 134.2 PAR VALUE (RS) : 10.0 SHARE HOLDING PATTERN, % PROMOTERS : 50.01 FII / FPI : 0.0 FI / MF : 0.0 PUBLIC & OTHERS : 49.99 PRICE Vs. SENSEX

Source: Phillip Capital India Research Samarth Sanghavi (+ 9122 6655 1412) [email protected]

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

mailto:[email protected]

INVESTMENT AND PRECISION CASTINGS LIMITEDPRIVATE CLIENT GROUP INITIATING COVERAGE REPORT


Strong Tie‐Ups with Large Auto OEMs: Approximately 70‐75% of the sales of the company are to large auto ancillary companies including names like Maruti Suzuki, Hyundai, M&M, Ashok Leyland, Tata Motors, and John Deere among others. IPCL has long term relationships with its customers which have held them in good stead over the past many years.

Continuous Investment in Capacity Expansion: IPCL currently operates out of one plant located in Bhavnagar which has a capacity of 1400 tons. This plant is currently operating at nearly full capacity. With increasing product demand and diversification the company has expanded to another plant by another 400 tons and has already begun the development of another 400 tons plant. The second plant can be expanded upto additional 1400 tons. Diversifying Product Range: Historically IPCL has been mainly engaged in the business of providing casting products for the auto industry. In order to diversify its product range it has entered into providing casting components which find application in the medical, aerospace and other engineering applications. Currently, approximately 70‐75% of the revenues of the company are generated from the auto space, with this diversification the company aims to reduce its dependence on a single sector. Key Risks: Change in Raw Material Prices: Raw material prices for the company have increased by over 39% in the past 2 quarters. We believe that this is a concern given that price pass through happen at a later date. However, we expect the margins to improve as the prices are passed on to the customers with a lag. Additionally the company has been transitioning to higher price products which are expected to aid in higher margins. Outlook & View: Investment and Precision Casting Limited (IPCL) is engaged in the manufacture of investment casting products which mainly find application in the automotive industry currently. The management has undertaken capacity expansion in order to diversify its product range and the industries to which it caters to in order to reduce its sector concentration. The company has already completed its expansion (400 tons) and is expected to increase its capacity further (by 400 tons) by March with not a significantly large capital expenditure (~INR 200 million). With increasing capacity we expect the margins to improve further as the sectors to which the company is likely to cater to are expected to result in higher realizations for the products of IPCL. This expansion combined with the diversification plans of the company gives it an opportunity to improve its return ratios going ahead in the future, we expect the ROE of the company to improve from the current 8% levels to 19% levels in FY20 while the RoCE is expected to improve to 21% from the current 12% levels. At the current market price of Rs.339, the company currently trades at a PE multiple of 21.4x and 10.5x EV/EBITDA. We recommend a BUY on the company with a price target of INR 556.50, implying a 64% upside from current levels.


Company Overview Investment and Precision Castings Limited has been in the business of investment casting set up in 1975 under technical collaboration with Arwood Corporation, USA. Over the years the company has had technological collaborations with several other leading international players like M/s. Furstlich Hohenzollernsche Huttenverwaltung (Zollern Group), Germany and with M/s. Associated Foundries Engineering Co. Ltd., Japan for producing very large piece weight investment castings. IPCL is a pioneer in the investment casting business in India, boasting of top of the line customers across a wide range of industries. The company has been in the business since 1975 and has acquired additional technology over the years which enable it to produce its own ceramic cores and ceramic moulds. The company also has two wind turbines generating nearly 2.5 MW of energy, 100% of this electricity generated is used for captive consumption. The wind turbines contribute to nearly 40% of the supply of the company’s energy requirement. Over the past few years the company has seen a constant increase in its volume demanded and with a commensurate increment in the average selling price of its product. It is pertinent to note here that owing to the complexity in manufacturing process and with the quality standards provided by the company it commands a significant premium as compared to other players in the industry. The average rate of products available in the Rajkot market for investment castings is nearly INR 350‐400 while the products provided by IPCL range at INR 800‐850.

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The company is headed by Mr. Piyush Tamboli, who is the Chairman & Managing Director of the company. Mr. Tamboli has been a part of the family business over the past 2 decades and has been an integral part of the investment casting business. Below is a list of Memberships of Mr. Tamboli in various associations: • Chairman – Western Region, Automotive Component Manufacturers Association of India (ACMA) since last 2 years.

• Chairman – Western Zonal Council – CII

• Chairman, Sub‐Committee‐Defense, ACMA

• Member – ACMA Globalization Committee

• Co‐Chairman, ACMA Supply Chain Management Committee

• Member, ACMA MSME Committee

• Chairman – Sub Committee – Auto Industry, CII

• Ex‐Committee Member of Gujarat State Council CII

• Executive Committee Member, Saurashtra Chamber of Commerce

• Committee Member, Bhavnagar Small Industries Association



Investment Casting Investment casting (also known as “lost wax” or “precision” casting) is a manufacturing process in which a wax pattern coated with a refractory ceramic material. Once the ceramic material is hardened it takes the shape of the casting, subsequently the wax is melted out and then molten metal replaces the wax. The metal solidifies and then the casting is broken off.

This process is capable of producing:

• Castings in a weight range of 10 grams to 200 Kgs and size ranging from 2mm to 750mm • Casting quality which matches the standards of aerospace, defense, nuclear and medical devices • High level of automation enables better finishing substantially reducing the need for machining operations

The company has a state of the art manufacturing facility located in Bhavnagar, Gujarat with an installed capacity of 1500 tonnes per year of finished investment castings. The company ferrous, non‐ferrous, aluminum alloys, nickel base and cobalt base alloys of piece weight up to 200 kg. Industries being served by us are Aerospace, Automotive, Pumps and Valves, Electrical and Power Generation, Agricultural Equipments, Instrumentation, Aerospace, Defense, Earth Moving Equipments, Material Handling Equipments, Machine Tools, Dairy & Food Processing, Nuclear and General Engineering etc. With the knowledge and experience gained through the above collaborations and further refined by in‐ house Research & Development, IPCL is today the technology leader in the industry in India, producing very complex investment castings in a wide range of material specifications. The company acquired additional technologies which enable it to produce its own Ceramic cores and Ceramic moulds.

Products:

Automotive Aerospace Power Plants Pumps & Valves Medical Implants Electronics Compressors

Transmission Parts

Engine Parts

Clutch Parts

Coolant Connections

Supplying for Aircrafts & Satellite Supply Parts:

Gimbal Box

Pedestal Unit

Structural Castings

Turbine Blades

Impellers

Diffusers

Impellers

Diffusers

Valve Body

Knee Joint

Prosthetic Assembly Parts

Frame and Body Castings

Connecting Rod

Piston



Diffusers

Gas Boxes

Gas Tanks

Awards Received:

• Received 'SAME' Gold Medal Award 2014 from SOCIETY OF AEROSPACE MANUFACTURING ENGINEERS (VIKRAM SARABHAI SPACE CENTRE) • IPCL received "CASTING CONTEST AWARD‐2014" from INVESTMENT CASTING INSTITUTE, USA for Outstanding Leadership in demonstrating the benefits

of the Investment Casting Process. IPCL is the first Company in India to get this Award. • IPCL is the first Investment Casting Foundry in India to received Prestigious "TYPE APPROVAL CERTIFICATION' from 'CENTRE FOR MILITARY

AIRWORTHINESS & CERTIFICATION" (CEMILAC), DRDO, Ministry of Defence, Government of India for supply of Aluminium Castings (Gimbal Box & Pedestal Unit), to be fitted onboard Light Combat Aircraft "TEJAS"

Industry Background: The Indian foundry industry manufacturers metal cast components for applications in Auto, Tractor, Railways, Machine tools, Sanitary, Pipe Fittings, Defense, Aerospace, Earth Moving, Textile, Cement, Electrical, Power machinery, Pumps / Valves, Wind Turbine Generators etc. Foundry Industry has a turnover of approx. USD 19 billion with exports approx. USD 2.5 billion. Currently there are nearly 5000 units of which 90% can be considered as MSME. In 2016, worldwide casting production stood at 104.4 million metric tons which was similar to 2015 production numbers of 104.1 million metric tons as per Modern Casting’s Census of World Casting Production resulting in a growth rate of 0.2% annually. The world’s top 10 casting production nations produced 91.6 million metric tons as compared to the total of 104.4 million metric tons. India is the second largest producer of castings in the world with a production of 11.35 million metric tons annually. Country Grey Iron Ductile Iron Malleable Iron Steel Copper Aluminum Magnesium Zinc Others Total

China 20,350,000 13,200,000 600,000 5,100,000 800,000 6,900,000 ‐ 250,000 ‐ 47,200,000 India 7,890,000 1,180,000 50,000 1,010,000 ‐ 1,220,000 ‐ ‐ ‐ 11,350,000 US Metric 3,210,350 2,490,970 40,515 1,245,790 205,440 1,686,230 142,740 322,230 51,040 9,395,305 Japan 2,224,000 1,301,300 41,000 150,100 77,400 1,380,570 ‐ 23,530 5,400 5,203,300



Germany 2,234,900 1,509,900 ‐ 174,200 78,471 1,096,707 17,398 56,247 1 5,167,824 Russia 2,000,000 380,000 20,000 800,000 100,000 450,000 100,000 50,000 ‐ 3,900,000 Major Foundry Clusters:‐ Each cluster is known for its products. The major foundry clusters are located in Batala, Jalandhar, Ludhiana, Agra, Pune, Kolhapur, Sholapur, Rajkot, Mumbai, Ahemdabad, Belgaum, Coimbatore, Chennai, Hyderabad, Howrah, Kolkata, Indore, Chennai, Ahemdabad, Faridabad, Gurgaon etc. Typically, each foundry cluster is known for catering to some specific end‐use markets. For example, the Coimbatore cluster is famous for pump‐sets castings, the Kolhapur and the Belgaum clusters for automotive castings and the Rajkot cluster for diesel engine castings, Howrah cluster for sanitary castings etc. Investment casting products are mainly manufactured in the city of Rajkot which is known as the hub for the manufacture of these products. There are nearly 250 manufacturers based out of this region. The average price in the market for investment castings is around Rs. 350‐400 per kg. Owing to the quality of products manufactured by IPCL and due to its advanced technology it is able to quote a significant premium to its competitors. IPCL has a fully automated plant with 3 robots. Financial snapshot of listed peers: CMP Mkt Cap

INR Mn Revenues EBITDA PAT EV/EBITDA P/E P/B

FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 IPCL 339.0 1695.0 1028.3 1075.7 149.8 208.6 42.3 79.4 9.4 11.4 27.1 25.7 1.9 3.1 Tamboli Capital 80.0 793.6 552.0 558.3 144.5 148.5 70.4 70.0 6.2 4.7 15.1 12.6 1.8 1.4 Gujarat Intrux 100.9 346.8 270.2 353.9 23.5 61.7 7.7 34.3 5.3 3.8 28.9 9.5 0.6 0.8


Investment Rationale Superior Quality Manufacturing Through Higher Focus of R&D & Automation IPCL has been in the business of manufacturing investment casting products through the lost wax process since 1975. Over the years the company has collaborated with several international players from countries like USA, Germany and Japan. These tie‐ups have improved the company’s technological prowess. Additionally, with the continuous investment by the management in R&D and automation has improved the profitability and performance of the company. (https://youtu.be/33qU‐d6tm_0). Increasing revenues and margins give a good indicator on the growth of the company and its product acceptance. Also it is pertinent to note the constant capital expenditure undertaken by the company which is visible when we look at the gross block of the company.

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Strong Tie‐Ups With Large OEMs: Investments & Precision Castings ltd (IPCL) has provided investment casting solutions for quality‐minded companies in a wide variety of industries including – Automotive, Construction Equipment, Pumps & Valves, Railways, Agricultural Machinery, Medical Devices among others. A key advantage of the services offered by IPCL is in its technical ability to be able to participate in the designing process which makes it a critical supplier to OEMs. About 75% of the revenues of the company are derived from the automotive industry. Page | 8 | PHILLIPCAPITAL INDIA RESEARCH

https://youtu.be/33qU-d6tm_0


Customers: The company deals with several large OEM players in the auto industry across all types of vehicles including 2 wheelers, 3 wheelers, 4 wheelers, commercial vehicles and tractors. Some of the customers catered by the company include:

In addition to its existing customer base the company has also received certifications from the Railways and Aerospace industries. Currently the company supplies parts to IWI, and Bharat Dynamics Limited in the defense space.



Continuous Investment in Capacity Expansion: IPCL has been constantly investing in capacity expansion and increasing the industries to which it caters to. Over the past few years the company’s gross block has increased from INR 735 million to INR 1113.5 million in 6 months of FY 18. On an average the company has been increasing is capital expenditure which is expected to reach the level of INR 125 million in FY 2018. The amount of capital expenditure done by the company over the years is depicted in the chart below:

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Currently the company has a capacity of 1900 tons. In order to cater to the growing demand and increasing the number of industries it can cater to the company has expanded its capacity by 400 tons which has already come on stream. Subsequent to this expansion the company has already planned to increase its capacity by 400 tons and overall can increase its capacity up to 3000 tons.



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Increasing Product Range: IPCL has been a major supplier to the Automotive Industry. The company generates nearly 75% of its revenues from this industry. In order to expand its presence it has developed products which find application in the aerospace industry and in the medical devices space. These applications are extremely complicated in nature and require a higher level of manufacturing capability which the company has been able to develop with over years of experience in the same space. Looking at company’s expansion plans, the management seems confident of future growth.




IPCL has set up another plant which is already on stream. The new plant has a capacity of 400 tons which can be extended upto 1500 tons with a capital outlay of INR 250‐300 million. The capital expenditure incurred for the current 400 tons capacity was INR 300 million. Another 400 tons of capacity is expected to be added in 2019 with a capital outlay of ~INR 20 million. This new plant is expected to cater mainly to the aerospace, defense, medical and railway industries. The contribution from the non‐auto industries is expected to grow gradually going ahead, this does not mean the revenues of the auto segment are expected to reduce. The revenues from the auto segment are expected to remain at ~800 million but its share in the overall revenues is expected to reduce. This is depicted in the table given below:

Revenues (INR mn) Auto Non‐Auto FY17 ~800 mn ~200 mn FY18 ~800 mn ~350 mn

Industry Overview: The Indian foundry industry is the third largest globally in terms of production capacity (10 mn tons in FY16) after China (40 mn tons) and USA (11mn tons). The Indian foundry industry has an installed capacity of 15 mn tons. This industry has a turnover of approximately USD 19 bn with exports of nearly USD 2.5 bn. The industry can broadly be divided into the following products namely Grey Iron castings, SG Iron, Malleable Castings, Steel Castings, and Non‐Ferrous Castings – Grey Iron Castings contribute have the major share i.e. ~68% of the total castings produced. This industry mainly caters to the Auto, Tractor, Railways, Machine Tools, Sanitary, Pipe Fittings, Defense, Aerospace, Earth Moving, Textile, Cement, Electrical Power Machinery, Pumps/Valves, Wind Turbine Generators etc. Production of Castings in Million MT (2015‐16) India

2006‐07 2007‐08 2008‐09 2009‐10 2010‐11 2011‐12 2012‐13 2013‐14 2014‐15 2015‐16 2016‐17 Grey CI 4.87 5.332 4.532 5.05 6.18 6.798 6.254 6.7 6.83 7.41 7.89 SG Iron 0.762 0.802 0.785 0.8 0.984 1.09 0.981 1.0 1.07 1.18 1.18 Malleable 0.0623 0.0651 0.0605 0.0602 0.0692 0.066 0.0604 0.060 0.06 0.05 0.05 Steel 0.914 0.964 0.916 0.88 1.07 1.14 1.158 1.10 0.968 0.88 1.01 Non‐Ferrous 0.571 0.608 0.547 0.653 0.75 0.9 0.891 0.95 1.093 1.25 1.22 Total 7.1793 7.7711 6.8405 7.4432 9.0532 9.994 9.3444 9.810 10.021 10.77 11.35

Source: Foundry Informatics Centre, Steel 360, Phillip Capital (India) Research


Auto contributes mainly to the demand for the castings with new opportunities expected to arise from the government’s boost to infrastructure projects such as the metro rails. This is expected to increase the capacity utilization from the current 67% and is expected to increase the capacity in this space over the next few years. There are currently about 4,600 units engaged in forging and are located in 19 major foundry clusters across the country.


Source : Foundry Informatics Centre, Steel 360, Phillip Capital (India) Research

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Agriculture Machinery

Earthmoving

Pumps & Compressors

Valves

Diesel Engines

Sanitary

Auto, Auto Components & Capital Goods Industry have drawn up ambition plans to grow three folds in next 10 years Which will drive the demand for metal casting industry .The Capital Goods Policy of Govt envisages the sector to grow from USD 35 Bn to USD 115 Bn Industry by 2025 .Whereas the auto sector as per Automotive Mission plan 2016‐26 envisages auto sector to grow 3.5 to 4 times of the current value of USD 74 billion to USD 260 billion to 300 billion. Even if these plans are realized by 75‐80% ,it will augur well for the Indian Foundry Industry .The casting demand for iron & Aluminum castings could grow by 35‐40 % by 2019‐20 from current levels There is focus on infrastructure in India .Construction of roads & rural housing etc which will push demand fro earthmoving & allied equipment .Good monsoons augur well for agricultural sector which will drive demand for tractors .The tractor industry grew by 21% in 2016‐17 compared to previous year after registering a decline of approx 6.5% in 2015‐ 16 compared to 2014‐15. Auto industry grew at an average rate of 5 .4% in 2016‐17 compared to previous year. The Society of Indian Automotive Manufacturers (SIAM) forecast a 7 to 9% growth for the domestic passenger vehicle sales in the financial year 2017‐18, expecting support from 7th pay commission payout and better rabi output. As Per SIAM, “We are seeing an improvement in the economic growth and also consumer sentiment. Factors like lower borrowing costs, pent‐up demand after demonetization and a mild budgetary support to incomes will drive consumption growth in 2017‐18.” The new manufacturing policy envisages the increase in the share of manufacturing in the GDP to 25% from current 15% & to create 100 Million additional jobs in next 10 years. Since all engineering & other sectors use metal castings in their manufacturing, the role of foundry industry to support manufacturing is very vital. It is not possible to achieve the above goal without the sustainable corresponding growth of the foundry sector



Key Concerns & Risk: • Advent of the Electric Vehicle: The advent of the production of the electric vehicle may dampen the demand for the products manufactured by IPCL. IPCL

currently derives 70% of its revenues from the auto industry which can negatively impact the demand for its products. However, in order to mitigate this IPCL plans to diversify its product range and widen the industries it caters to. Additionally, electric vehicles are now beginning to make an entry into the market and would take a long time to replace the existing demand for the casting products manufactured by IPCL.

• Requirement of High Quality Precision Products: The industry in which IPCL has diversified its product range into requires extremely high precision and quality of products which can cause significant impact to the end consumer. However, we derive comfort from the complete automation of IPCL’s facilities and minimal human intervention we expect the company to be able to manufacture such high quality products.

Outlook and valuation: Investment and Precision Casting Limited (IPCL) is engaged in the manufacture of investment casting products which mainly find application in the automotive industry currently. With product and customer diversification and increasing capacities we believe that the company is expected to improve its performance in the coming years. At the current market price of Rs. 339.0, the company currently trades at a PE multiple of 21.4x and 10.5x EV/EBITDA based on FY18 performance. We recommend a BUY on the company with a price target of INR 556.50 by FY 20, implying a 64% upside from current levels.



Income Statement Cash FlowY/E March, INR Millions FY17 FY18 FY19E FY20E Y/E March, INR Millions FY17 FY18 FY19E FY20E Net Sales 920.4 1075.7 1374.6 1583.2 PAT 41.7 79.3 113.4 154.6 Growth % 8% 17% 28% 15% Depreciation 49.9 51.4 62.5 67.5

Change in WC ‐

25.6 ‐23.7 ‐41.3 ‐104.4 Total Expenses Cash Flow from Operating Activities 99.4 152.2 175.2 153.8 Raw Material Costs 76.1 82.3 114.1 118.7 Employee Costs 78.8 81.6 91.4 102.4 Capital Expenditure ‐ ‐204.951.824 ‐100 ‐100 Other Manufacturing Costs 616.5 703.2 899.0 1029.9 Change in Investments 0 0 0 0 EBITDA 149.0 208.6 270.1 332.2 Other Investing Activities 1.6 2 0 0 Growth % 14% 40% 29% 23% Cash Flow from Investing Activities ‐50.2 ‐202.9 ‐100.0 ‐100.0 EBITDA Margin % 16% 19% 20% 21% Depreciation 49.9 51.4 62.5 67.5 Dividend (Incl. Tax) ‐3.5 ‐6.2 ‐13.6 ‐18.5 EBIT 99.2 157.2 207.6 264.7 Change in Equity 0 0 0 0 Interest 39.1 41.9 40.5 36.1 Change in Debt ‐11.2 94.6 2.3 0.1 Other Income 2.3 4.4 4.1 4.7 Others ‐34.0 ‐36.7 ‐40.5 ‐36.1 PBT 62.3 119.7 171.2 233.3 Cash Flow from Financing Activities ‐48.7 51.7 ‐51.8 ‐54.6 Less: Taxation 20.6 40.4 57.8 78.7 Net Change in Cash 0.6 1.0 23.4 ‐0.8 Effective Tax Rate (%) 33% 34% 34% 34%Recurring PAT 41.7 79.3 113.4 154.6Growth % 47% 90% 43% 36% Valuation Ratios PAT Margin % 5% 7% 8% 10% FY17 FY18 FY19E FY20E Exceptional Items (net of tax) 0 0 0 0 EPS 8.5 15.9 22.7 30.9 Reported PAT 41.7 79.3 113.4 154.6 Book NAV / Share 121.6 146.4 163.1 188.3 Wtd. Avg. of Shares (Mns) 5.0 5.0 5.0 5.0 DPS 0.0 0.0 0.5 0.6

Growth Ratios Balance Sheet Net Sales % 8% 17% 28% 15% Y/E March, INR Millions FY17 FY18 FY19E FY20E EBITDA % 14% 40% 29% 23% Equity Capital 50 50 50 50 PAT % 47% 90% 43% 36% Reserves 543.8 615.8 715.6 851.7 Return Ratios Net Worth 593.8 665.8 765.6 901.7 ROA % 4% 6% 8% 10%

ROE % 7% 12% 15% 17% Minority Interest + Others 0 0 0 0 RoCE % 11% 14% 17% 20% Total Borrowings 278.0 372.6 374.9 375.0 Turnover Ratios Current Liabilities 152.4 211.6 216.9 230.7 Asset Turnover (x) 0.9 0.8 1.0 1.0 Non Current Liabilities 37.3 50.9 50.9 50.9 Receivable Days 70.3 76.1 70.0 70.0 Total Liabilities 1062.1 1300.8 1407.9 1557.9 Inventory Days 88.0 93.1 80.0 85.0

Payable Days 47.8 61.7 45.0 40.0 Net Block 511.5 630.0 667.5 700.0 Liquidity Ratios Investments 0.1 0.1 0.1 0.1 Current Ratio (x) 3.2 2.6 3.1 3.4 Others 65.3 110.3 68.7 79.2 Interest Cover (x) 2.5 3.8 5.1 7.3

Total Debt / Equity (x) 0.5 0.6 0.5 0.4 Current Assets Valuation Ratios Inventories 171.7 203.5 226.7 271.6 PER (x) 24.4 21.4 14.9 9.6 Debtors 177.2 224.4 263.6 303.6 Price / Book (x) 2.8 2.3 2.1 1.9 Cash 12.8 7.1 30.1 29.3 Other Current Assets 123.4 125.5 151.2 174.2 EV / Sales (x) 2.4 2.2 1.7 1.5 Total Assets 1062.1 1300.9 1407.9 1557.9 EV / EBITDA (x) 14.0 10.5 8.0 6.5



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Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the company (ies)covered in this report as of the end of the month

immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in

this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co‐managed in the previous twelve months, a private or public offering of securities for the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report: Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL No 2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report No 3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No 4 PCIL or its affiliates have managed or co‐managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report No 5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services

from the company(ies) covered in the Research report, in the last twelve months No

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INITIATING COVERAGE REPORT

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.

Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

Kindly note that past performance is not necessarily a guide to future performance.

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For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., 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 PhillipCapital (India) Pvt Ltd. 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 the 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 a Major Institutional Investor. 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, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer. If Distribution is to Australian Investors This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827). This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately. PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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