kec international ltd - direct research report - enam direct - 22052012

ENAM Securities Direct 22nd May 2012

KEC International Ltd

ENAM DIRECT EQUITY RESEARCH

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Execution Capabilities to Prove the Mettle… KEC International – a RPG group company – is a leading transmission and distribution EPC company with global footprint. It has presence in the verticals of Power Transmission, Power systems, Cables, Railways, Telecom Cables & Water. Investment Argument

Diversified player: KEC Intl. has been a dominant player in the erection and commissioning of the Long distance power transmission towers. KEC has entrenched presence in MENA region and acquisition of SAE Towers (US) (in FY11) has aided the company to explore the business opportunities in The American continent. The company procures its business from 45 countries across S Asia, ME, Africa, Central Asia & Americas.

Consistently rising Order book: The company has a robust order book of Rs 8,572 cr (at the end of Q4FY12), which has been growing consistently despite trend of rising quarterly revenues. With its vast experience in building power transmission lines, KEC could be one of the major beneficiaries of the incremental order flows from PGCIL (PGCIL has planned 9 High Capacity Transmission Corridors (HCTC) at an expense of Rs 58,000 cr in XII the five year plan along with other planned transmission network expansion as discussed on page no 11).

Integration in line with Strategic intent: KEC Intl. had merged RPG Cables in FY10 due to synergies with the Power systems business. The company is investing Rs 175 cr for a green field plant at Vadodara, Guj., with capacity of 4,000 km pa. HT power cable, which is expected to commission by end of Q1FY13. This will increase its total capacity of HT power cable to 5,200 km pa.

Margins expected to improve: Stable margins from transmission towers business coupled with improving margins from new businesses will lead to improvement in overall margins of the company. We estimate the consol. business to report an improvement in margins in FY13E (8.4%) & FY14E (8.5%) over FY12 (8.1%).

Valuation KEC Intl. – a well diversified company both in terms of business segments and geographies- has been exhibiting a robust order book (Rs 8,572 cr at end of Q4FY12) with visibility of ~18 months based on FY12 revenues. KEC Intl. is expected to be one of the major beneficiaries of the new tenders from PGCIL and enhanced spends on power transmission sector in XIIth five year plan. We estimate the company to grow at CAGR of 15% and 19% between FY12-FY14E on topline and bottomline, respectively. We initiate BUY on the stock with target price of Rs 76 giving an upside of 49%.

CMP (Rs) 51 Target price (Rs) 76 Potential upside 49%

Stock data

No. of shares (Cr) 25.7

FV (Rs) 2/-

Market cap (Rs Cr) 1,311

52 wk high/low (Rs) 95/32

Avg. daily vol* (shrs) 363744

BSE Code 532714

NSE Code KEC

Bloomberg code KECI IN

Reuters Code KECL.BO

*BSE 6 monthly

Shareholding (%)

Mar-12 QoQ chg Promoter 43.11 1.12

FIIs 2.26 (0.14)

MFs / UTI 32.11 (0.59)

Banks/FIs 6.85 (0.07)

Others 15.7 (0.32)

Relative performance

10000

12000

14000

16000

18000

20000

May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12

20

30

40

50

60

70

80

90

BSE_SENSEX K E C International Ltd Source: Cline, ENAM Direct Research

Pankaj Bobade [email protected]

Financial summary Y/E March

Sales (Rs Cr)

PAT (Rs Cr)

EPS (Rs.)

Change (YoY %)

P/E (x)

RoE (%)

RoCE (%)

EV/EBITDA (x)

DPS (Rs)

2010 3907 190 7.4* 62.4 - 27.5 27.4 - 1.2* 2011 4474 206 8.0 8.4 - 23.2 21.3 - 1.2 2012 5735 210 8.2 2.3 - 20.1 17.4 - 1.2 2013E 6657 243 9.5 15.8 5.4 19.9 20.1 4.3 1.2 2014E 7525 295 11.5 21.3 4.4 20.4 21.1 3.9 1.2

* Adjusted for stock split in FY11, ENAM Direct Estimates

BUY

22nd May 2012 ENAM Securities Direct 2


BUSINESS Expanding Horizons…

KEC International – RP Goenka Group Company is a leading EPC contractor in Power Transmission and distribution segment. The company undertakes design, testing and manufacturing of Towers & Cables, project management, construction of turnkey projects in areas of Power transmission, Power distribution, Telecom, Railways and Water Infrastructure projects. With rich skill sets in executing Power transmission projects, KEC has entered into the sunrise Water Infrastructure and Railway segments, which are expected to attract high governmental and private spending in near future.

Revenue Break Up

0%

10%

20%

30%

40%

50%

60%

FY10 FY11 FY12 FY13E FY14E

Transmission (Intl.) Transmission (S Asia/ domestic) SAE

Power Sys (Intl. + Domestic) Cables Telecom

Railways Water Source: Company, ENAM Research

KEC’s efforts to become a diversified player, both in terms of geographies and business segments, are yielding good results. The company has been successful in reducing its dependence on its revenues from Transmission Segment (both domestic & overseas) from 79% in FY10 to 75% in FY12 and we estimate it to further come down at around 61% by FY14E.

Order Book Break Up- Business wise Order book Break Up- Geography wise

69%

18%

2%4%4% 3%

Transmission Power Sys. Cables

Railways Telecom Water

44%

24%

13%

16% 3%

South Asia Africa/Central Asia MENA

Americas Others Source: Company, ENAM Research



The company holds order book of Rs 8,572 cr at the end of Q4FY12, which gives a visibility of ~18 months on the run rate based on FY12. The order book has not only been steadily building up despite rising quarterly revenues (as depicted in the chart below), but also almost doubled (~1.7x) over the period of last 12 quarters.

Qtr.ly Revenues Vs. Order Book

4000

5000

6000

7000

8000

9000

10000

Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12

(Rs

cr.)

500

700

900

1100

1300

1500

1700

1900

2100

2300

(Rs

cr.)

Order Book (Rs cr.) (LHS) Qtrly Revenues (Rs cr.) (RHS)

Source: Company, ENAM Research

KEC Intl. could be one of the beneficiaries of the transmission capex to be undertaken domestically by PGCIL, SEB, Central Trading Units (CTU), State Trading Units (STU) etc. (the size of opportunity available is discussed in annexure I on pg. 11). Moreover, being a global player, the enormity of the opportunities (as discussed in the annexure II below on pg. 12 & 13) available for the company, to connect power producing centers (using renewable and non renewable sources) and power consumers are huge.

We believe that KEC Intl. could be in advantageous position to bag few of these contracts due to its a) expertise and technical prowess in handling big size projects b) historical ability to successfully execute projects even in inhospitable terrains.



Margins set to improve on account of higher efficiencies in new business:

EBIDTA Margins

11.8

10.4 10.39.8 10.0 10.1

11.6

10.5

9.4

7.27.7

8.2 8.1 8.08.5

8.88.5

6

7

8

9

10

11

12

13

Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113E Q213E Q313E Q413E FY 14E

Source: Company, ENAM Research

KEC has been successfully maintaining its double digit operating margins till FY11, but has suffered in last 3 quarters. We are of the opinion that the company is past its nadir, although, margins may amble around higher single digit. With the sunrise business (marked by entry level pricing to garner business) starting to perform, we feel that KEC Intl. will be on its path to reap the benefits of diversifying into new growth avenues viz. Railways, BoP and Cables, though the margins (from new business initiatives) would be muted as per our estimates. With rich experience of Railway electrification projects, KEC Intl. is expanding into other Railway opportunities like track laying, civil infrastructure, signaling and telecommunications. Having acquired Jay Railway Signaling, KEC Intl. has made a foray in Signaling and Telecommunications space and is now eyeing an opportunity to execute the entire gamut of Railway Infrastructure projects. Going forward, Indian Railways is expected to build on, expand and modernize its existing infrastructure to meet the needs of growing economy. Addition of new lines, gauge conversion, de-congestion of existing routes and the dedicated freight corridors are few of the objectives on cards for Indian Railways. Similarly, the mass rapid transport system like Metro Rail in different cities is also offering business opportunities for companies operating in Railways turnkey project segment. We are of the opinion that KEC Intl. would be in better position to make the most of the opportunities available due to its all-round experience from Signaling to EPC contracts.



KEC Intl. stands tall in the crowd

Diversified portfolio across business segments and geographies

Rich experience in timely executing large size Power Transmission EPC orders

Ahead of competition by having entrenched presence in the Developed market esp. American continent through SAE Towers.

Rising order book (Rs 8,572 cr at the end of Q4FY12) gives a visibility of ~1.5 yrs based on FY12 revenues

Efficient working capital management vis-à-vis peers.

Peer Comparison based on FY11 Cash Conversion cycle for KEC Intl.

120

130

140

150

160

KEC Kalpataru Jyoti Str.

(day

s)

10%

15%

20%

25%

30%

35%

(%)

Cash Conversion Cycle (days) (LHS)WC as % of Sales (RHS)

110

134

40

0

20

40

60

80

100

120

140

160

FY10 FY11 FY12

(Day

s)

Comparison made on FY11 as audited data for FY12 not available for all peers

Source: ENAM Research

The company efficiently manages the raw material cost, which happens to be the largest contributor (59% for FY12) to the expenditure. 60% of the order book has price variation clause and the company protects its margins by hedging its raw material for rest of the orders.

Commissioning of the Greenfield Cable plant at Vadodara in Q1FY13 to add value.

KEC Intl. has been one of the leaders in Indian Tower business bagging a tenth of Tower orders from PGCIL in 3 out of the last 4 yrs. (refer tables on page no 8). With new orders on anvil from PGCIL stable, we feel KEC would be able to maintain this run rate.

Moreover, the company enjoys vantage as it is qualified for and executing projects 765+ kV projects with PGCIL. KEC Intl. had bagged the 765 kV tower project way back in 2008 worth Rs. 133 cr for Sasaram Fatehpur transmission line associated with DVC Maithon Right Bank Project and has been successful in wining substantial portion of orders awarded in last 2 yrs (refer table on page no 8). KEC Intl. will be one of the major beneficiaries of tendering for extra high voltage transmission capex by PGCIL and intercontinental HVDC grids.

Better Return Ratios- KEC has better RoEs vis-à-vis its peers (refer the chart)



RoE comparisons for Power Transmission Peers for FY11

KEC Intl. RoE (%)

23.2

14.918.7

0

5

10

15

20

25

(%)

KEC Intl. Kalpataru Jyoti Structures

27.5

23.220.1

0

5

10

15

20

25

30

FY10 FY11 FY12

Comparison made on FY11 as audited data for FY12 not available for all peers


Improving Ratios

KEC Intl. has witnessed drop in its return ratios in recent past, due to fall in both NPM and asset turn. We feel that the worst is over for the company and expect the ratios to improve on account of improving margins and asset turn, although we do not expect the company to scale the historical highs in next 2 yrs.

FY10 FY11 FY12 FY13E FY14E Net Margins (%) 4.9% 4.6% 3.6% 3.7% 3.9% Asset turnover (x) 2.8 2.2 2.4 2.6 2.7 RoA (%) 13.4% 10.2% 8.7% 9.6% 10.7% Leverage (x) 2.0 2.3 2.3 2.1 1.9

Return on Equity (%) 27.5% 23.2% 20.1% 19.9% 20.4%


Trends in Return Ratios

5

10

15

20

25

30

FY10 FY11 FY12 FY13E FY14E

(%)

RoE RoCE




Valuations

KEC Intl. is in the business of executing EPC turnkey projects in Power Transmission sector. In addition, the company has entered into Water Infrastructure and Railways Sectors too. The company has delivered strong sales growth and healthy build up in its order book. In the recent past, the operating margins have been contracting on account of entry in low margins in the sunrise business segments and competition in the domestic transmission business. Going forward, the margins are set to improve as the company has now started to bid on competitive terms for the new as well as old business segments.

KEC is currently trading at 5.4x FY13E and 4.4x FY14E which is below the historical mean of 10x (one year forward) on account of the concerns about the incremental order book for the sector as a whole and the weak sentiments across asset classes. Going forward, we feel that the commencement of new order book issuance from PGCIL, CTU/STU for XIIth 5 year plan would be a key trigger for rerating of the entire sector. We are of the opinion that KEC would be the key beneficiary of this improvement in sentiments towards the sector per se. Moreover, improvement in margins will also augur well for the stock. We initiate coverage on KEC Intl with target price of Rs. 76 based on 8x FY13E EPS, implying an upside of 49% over CMP. Historically, the average 12 month forward PE for KEC Intl. has been 10x.

KEC International -12mth fwd P/E (x)

02468

101214161820

Aug-08 Jan-09 Jul-09 Dec-09 Jun-10 Nov-10 May-11 Nov-11 Apr-12

Source: Bloomberg, ENAM Research

Risk Factors:

Delay in award/ Cancellation of Projects

Weaker than expected execution

Slowdown in Power generation investment activities, eventually affecting transmission related capex

Sharp rise in Steel/ Aluminium prices



TABLES PGCIL Order Mix (%)

FY09 FY10 FY11 FY12

Transformers/ Reactors 9 21 6 13

Towers 26 37 34 39

Insulators 4 8 2 3

Conductors 32 12 16 25

Substations 12 17 39 13

Rural Electrification 16 2 0 0

Civil 0 1 2 1

Others 1 3 1 6

Source: PGCIL, ENAM Research

PGCIL Tower Projects Awarded (%)

FY09 FY10 FY11 FY12

KEC Intl. 10 2 12 9

Kalpataru 11 5 12 3

Jyoti Structures 10 11 0 7

Tata Projects 13 22 20 19

Gammon 0 2 5 14

ATSL 34 1 0 0

L&T 11 9 6 10

Others 11 48 45 38

Source PGCIL, ENAM Research

PGCIL Tower Projects 765+ kV (%)

FY09 FY10 FY11 FY12

KEC Intl. 38 0 11.5 12.5

ATSL 42 0 0 0

EMCO 20 0 0 0

Tata Projects 0 38 25.6 35.7

Gammon 0 10 4.6 14.6

Kalpataru 0 0 15.8 11.8

L&T 0 0 9.1 7.9

Others 0 52 33.4 17.5

Source: PGCIL, ENAM Research



COMPANY FINANCIALS (CONSOL.) Income Statement (Rs Cr)

Y/E Mar FY10 FY11 FY12 FY13E FY14E

Net sales 3,907 4,474 5,735 6,657 7,525

Other operating income 0 0 79.7 0 0

Total income 3,907 4,474 5,815 6,657 7,525

Cost of goods sold 3,284 3,743 5,046 5,759 6,513

Contribution (%) 16.0% 16.4% 12.0% 13.5% 13.5%

Advt/Sales/Distrn O/H 217.7 269.1 300.9 340.8 376.2

Operating Profit 406 462 468 557 636

Other income 9 9 0 0 0

PBIDT 415 472 468 557 636

Depreciation 27 41 48 48 50

Interest 94 114 149 134 131

E/o income / (Expense) 0 0 54 0 0

Pre-tax profit 293 317 325 375 454

Tax provision 104 111 115 131 159

Adjusted PAT 190 206 175 243 295

Reported PAT 190 206 210 243 295

Balance Sheet (Rs Cr)


Total assets 1,620 2,428 2,398 2,655 2,886

Gross block 835.7 1,038.2 1,206.5 1,374.8 1,553.0

Net Block 678.7 801.6 922.0 1,041.8 1,169.8

Goodwill 0.0 281.3 320.9 320.9 320.9

CWIP 41.3 39.3 73.0 17.8 15.0

Investments 0.0 0.0 0.0 0.0 0.0

Wkg. cap. (excl cash) 830 1,145 879 1,075 1,268

Cash / Bank balance 69.8 161.4 203.0 199.1 111.6

Capital employed 1,620 2,428 2,398 2,655 2,886

Equity capital 49.3 51.4 51.4 51.4 51.4

Reserves 738 895 1,056 1,252 1,500

Borrowings 787 1,432 1,239 1,303 1,288

Def tax Liabilities 46.1 49.7 51.0 48.1 46.6

Source: Company, ENAM Direct Research



Ratio Analysis (%)


Sales growth 14.0 14.5 28.2 16.1 13.0

OPM 10.4 10.3 8.1 8.4 8.5

Oper. profit growth 34.8 13.9 1.3 18.9 14.2

COGS / Net sales 84.0 83.6 88.0 86.5 86.6

Overheads/Net sales 5.6 6.0 5.2 5.1 5.0

Depreciation / G. block 3.2 3.9 4.0 3.5 3.2

Effective interest rate 13.4 10.3 11.2 10.5 10.1

Net wkg.cap / Net sales 0.17 0.22 0.18 0.15 0.16

Net sales / Gr block (x) 4.7 4.3 4.8 4.8 4.8

RoCE 27.4 21.3 17.4 20.1 21.1

Debt / equity (x) 1.0 1.5 1.1 1.0 0.8

Effective tax rate 35.3 35.1 35.4 35.0 35.0

RoE 27.5 23.2 20.1 19.9 20.4

Payout ratio (Div/NP) 19.0 17.4 17.0 14.7 12.1

EPS (Rs.) 7.4 * 8.0 8.2 9.5 11.5

EPS Growth 62.4 8.4 2.3 15.8 21.3

CEPS (Rs.) 8.4 * 9.6 10.0 11.4 13.4

DPS (Rs.) 1.2* 1.2 1.2 1.2 1.2

*Adjusted for stock split in FY11

Cash-flow (Rs. Cr)


Sources 442 888 17 305 281

Cash profit 311 361 407 426 477

(-) Dividends 36 36 36 36 36

Retained earnings 275 325 371 390 441

Issue of equity 0.0 2.1 0.0 0.0 0.0

Change in Reserves 75.5 (12.5) (13.3) (12.0) (12.0)

Borrowings 165 645 (193) 64 (15)

Others (73) (72) (148) (137) (133)

Applications 442 888 17 305 281

Capital expenditure 191 482 242 113 175

Investments 0 0 0 0 0

Net current assets 323 315 (266) 196 193

Change in cash (71) 92 42 (4) (87)

Source: Company, ENAM Direct Research



ANNEXURE I

Transmission and Distribution in XIIth Five year plan: Indian Power Generation has an

installed capacity of 185 GW at the end of Nov., 2011 and is targeted to add another

100GW by end 2017 (i.e. XIIth 5 yr plan). The electricity distribution network in India is

inefficient as the losses stand at staggering 32% compared to the world average of <15%.

Loss reduction technologies, if adopted in India, can add about 30 GW of electric power,

simultaneously reducing the cost per unit and carbon footprint pollution per unit

consumed. In its endeavour to erect an efficient Transmission network, PGCIL is

working on to set up 9 High Capacity Transmission Corridor (HCTC) at an expense of Rs

58,000 cr (approx.) in the XIIth five year plan. Moreover, the XIIth five year plan has also

charted out an ambitious expansion of Transmission capacity by >40% and ~70% increase

in substation capacity over the achieved target of XIth five year plan.

Tentative XIIth Five year plan for Capacity addition in Power Transmission segment:

Transmission Lines Unit End of Xth

plan Tgt at End of XIth plan (E)

Status as on Jan. 31st, 2012

Tgt at End of XIIth plan (E)

765 kV ckm 1,704 7,132 6,190 31,164

HVDC +/- 500 kV ckm 5,872 11,078 9,432 18,892

High Voltage Transmission ckm 7,576 18,210 15,622 50,056

HVDC 200 kV Monopole ckm 162 162 162

400kV ckm 75,722 125,000 114,998

230/220 kV ckm 114,629 150,000 138,729

Low Voltage Transmission ckm 190,513 275,162 253,889 328,955

Total Transmission ckm 198,089 293,372 269,511 379,011

Source: CEA, ENAM Research

XIIth five year plan has charted out plans to enhance the capacity of Transmission lines by

109,440 ckt. kms and substation capacity by 270,000 MVA. The majority of lines

(aggregating 27,000 ckt. kms) will be at 765 kV voltage level. The High Voltage Direct

Current (HVDC) capacity is expected to increase twofold, from 13,500 MW to 26,500 MW,

by the end of Twelfth plan. The interregional transfer capacity addition target is 37,800

MW, which would take the total transfer capacity to 63,450 MW by March 2017. The total

Transmission line enhancement (by about >40%) & Substation capacity expansion (by

~70%) by the end of XIIth Five year plan over the capacity at the end of Jan. 2012- calls for

Rs. 5,00,000 cr (approx.) of spend in both Transmission and distribution segment. We

expect a deluge of order tendering in first 3 years of XIIth five year plan starting 2012.

KEC has been regular recipient of orders from PGCIL and the latter contributes around

15% of the current total order book (Rs 8,572 cr at end of Q4FY12) of KEC Intl.



ANNEXURE II

International opportunities: KEC Intl. sources >50% business from outside India. It has presence in American continent, MENA and African region. The company had acquired a leading manufacturer of lattice towers - SAE Towers in FY11 at an enterprise value of USD 95 mn with an eye on the upcoming opportunities in American continent. SAE Towers enjoys dominant market position in Brazil, US and Canada. Brazil is hosting two major sporting events viz. FIFA in 2014 and Olympics in 2016. In order to meet its electrical power needs (80% of which is generated through Hydropower plants located in North and North East parts of country and energy consumption in Southern parts), the country needs robust network of transmission towers. Similarly, replacement of ageing transmission infrastructure and new transmission network connecting the renewable energy sources (which accounts for the 60% of the incremental power generation) to the national grid are some of the business opportunities in USA. As per the Edison Electric Instt. (EEI), the Shareholder owned Utilities in N. America have planned an average investment of $13.7 bn for next 3 yrs. Moreover, EEI has projected a cumulative transmission investments of $298 bn over 2008-2030 based on Transmission Addition method.

Actual and Planned Transmission Investment By Shareholder-Owned Utilities (2005-2014)

Annual Transmission Investment Projection Transmission Additions Method (2008)

Source: EEI updated on Sep 2011. Source: EEI.

With acquisition of SAE Towers, KEC is well equipped to bid and win opportunities coming its way. Moreover, the margins enjoyed by SAE, US are better than that enjoyed by the company in its domestic operations.

Opportunities are emerging from the continent of Africa which is bracing itself for higher single digit growth. As per UN estimates, only ~20% of the African population (excluding S. Africa & Egypt) have direct access to electricity. Rising urbanization trend is calling for enhanced demand of power and hence, a robust transmission and distribution network in the coming decade. The African continent has embarked upon ambitious electricity generation plan - both renewable and non renewable- through next 2 decades. The power generation capacity is expected to rise at a CAGR of ~3% over next 30 yrs involving an outlay of USD 12.5 bn. The opportunity to build power transmission and distribution network is ~USD 10 bn for the same period.



African Electricity generation to double by 2035 - Big power investment ahead

Power investment needs per year through 2015

Rehabilitations: USD4 bn

New transmission and distribution: about USD10 bn

New generation: about USD12.5 bn

Source: ABB, Enam Research

With its established presence in African continent, KEC is well braced for bidding the

opportunities coming its way.

New International Opportunities awaiting: Post nuclear disaster at Fukushima, Japan,

plans are afoot, among the developed nations, to accelerate the deployment of Renewable

Energy as an alternative to the fossil fuels and nuclear power. Think tanks across the globe

are working to secure sustainable Renewable energy resources and connect them to the

consumption centers. The idea of erecting wind power mills at places having optimum

wind speed, concentrating solar power (CSP) installations (with thermal storage) at places

receiving optimal (read maximum) sunlight, harvesting Hydro/ Tidal energy and

connecting all these geographically dispersed sources of energy to the consumption centre

miles away through HVDC lines- creating Renewable Energy Superhighway- is fast taking

shape in both developed and developing nations. In an attempt in this direction,

DESERTEC Foundation along with Japan Renewable Energy Foundation (JREF) is

promoting to set up an Asian Super Grid initiative to facilitate an electricity supply system

based fully on Renewable energy in Asia. This initiative envisions the interconnection of

the national grids of Japan, Korea, China, Mongolia, Russia with low loss HVDC

transmission lines. These transmission lines would enable the delivery of electricity from

the region’s most abundant renewable energy sources to its centers of demand whilst

simultaneously balancing out the peaks and troughs of fluctuating renewable energy

sources over a wider area. A concept of similar grid connecting EU & MENA will be

implemented by the consortium Dii GMbH, formed by group of European companies and



the DESERTEC foundation. Even though, the value of the opportunity available cannot be

ascertained, it will be enormous in size.


Any ambitious project on the lines of DESERTEC- EUMENA would be a business

opportunity for companies like KEC Intl., who undertake Power & Transmission EPC

turnkey projects on global scale. Global Focus on renewable/ clean energy coupled with

escalating demand (~35%) over coming 2-3 decades calls for sizable investment in efficient

energy transport.



CONFLICT OF INTEREST DISCLOSURE

We, at ENAM, are committed to providing the most honest and transparent advice to our clients. However, given thenature of the capital markets, from time to time we are faced with situations that could give rise to potential conflict ofinterest. In order to provide complete transparency to our clients, before we make any recommendations, we arecommitted to making a disclosure of our interest and any potential conflict IN ADVANCE so that the interests of ourclients are safe- guarded at all times. In light of this policy, we have instituted what we believe to be the mostcomprehensive disclosure policy among leading investment banks/brokerages in the world so that our clients may make an informed judgment about our recommendations. Thefollowing disclosures are intended to keep you informed before you make any decision- in addition, we will be happyto provide information in response to specific queries that our clients may seek from us. Disclosure of interest statement (As of 17th April, 2012) 1. Analyst ownership of the stock No 2. Firm ownership of the stock No 3. Directors ownership of the stock Yes 4. MBD Relationship No 5. Broking relationship No

We are committed to providing completely independent and transparent recommendations to help our clients reach a better decision.

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Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options and other derivatives as well as non investment grade securities - involve substantial risk and are not suitable for all investors. Enam Securities Direct Private Limited has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. Enam Securities Direct Private Limited, its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of ENAM Securities Direct Private Limited. The views expressed are those of the analyst and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S. Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Enam Securities Direct Private Limited to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

Copyright in this document vests exclusively with ENAM Securities Direct Private Limited.

ENAM Securities Direct Pvt. Ltd.

201, Laxmi Towers, 'A' Wing, Bandra-Kurla Complex, Bandra East, Mumbai - 400 051. Board: 6680 3600 Helpline: 6680 ENAM Fax : 6680 3700

Website: www.enam.com / www.enamdirect.in Email: [email protected]

kec international ltd - direct research report - enam direct - 22052012

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