Result Update

February 3, 2017
Rating matrix
Rating
Target
:
:
Buy
| 420
Indian Oil Corporation (INDOIL) | 390
Target Period : 12 months
Potential Upside : 10%
Performance to remain strong...
Whats changed? Indian Oil Corporations (IOC) Q3FY17 results were in line with our
Target Changed from | 335 to | 420 estimates on the topline front. Revenues increased 15.3% QoQ to
EPS FY17E Changed from | 36.7 to | 38.4 | 115644.9 crore, in line with our estimate of | 116657.1 crore
EPS FY18E Changed from | 30.6 to | 33 Reported EBITDA was at | 7948.6 crore, marginally below our
EPS FY19E Changed from | 31.3 to | 35 estimated EBITDA of | 8075.6 crore due to higher-than-expected
Rating Changed from Hold to Buy other expenses (provision made in the matter of entry tax for Uttar
Pradesh). However, GRMs came in at US$7.7/bbl, above our estimate
Quarterly performance of US$6.7 /bbl due to inventory gains
Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%) PAT increased 28% QoQ to | 3994.9 crore but came in below our
Revenue 115,644.9 83,461.9 38.6 100,274 15.3 estimate of | 4401.5 crore. There was no subsidy burden this quarter
EBITDA 7,948.6 5,242.0 51.6 5,772.2 37.7
EBITDA (%) 6.9 6.3 59 bps 5.8 112 bps
Government policies continue to provide comfort
PAT 3,994.9 3,056.9 30.7 3,121.9 28.0 The governments decision to deregulate diesel prices was a major
positive for OMCs. It led to a decline in crude oil gross under-recoveries,
Key financials with only kerosene and LPG prices under the regulatory regime. Also, the
| Crore FY16 FY17E FY18E FY19E hike of 25 paise per month in kerosene prices and scheme of Direct
Revenues 350,603.1 450,170.1 533,390.9 544,960.0 Benefit Transfer (DBT) for LPG cylinders has led to lower gross under-
EBITDA 20,081.8 33,866.9 30,387.7 32,399.6 recoveries. Given our assumptions on Brent crude at US$55/barrel and
Net Profit 10,399.1 18,662.1 16,037.1 17,000.5 exchange rate of | 67 per US dollar, we expect gross under-recovery of
EPS (|) 21.4 38.4 33.0 35.0 | 23662.5 crore and | 24640.7 crore in FY18E and FY19E, respectively.
The governments decision to cap its sharing of kerosene subsidy at
Valuation summary | 12/litre and LPG at | 15/kg and the rest by upstream companies is a
FY16 FY17E FY18E FY19E welcome move for OMCs. Hence, we assume no downstream subsidy
P/E 17.8 9.9 11.6 10.9 share for FY18E and FY19E of total under-recoveries.
Target P/E 19.6 10.9 12.7 12.0
GRMs remain robust due to inventory gains
EV / EBITDA 9.2 5.5 6.1 5.7
P/BV 2.5 2.2 2.0 1.8 Reported GRMs of IOC were at US$7.7/bbl in Q3FY17 vs. our estimate
RoNW (%) 14.1 21.8 16.9 16.2 US$6.7/bbl mainly on account of higher operational efficiency and
RoCE (%) 12.0 22.3 17.2 17.1 inventory gains. The refining products inventory gains came in at | 2094
crore in Q3FY17 vs. | 45 crore in Q2FY17. With the revival seen in GRMs
Stock data due to complete commission of the Paradip refinery, we estimate
Particular Amount reported GRMs of US$6.8/bbl, $6/bbl and $6.3/bbl for FY17E, FY18E and
Market Capitalization (| Crore) 185,495.4 FY19E, respectively. The marketing products inventory gains came in at
Total Debt (FY16) (| Crore) 52,467.1 | 957 crore in Q3FY17 vs. loss of | 731 crore in Q2FY17. We estimate
Cash and Investments (FY16) (| Crore) 10,513.0 throughput of 64.9 MMT, 68.4 MMT and 69.2 MMT for FY17E, FY18E and
EV (| Crore) 227,449.5 FY19E, respectively. Going forward, we expect the interest cost to remain
52 week H/L 392/172 at comfortable levels of | 3153.3 crore, | 3147.5 crore and | 3335 crore in
Equity capital (| Crore) 2,428.0
FY17E, FY18E and FY19E, respectively, due to working capital efficiencies
Face value (|) 10.0
on account of diesel price deregulation, DBT for LPG cylinders.
Price performance Paradip ramp up to strengthen position
Return % 1M 3M 6M 12M
HPCL 22.1 15.9 27.5 100.4 The successful commissioning of 15 MMTPA Paradip refinery marks a
BPCL 9.0 2.5 16.5 57.4
major shift for IOC as a pivotal player in complex refineries. The refinerys
IOCL 15.5 15.5 38.5 86.0
capacity utilisation during the quarter was at 63% with further ramp up
ONGC 4.6 3.9 37.2 33.4
expected in coming quarters. The ability to process heavy crude oils with
major secondary processing units like FCC, delayed coking unit (DCU),
etc, will further improve GRMs. Going forward, steady petroleum sales
Research Analyst volume and normalised marketing margins would augur well for the
Mayur Matani company over the next two years. Hence, we have a BUY
mayur.matani@icicisecurities.com recommendation on the stock with a target price of | 420 (based on
Akshay Gavankar average of P/BV multiple: | 397/share and P/E multiple: | 443/share).
akshay.gavankar@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q3FY17 Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%) Comments
Total Revenues 115,644.9 116,657.1 83,461.9 38.6 100,273.9 15.3
Raw materials costs 73,872.5 78,478.7 68,999.0 7.1 66,329.6 11.4
Employees Cost 1,812.6 1,602.8 1,702.6 6.5 1,871.7 -3.2
Other Expenses 32,011.3 28,500.0 7,518.3 325.8 26,300.3 21.7
Total Expenditure 107,696.3 108,581.5 78,219.8 37.7 94,501.7 14.0 Provision for entry tax in Uttar Pradesh led to higher other expenses
EBITDA 7,948.6 8,075.6 5,242.0 51.6 5,772.2 37.7
EBITDA margins (%) 6.9 6.9 6.3 59 bps 5.8 112 bps
Depreciation 1,554.1 1,475.5 1,169.3 32.9 1,504.8 3.3
EBIT 6,394.5 6,600.1 4,072.7 57.0 4,267.4 49.8

Interest 996.7 724.0 610.4 63.3 614.7 62.1 Higher due to interest implications of Paradip Refinery and higher oil prices
Other Income 792.9 693.2 650.0 22.0 854.1 -7.2
Extra Ordinary Item 0.0 0.0 473.1 -100.0 0.0 NA
PBT 6,190.7 6,569.4 4,585.4 35.0 4,506.9 37.4
Total Tax 2,195.8 2,167.9 1,528.6 43.7 1,385.0 58.5
PAT 3,994.9 4,401.5 3,056.9 30.7 3,121.9 28.0

Key Metrics
Exchange rate (|/$) 67.5 67.5 66.1 2.1 66.9 0.9
Under-recoveries (| cr)* 4614.3 4614.3 6151.4 -25.0 3731.3 23.7
Downstream share (%) 0.0 0.0 10.4 NA 0.0 NA The company did not bear any subsidy for the quarter
Net Under-recovery (| cr) 0.0 0.0 206.5 -100.0 0.0 NA
Throughput (mmt) 16.4 12.9 13.1 25.0 15.6 4.7
Sales (mmt) 20.1 19.9 19.1 5.3 18.5 9.0
GRM ($/barrel) 7.7 6.4 6.0 28.7 4.3 77.5

Source: Company, ICICIdirect.com Research * Includes Direct Benefit Transfer(DBT) of LPG

Change in estimates
FY17E FY18E
(| Crore) Old New % Change Old New % Change Comments
Revenue 440,250.9 450,170.1 2.3 481,410.4 533,390.9 10.8
Increase in crude oil throughput and higher marketing profitabilty led to
EBITDA 33,577.1 33,866.9 0.9 27,735.1 30,387.7 9.6 increase in FY18E estimates
EBITDA Margin (%) 7.6 7.5 -10 bps 5.8 5.7 -6 bps
PAT 18,817.2 18,662.1 -0.8 14,507.9 16,037.1 10.5
EPS (|) 39.7 38.4 -3.2 30.6 33.0 7.9
Source: Company, ICICIdirect.com Research

Assumptions
Current Earlier
FY15 FY16 FY17E FY18E FY17E FY18E Comments
Exchange rate (|/$) 61.1 65.4 67.3 67.5 67.1 67.0
Under-recoveries (| cr) 76,285.0 27,570.2 17,487.9 19,382.6 17487.9 19,382.6 Estimates increased due to higher crude oil prices
Downstream share (%) 3.0 0.1 0.0 0.0 0.0 0.0
Net Under-recovery (| cr) 1,200.5 9.1 0.0 0.0 0.0 0.0 Assuming no downstream share for FY17E and FY18E
Throughput (mmt) 53.6 56.7 64.9 68.4 64.5 68.0
Sales (mmt) 72.8 77.1 80.4 83.6 80.2 83.4
GRM ($/barrel) 0.3 5.1 6.8 6.0 6.4 6.0
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Company Analysis
Government policies continue to provide comfort
The governments decision to deregulate diesel prices was a major
positive for OMCs. It led to a decline in crude oil gross under-recoveries,
with only kerosene and LPG prices under the regulatory regime. Also, the
hike of 25 paise per month in kerosene prices and scheme of Direct
Benefit Transfer (DBT) for LPG cylinders, has led to lower gross under-
recoveries. Given our assumptions on Brent crude at US$55/barrel and
exchange rate of | 67 per US dollar, we expect gross under-recovery of
| 23662.5 crore and | 24640.7 crore in FY18E and FY19E, respectively.
The governments decision to cap its sharing of kerosene subsidy at
| 12/litre and LPG at | 15/kg and the rest by upstream companies is a
welcome move for OMCs. Hence, we assume no downstream subsidy
share for FY18E and FY19E of the total under-recoveries.

Exhibit 1: IOCs share of net under-recoveries

Year FY15 FY16 FY17E FY18E FY19E
Products (| Cr)
HSD 10,935.0 0.0 0.0 0.0 0.0
LPG 40,551.0 16,056.9 10,125.3 15,397.5 16,706.3
SKO 24,799.0 11,513.3 7,748.1 8,265.0 7,934.4
Total 76285.0 27570.2 17873.5 23662.5 24640.7

Sharing Macro (%)

Upstream 56.1% 4.5% 0.0% 2.8% 2.5%
Downstream 2.9% 0.1% 0.0% 0.0% 0.0%
Government 41.0% 95.4% 100.0% 97.2% 97.5%
Total 100.0% 100.0% 100.0% 100.0% 100.0%

Sharing (| Cr)
Upstream 42,822.2 1,251.2 0.0 651.2 625.2
Downstream 2,183.5 17.1 0.0 0.0 0.0
Government 31,279.3 26,301.9 17,873.5 23,011.3 24,015.5
Total 76285.0 27570.2 17873.5 23662.5 24640.7

IOCL share of net under-recoveries (| Cr) 1200.5 9.1 0.0 0.0 0.0
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 3

 Core GRMs continue to be strong
The reported GRMs of IOC were at US$7.7/bbl in Q3FY17 vs. our estimate
of US$6.7/bbl mainly on account of higher operational efficiency and
inventory gains. The refining products inventory gains came in at | 2094
crore in Q3FY17 vs. | 45 crore in Q2FY17. With the revival seen in GRMs
due to complete commission of the Paradip refinery, we estimate
reported GRMs of US$6.8/bbl, $6/bbl and $6.3/bbl for FY17E, FY18E and
FY19E, respectively.

Exhibit 2: Refining margins trend

7.5

5.1 6.3
6.0 6.8
6.0
4.5
US$ / bbl

4.2
3.0

1.5
0.3

0.0
FY14 FY15 FY16 FY17E FY18E FY19E

Source: Company, ICICIdirect.com Research

Exhibit 3: Retail sales trend

100
83.6 86.9
77.1 80.4
80 71.1 72.8

60
(mmt)

40

20

0
FY14 FY15 FY16 FY17E FY18E FY19E

Source: Company, ICICIdirect.com Research

The commissioning of new 15 MMT refinery complex at Paradip begun

operations in Q4FY16 and is ramping up its production with capacity
utilisation of ~63% in current quarter. Hence, we have assumed the
throughput will increase from 56.7 MMT in FY16 to 69.2 MMT in FY19E.

The marketing sales volume reported 5.3% YoY growth to 20.1 MMT in
Q3FY17, which led to higher marketing segment profitability. We expect
marketing margins to remain stable over the next few months.

ICICI Securities Ltd | Retail Equity Research Page 4

 Interest costs to remain at comfortable levels
Going forward, interest costs are estimated to increase marginally but are
expected to remain at comfortable levels of | 3153.3 crore, | 3147.5 crore
and | 3335 crore in FY17E, FY18E and FY19E, respectively. The working
capital efficiencies on account of diesel price deregulation, DBT for LPG
cylinders will continue to benefit the company

Exhibit 4: Interest cost trend

5600 5084.4

4200
3435.3 3335.0
3000.1 3153.3 3147.5
| crore
2800

1400

0
FY14 FY15 FY16 FY17E FY18E FY19E

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 5

 Outlook & Valuation
The successful commissioning of 15 MMTPA Paradip refinery marks a
major shift for IOC as a pivotal player in complex refineries. The refinerys
capacity utilisation during the quarter was at 63% with further ramp up
expected in coming quarters. The ability to process heavy crude oils with
major secondary processing units like FCC, delayed coking unit (DCU),
etc, will further improve GRMs. Going forward, steady petroleum sales
volume and normalised marketing margins would augur well for the
company over the next two years. Hence, we have a BUY
recommendation on the stock with a target price of | 420 (based on
average of P/BV multiple: | 397/share and P/E multiple: | 443/share).

Valuation
Valuation based on Price / BV Multiple
Adjusted Book Value for FY19E (|Crore) 100951.3
Adjusted number of shares (Crore) 482.7
Adjusted Book Value per share (|) 209.1
Multiple 1.6
Value of core business (| per share) 336.7
Add: Listed investments (25% discount to CMP)+ Other Investments 59.8
Fair Value per share (|) 397

Valuation based on P / E multiple

Profit after tax for FY19E (| Crore) 17000.5
Less: Other Income adjusted for tax (| Crore) 2221.2
Adjusted profit after tax for FY19E (| Crore) 14779.4
Number of shares (Crore) 482.7
Adjusted EPS for FY19E (|) 30.6
Multiple 12.5
Fair value per share without investments (|) 383
Add: Value of Investments (| per share)
Listed investments (25% discount to CMP) 44.6
Other Investments 15.2
Fair value per share (|) 443

Weighted Target Price (| per share) 420

Source: ICICIdirect.com Research

Exhibit 5: Valuations
Year Sales EPS EPS Gr. PE RoNW
(| Crore) (%) (|) (%) (x) EV/EBITDA (x) (%) RoCE (%)
FY16 350,603.1 -19.9 21.4 97.2 18.2 9.4 14.1 12.0
FY17E 450,170.1 28.4 38.4 79.5 10.1 5.6 21.8 22.3
FY18E 533,390.9 18.5 33.0 -14.1 11.8 6.2 16.9 17.2
FY19E 544,960.0 2.2 35.0 6.0 11.1 5.8 16.2 17.1
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

Recommendation history vs. consensus estimate
400 100.0
90.0
80.0
300 70.0
60.0
(|)

50.0

(%)
40.0
200 30.0
20.0
10.0
100 0.0
Jan-15 Apr-15 Jun-15 Aug-15 Nov-15 Jan-16 Apr-16 Jun-16 Sep-16 Nov-16 Feb-17

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date Event
Jun-11 Indian government announced increase in petroleum product prices, eliminated custom duty on crude oil and reduced in excise duties on petrol and diesel

Nov-11 Under recoveries on diesel remain high due to depreciation of Indian rupee. Gross under recovery on petroleum products likely to increase sharply QoQ

May-12 Petrol prices increased sharply by | 7.5-8 per litre

Jan-13 The government took a brave and bold decision and asked the oil marketing companies (OMCs) to periodically hike diesel prices by 50 paise/month

May-13 Finance ministry plans to implement Export Parity Pricing (EPP) for pricing of petroleum products for refiners from the current trade parity pricing model. The move if
implemented would have a huge negative impact on profitability of companies
Jun-13 Cabinet clears 10% disinvestment in IOC
Oct-14 Government announces Diesel deregulation
Oct-14 Government announces gas pricing policy
Dec-14 Crude oil prices decline by nearly 50% from the 2014 high's
Aug-15 Government of India divests its 10% stake in IOC
Feb-16 Prime Minister inaugurates IOC's 15 MMTPA Paradip Refinery
Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
1 Government of India 25-Jan-17 57.6 2796.7 -33.3 Promoter 58.6 58.6 58.3 58.3 58.3
2 Oil and Natural Gas Corporation Ltd 31/Dec/16 13.8 668.6 0.0 FII 3.9 4.2 4.5 5.4 5.3
3 Life Insurance Corporation of India 31-Dec-16 8.3 402.3 -21.4 DII 12.9 12.4 12.4 11.2 11.2
4 Oil India, Ltd. 31/Dec/16 5.0 242.8 0.0 Others 24.7 24.8 24.8 25.1 25.2
5 IOC BRPL Merger Scheme Trust 31-Dec-16 2.4 116.6 0.0
6 The Vanguard Group, Inc. 31/Dec/16 0.7 33.2 0.4
7 Norges Bank Investment Management (NBIM) 31-Dec-15 0.4 21.6 -1.1
8 Birla Sun Life Asset Management Company Ltd. 31/Dec/16 0.4 17.6 -0.1
9 Reliance Nippon Life Asset Management Limited 31-Dec-16 0.3 16.3 4.0
10 Goldman Sachs Asset Management (India) Private Ltd. 31/Dec/16 0.3 12.8 0.1
Source: Reuters, ICICIdirect.com Research

Recent Activity
Investor name Investor name
Investor name Value(m) Shares(m) Investor name Value(m) Shares(m)
DSP BlackRock Investment Managers Pvt. Ltd. 22.03 4.61 Government of India -180.66 -33.28
Reliance Nippon Life Asset Management Limited 19.14 4.00 Life Insurance Corporation of India -102.32 -21.39
Tata Asset Management Limited 12.24 2.56 SBI Funds Management Pvt. Ltd. -4.52 -0.94
Grantham Mayo Van Otterloo & Co LLC 8.50 1.98 JM Financial Asset Management Pvt. Ltd. -3.12 -0.65
UTI Asset Management Co. Ltd. 6.78 1.42 Goldman Sachs Asset Management (US) -4.40 -0.54
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 7

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E (Year-end March) FY16 FY17E FY18E FY19E
Revenue 350,603.1 450,170.1 533,390.9 544,960.0 Profit after Tax 10,399.1 18,662.1 16,037.1 17,000.5
Growth (%) -19.9 28.4 18.5 2.2 Less: Dividend Paid 4,063.6 6,817.7 6,817.7 6,817.7
(Inc.)/(Dec.) in stock in trade 3607.2 -6405.5 0.0 0.0 Add: Depreciation 4,852.8 5,948.1 6,377.3 6,863.8
Raw material Costs 142265.0 159969.2 203469.6 205872.1 Add: Others 0.0 0.0 0.0 0.0
Purchase of Products 143628.8 136787.5 163089.3 163089.3 Cash Profit 13,936.3 20,792.5 15,896.7 17,346.6
Employee Costs 7637.1 7595.8 7964.4 8600.5 Increase/(Decrease) in CL 808.9 12,620.2 10,142.8 2,811.0
Other Expenditure 33383.1 118356.3 128480.0 134998.4 (Increase)/Decrease in CA 3,061.9 -3,008.3 -8,058.1 3,962.7
Op. Expenditure 330521.3 416303.2 503003.3 512560.3 CF from Operating Activities 17807.0 30404.4 17981.4 24120.4
EBITDA 20,081.8 33,866.9 30,387.7 32,399.6 Purchase of Fixed Assets 14,195.5 15,231.5 20,000.0 25,000.0
Growth (%) 97.9 68.6 -10.3 6.6 (Inc)/Dec in Investments -75.8 0.0 0.0 0.0
Depreciation 4852.8 5948.1 6377.3 6863.8 Others 2.0 3.0 4.0 4.0
EBIT 15229.0 27918.8 24010.4 25535.8 CF from Investing Activities -14,271.4 -15,231.5 -20,000.0 -25,000.0
Interest 3000.1 3153.3 3147.5 3335.0 Inc/(Dec) in Loan Funds -2,777.9 -13,000.0 5,000.0 0.0
Other Income 3610.6 2860.8 3073.1 3173.1 Inc/(Dec) in Sh. Cap. & Res. -356.7 -0.1 0.0 0.0
PBT 15839.5 27626.4 23935.9 25373.9 Others 0.0 0.0 0.0 0.0
Growth (%) 98.1 74.4 -13.4 6.0 CF from financing activities -3,134.6 -13,000.1 5,000.0 0.0
Tax 5440.5 8964.3 7898.9 8373.4 Change in cash Eq. 401.1 2,172.8 2,981.4 -879.6
Reported PAT 10,399.1 18,662.1 16,037.1 17,000.5 Op. Cash and cash Eq. 111.9 513.0 2,685.8 5,667.3
Growth (%) 97.2 79.5 -14.1 6.0 Cl. Cash and cash Eq. 513.0 2,685.8 5,667.3 4,787.6
EPS 21.4 38.4 33.0 35.0 Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY16 FY17E FY18E FY19E (Year-end March) FY16 FY17E FY18E FY19E
Source of Funds Per share data (|)
Equity Capital 2,428.0 4,855.9 4,855.9 4,855.9 Book Value 152.3 176.7 195.7 216.6
Preference capital 0.0 0.0 0.0 0.0 Cash per share 1.1 5.5 11.7 9.9
Reserves & Surplus 71,520.8 80,937.2 90,156.6 100,339.5 EPS 21.4 38.4 33.0 35.0
Shareholder's Fund 73,948.8 85,793.1 95,012.5 105,195.4 Cash EPS 31.4 50.7 46.2 49.1
Loan Funds 52,467.1 39,467.1 44,467.1 44,467.1 DPS 7.0 12.0 12.0 12.0
Deferred Tax Liability 9,468.2 12,468.2 12,768.2 13,068.2 Profitability & Operating Ratios
Minority Interest 0.0 0.0 0.0 0.0 EBITDA Margin (%) 5.7 7.5 5.7 5.9
Source of Funds 135,884.1 137,728.4 152,247.8 162,730.7 PAT Margin (%) 3.0 4.1 3.0 3.1
Fixed Asset Turnover (x) 3.1 3.7 4.0 3.6
Application of Funds Inventory Turnover (Days) 39.9 40.0 40.0 40.0
Gross Block 150,559.0 175,559.0 188,059.0 203,059.0 Debtor (Days) 8.4 8.5 8.5 8.5
Less: Acc. Depreciation 59,663.5 65,380.0 71,757.3 78,621.1 Current Liabilities (Days) 61.4 55.0 55.0 55.0
Net Block 90,895.5 110,179.0 116,301.7 124,437.9 Return Ratios (%)
Capital WIP 21,022.2 11,022.2 18,522.2 28,522.2 RoE 14.1 21.8 16.9 16.2
Total Fixed Assets 111,917.7 121,201.2 134,823.9 152,960.1 RoCE 12.0 22.3 17.2 17.1
Investments 23,975.3 23,975.3 23,975.3 23,975.3 RoIC 13.1 24.8 19.4 18.9
Inventories 38,282.4 49,333.7 58,453.8 59,721.6 Valuation Ratios (x)
Debtor 8,026.4 10,483.4 12,421.4 12,690.8 PE 18.2 10.1 11.8 11.1
Cash 513.0 2,685.8 5,667.3 4,787.6 Price to Book Value 2.6 2.2 2.0 1.8
Loan & Advance, Other CA 43,892.4 33,392.4 30,392.4 24,892.4 EV/EBITDA 9.4 5.6 6.2 5.8
Total Current assets 90,714.2 95,895.3 106,934.9 102,092.5 EV/Sales 0.7 0.5 0.4 0.4
Current Liabilities 58,959.4 67,833.9 80,374.0 82,117.3 Leverage & Solvency Ratios
Provisions 31,763.8 35,509.5 33,112.2 34,179.9 Debt to equity (x) 0.7 0.5 0.5 0.4
Total CL and Provisions 90,723.1 103,343.4 113,486.2 116,297.2 Interest Coverage (x) 5.1 8.9 7.6 7.7
Net Working Capital -9.0 -7,448.0 -6,551.3 -14,204.7 Debt to EBITDA (x) 2.6 1.2 1.5 1.4
Miscellaneous expense 0.0 0.0 0.0 0.0 Current Ratio 1.0 0.9 0.9 0.9
Application of Funds 135,884.1 137,728.4 152,247.8 162,730.7 Quick ratio 0.6 0.5 0.4 0.4
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 8

ICICIdirect.com coverage universe (Oil & Gas)
CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)
Sector / Company (|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Bharat Petroleum (BHAPET) 695 680 Hold 50,254 35.2 51.4 53.9 19.8 13.5 12.9 13.6 10.4 9.8 16.5 21.6 19.9 23.2 27.9 24.4
Cairn India (CAIIND) 273 245 Hold 51,779 -50.3 12.8 12.4 11.4 -5.4 21.3 5.9 14.5 11.8 10.1 0.5 1.7 7.6 -19.3 4.8
Castrol India (CASIND) 418 504 Buy 24,926 12.4 13.5 14.3 33.6 31.0 29.2 22.3 19.9 18.9 148.7 158.7 163.9 106.9 110.0 114.1
GAIL (India) (GAIL) 476 505 Buy 60,380 24.0 18.1 30.9 19.9 26.3 15.4 14.6 15.6 10.6 9.6 7.6 11.7 10.4 7.5 11.7
Gujarat Gas (GUJGAS) 593 570 Hold 8,164 32.2 13.0 23.0 18.4 45.7 25.8 10.1 14.4 11.7 16.6 10.8 13.7 22.3 8.5 13.5
Gujarat State Petronet (GSPL) 158 170 Buy 8,901 7.3 7.9 9.3 21.7 20.0 16.9 10.8 11.5 10.0 15.2 13.5 15.3 11.3 11.2 12.1
Gulf Oil Lubricants (GULO) 683 750 Hold 3,386 20.2 23.8 24.3 33.8 33.8 33.8 21.0 18.8 18.2 34.5 37.1 35.8 40.4 36.8 31.0
Hindustan Petroleum (HINPET) 541 455 Hold 55,021 9.0 12.7 16.7 20.1 14.2 10.8 13.3 9.6 7.7 10.2 13.1 16.7 17.1 20.6 22.7
Indian Oil Corporation (INDOIL) 390 420 Buy 189,380 21.4 38.4 33.0 18.2 10.1 11.8 9.4 5.6 6.2 12.0 22.3 17.2 14.1 21.8 16.9
Indraprastha Gas (INDGAS) 972 920 Buy 13,608 31.3 29.7 42.1 31.1 32.7 23.1 17.1 17.0 12.4 28.7 25.4 28.8 20.9 17.2 20.4
Mangalore Refinery (MRPL) 104 114 Buy 18,228 6.6 14.1 12.1 15.9 7.4 8.6 7.0 5.6 6.1 7.4 23.9 18.9 17.9 29.1 20.8
ONGC (ONGC) 201 215 Hold 257,950 14.3 11.0 16.2 14.1 18.3 12.4 5.2 5.8 5.6 10.5 9.7 11.5 9.8 7.7 11.0
Petronet LNG (PETLNG) 386 410 Buy 28,950 11.8 12.2 21.5 32.8 31.7 18.0 21.7 18.3 10.6 13.5 14.5 23.2 15.5 14.3 21.0
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 9

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research Page 10

Disclaimer
ANALYST CERTIFICATION
We /I, Mayur Matani, MBA and Akshay Gavankar, PGDM) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately
reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities
Limited is a SEBI registered Research Analyst with SEBI Registration Number INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and has
its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of which
are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any
compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts
and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Mayur Matani, MBA and Akshay Gavankar, PGDM Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding
twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month
preceding the publication of the research report. ,

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Mayur Matani, MBA and Akshay Gavankar, PGDM. Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

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 ICICI Securities and affiliates 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.
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.

It is confirmed that Mayur Matani, MBA and Akshay Gavankar, PGDM, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding
twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities Ltd | Retail Equity Research Page 11