@LJ Agri Textile Post Conference Report-20180313-Mosl-su-pg050

MOSL Agri & Textile Conference: Opportunities immense
despite prevailing challenges

 The agri and textile sectors remain vital part of India’s economy, both in terms of overall value-
added output and employment. Solid support on the part of the government and emerging
opportunities, both in domestic and export markets alike, point to a sanguine outlook for the
industry. However, these sectors still face a range of challenges, including those related to tax
reform, environment, labor, and presence of a vast unorganized economy, among others. The Indian
government, though, has set out a series of focused programs in an attempt to address these issues.
 Against this industry backdrop, we organized the ‘MOSL Agri & Textile Conference’ with an aim to
capture the entire value chain of the agri and textile sectors. Notably, we were able to bring together
a range of corporates (8 textile companies and 4 chemical companies) and experts (2 farmers, 2
agrochemical dealers, a renowned chemical expert from a reputed chemical engineering college, a
seeds & agri expert, a cotton expert and a retail dealer) to share their knowledge, expertise and
insight into the prevalent issues and opportunities.
 In this report, we will offer our key takeaways from around 450 investor meetings with key
stakeholders in the industry. We will also discuss the current developments and what they will mean
for the Indian agri and textile industries.
Sumant Kumar - Research analyst (Sumant.Kumar@motilaloswal.com); +91 22 3846 4702

Investors are advised to refer through important disclosures made at the last page of the Research Report.
February, 2015 1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Contents
Page No.
Summary .................................................................................................................................................... 3
Chemicals Expert.......................................................................................................................................... 4
Agrochemicals Expert-1 (Dealer)................................................................................................................. 5
Agrochemicals Expert-2 (Dealer)................................................................................................................. 6
Seeds & Agri Expert .................................................................................................................................... 7
Farmer -1 (Bihar) & Farmer -2 (Maharashtra) ............................................................................................ 8
Companies ............................................................................................................................................... 9-19
Aarti Industries ...................................................................................................................................... 9
Hikal ...................................................................................................................................................... 13
Seya Industries ..................................................................................................................................... 16
The Waterbase Company .................................................................................................................... 19
Cotton Expert ............................................................................................................................................. 22
Retail Dealer............................................................................................................................................... 23
Companies ............................................................................................................................................. 24-46
Arvind Ltd ............................................................................................................................................. 24
Welspun ............................................................................................................................................... 27
Raymond .............................................................................................................................................. 30
Trident .................................................................................................................................................. 34
Himatsingka ......................................................................................................................................... 37
Kewal Kiran Clothing............................................................................................................................ 40
S P Apparels Ltd ................................................................................................................................... 43
Dollar Industries Limited ..................................................................................................................... 46
13 March 2018 2
Agri & Textile Day: Post-conference takeaways
We recently organized the ‘Agri & Textile Day’ Conference, which was attended by
12 corporates (8 textile companies and 4 chemical companies) and 8 experts in
various fields (2 farmers, 2 agrochemical dealers, 1 chemical expert, 1 seeds & agri
expert, 1 cotton expert and 1 retail dealer). Key takeaways:
Agrochemical: An opportunity in adversity

Agrochemical companies need to focus on marketing, as farmers tend to choose
products depending on their experience and word of mouth. Although branded
products are more popular among farmers than a particular chemical composition,
educating the farmer is crucial, as smaller firms try to replicate the brand logo of
established brands for new product launches. Thus, opportunities are immense for
established companies, provided they are able to create awareness about their
products by employing the right strategies.
Chemicals: Specialty chemicals is the way forward

India has an edge over China when it comes to specialty chemicals. The shutdown of
a number of Chinese chemical companies due to environmental concerns has
provided huge opportunities to the Indian chemicals industry. Factories in China are
considering relocating to other areas, but not the entire shutdown capacity will
come into stream in the near term. This might lead to unmet demand now shifting
to India. An expert from the chemicals space highlighted the importance of good
manufacturing practices and opined that adherence to environmental norms is
critical for sustainability of any chemical company. Looking at the environmental
clearance track record of a chemical company is extremely crucial.
Textile: Business likely to return to normalcy

The exports business of textile companies is likely to bounce back in FY19, led by re-
stocking by retailers in the US. Cotton prices and intensifying competition still pose a
challenge, but currency depreciation is proving good for exports. Textiles expert
believes that companies will focus more on increasing presence in new markets to
drive growth. Structural shift from unorganized to organized trade in the domestic
market has been slow and not panning out as expected. However, stabilization of
GST-related hurdles, along with e-way bill implementation, will make it difficult for
unorganized players to operate, going forward, creating opportunities for the
organized players. Overall outlook for the domestic textiles market is sanguine.
13 March 2018 3
AGRI AND Chemicals Expert
CHEMICAL Key takeaways
INDUSTRY  Shutdown in China an opportunity for India: The shutdown of a number of
Chinese chemical companies due to environmental concerns has given a huge
boost to the Indian chemical industry – unmet global demand is now shifting to
India. The expert believes that all shut capacity is unlikely to come on stream.
 India a preferred choice for specialty chemicals: India has an edge over China
when it comes to specialty chemicals, as these chemicals are produced in small
quantities, and require innovation and investments in R&D. Specialty chemicals
are manufactured in batches of just 3-4 tonnes per day. Profit margins are in the
range of 22-25%. Indian entrepreneurs are driven by innovation, with focus on
developing indigenous technology, and Indian chemicals are known to be more
pure than those produced in China. In bulk chemicals, Chinese players are far
ahead, as they enjoy economies of scale in this segment.
 Adherence to environmental norms key to success: The expert put a lot of

emphasis on the importance of good manufacturing practices. Adherence to
environmental norms is critical for sustainability of any chemical company in the
country. It is important to check for the environmental clearances track record
of any chemical company before evaluating it on financial aspects. REACH
(Registration, Evaluation, Authorization, and Restriction of Chemicals)
compliance is one of the highest standards of certification a company can have
to showcase its willingness to comply with environmental norms.
 Companies that should do well in chemical space: According to the expert, the
following companies are likely to do well – Aarti Industries, Vinati Organics,
Deepak Nitrite, Atul Industries, and Alkyl Amines. Deepak Nitrite is setting up a
200,000MT phenol capacity, which will largely substitute imports of this bulk
chemical in India. India’s demand for phenol is currently 350,000MT, most of
which is currently imported. Vinati Organics has market dominance in chemicals
like IBB (Isobutyl Benzene), 2-Acrylamido 2-Methylpropane Sulfonic Acid (ATBS),
and Isobutylene (IB). Alkyl Amines is now focusing more on specialty amines,
which have high value and vast usage. Aarti Industries has one of the largest
capacities for manufacturing NCB (Nitro Chloro Benzene), and other benzene
and toluene-based products. These companies also strictly follow environmental
norms and invest in green technology, which is critical for sustainable growth.
 Specialty amines, phosphates, nitrobenzene, ONCB, PNCB, para-amino phenols,

morphine, etc are high-margin products, with vast usage. Companies producing
these products will continue to do well.
13 March 2018 4
Agrochemicals Expert-1 (Dealer)
About the expert: He is the largest agrochemicals dealer for Bayer, Dow, Rallis, UPL,
Godrej, and Caminova. He has fertilizer dealerships of RCF and Deepak Fertilizer,
and seeds dealerships of Mahyco and UPL. His presence is largely in the Konkan belt.
Key takeaways
 Mango (Alphonso) is a key crop in the Konkan region. Though paddy is the
biggest crop in terms of acreage, pesticide consumption is highest in mango.
 Syngenta and UPL do not have a major presence in the region, but Godrej has a
huge presence.
 The dealer has been generating the highest revenues from Godrej in the last 4-5
years.
 Rallis’ presence in the region is limited. However, the company has introduced
five new products in the last one year, thus gaining market share.
 Syngenta has reduced the number of distributors from 200 to 20 to avoid the
penetration of one distributor into another distributor’s region.
 Syngenta and Bayer are the major players. For Bayer, major revenues come
from Nashik and Pune; it has lost market share in the Konkan region due to price
wars by local players.
 MNCs provide 30-35% margins to distributors and retailers. However, smaller
companies give an additional 5-6% to distributors and retailers.
 Farmers, 50-60% of whom are tribals, tend to choose the product depending on
their experience and word of mouth. They are highly price-sensitive.
 Farmers target a margin of 40-50% on their Alphonso (mango) produce.
 The acreage of crops in Maharashtra depends on sugarcane prices. If the prices
of sugarcane are favorable, the farmers increase their sugarcane acreage.
 There was huge shortage of urea 5-6 years ago. Now, the availability of urea at
favorable prices is benefitting farmers greatly.
13 March 2018 5
Agrochemicals Expert-2 (Dealer)
About the expert: He is an agrochemicals dealer from Kalyan, Mumbai, and has
been dealing in fertilizers, seeds and crop protection for 20 years. He has his retail
stores in Kalyan and Shahpur. He mostly sells fertilizers of Deepak, seeds of
Ramdhari and Yashoda, and crop protection products of Nagarjuna, Sumitomo and
Ichiban.
Key takeaways
 Labor cost has almost doubled in the last three years (from INR150-200/day in
2014 to INR300-400/day in 2017). This is mainly because fewer people are
coming back to work on the farms. Every year the labor available is declining
and this is creating an opportunity for herbicides.
 The farmers prefer brands and not particular chemical compositions. Companies
try to replicate logos of established brands for new launches to attract farmers.
 The dealer believes that BT cotton seeds failed because of the farmers’
negligence. The BT cotton seeds were supposed to be sown in the center of the
field, with normal seeds sown around them.
 POS system issues: The government has installed a POS (point of sale) system at
his store for DBT (direct benefit transfer). However, it is not fully functional.
 The dealer believes that the companies don’t make adequate efforts to educate
farmers about the utility of their agrochemical products. Hence, the farmers’
buying decision is totally dependent on what dealers say about the product.
13 March 2018 6
Seeds & Agri Expert
Key takeaways
Seeds market in India

 The seeds market in India currently stands at INR180b, of which INR30b is for
vegetable crops and INR1,500b is for other crops.
 Private sector players hold 65% of the market.
 70% of the seeds market in India is still unorganized, leaving huge headroom for
organized players.
 Farmers in India switch brands quickly, as they are in constant search for best
yield seeds. This behavior leads to constant innovation at the suppliers end.
 Farmers also look for differentiation in seeds in terms of pest/insect resistance,
earliness of the crop, etc. A seed maturing a week early will command better
pricing in the market, as farmers are able to sell the crop at higher prices in a
market where the crop is not yet available.
 There is a good market abroad for seeds produced in India.
Problems faced by Indian seeds industry

 With increasing urbanization, there is higher pressure on the decreasing land to
produce more to feed the large population of the country. This requires more
and more high yielding seeds.
 Per capita vegetable consumption is very low in India. This is increasing and
offers huge opportunities for growth to seed companies in India.
National Agriculture Market (NAM)

 e-NAM is a marketing reform-linked scheme and states desirous of joining the
NAM are required to carry out the following reforms in their APMC Act:
 A specific provision for electronic trading as a mode of price discovery.
 Provision for issue of a unified single trade license valid for trade in all the
mandis of the state/UT.
 Single point levy of mandi fee.
 Current status: Currently, 479 markets across 14 states and 1 UT are integrated;
the target is 585 markets by March 2018. The portal is available in 8 languages –
Hindi, English, Telugu, Marathi, Odia, Gujarati, Tamil and Bengali. Online
payments mode (including BHIM integration) is available.
13 March 2018 7
Farmer -1 (Bihar) & Farmer -2 (Maharashtra)
Represented by:
Key takeaways
Bihar (Farmer 1)
Maharashtra (Farmer 2)  Farmers in Purnea, Bihar, mainly grow corn and banana. Wheat, paddy masoor
and mustard are also grown.
 Lack of coordination between the state and the center is causing a delay in the
implementation of policies, according to the Bihar-based farmer.
 Current labor cost in Purnea is INR300/day, which is almost half of the labor cost
in other states. Consequently, laborers move out of the state for better
incentives. Labor shortage is also due to higher labor demand for construction
work in nearby cities, where wages are relatively high. In addition, laborers are
not motivated to work for longer hours, as food grains are being made available
at cheaper rates under the government's schemes.
 Mandi is not as strong compared to other states. Hence, farmers have to rely on
middle-men.
 Farmers mainly grow rice and wheat for self-consumption. For cash crops,
farmers grow banana and corn as they have higher realizations.
 High usage of urea and phosphate impacts soil quality.
 On the positive side, the roads and infrastructure have improved in the recent
times, providing some respite to the farmers who sell their produce in other
markets. Better infrastructure has also created other avenues of income (such
as transport business).
Farmer -2 (Maharashtra)
Key takeaways
 Farmers from the outskirts of Mumbai mainly grow paddy and vegetables.
 Farmer income in the region is in the range of INR75-100K per acre/annum.
 There are various rice qualities grown by farmers, depending on the availability
of land (90, 100, 120, 130, 150 days).
 Farmers sow rice in monsoon. Post that, they grow vegetables.
 Organic farming is very limited in Maharashtra.
 Farmers mainly use seeds with high brand recall. Farmers keep experimenting
with seeds and crops. Hence, companies with better marketing practices draw
interests from farmers.
 Agrochemical industry dynamics are changing. Farmer awareness was low in the
past – they used to rely on retailer advice for buying agrochemical products.
However, the scenario has changed with increased awareness among farmers
for particular brands.
13 March 2018 8
Aarti Industries
About the company
Aarti Industries is a leading Indian manufacturer of specialty chemicals and
pharmaceuticals with a global footprint. Chemicals produced by the company are
used in the downstream manufacture of pharmaceuticals, agrochemicals, polymers,
additives, surfactants, pigments, dyes, etc. The company started business in 1984,
and is now one of the frontrunners in the chemical and pharmaceutical industries. It
has also launched its home and personal care division. Aarti’s product mix based on
FY17 revenues: Specialty Chemicals: 81%, Pharmaceuticals: 14%, Personal Care: 5%.
Key takeaways
Specialty chemicals – on a strong footing

 Specialty chemicals (over 80% of total sales in FY17) and pharmaceutical (about
15% of total sales in FY17) segments are the key growth drivers, largely led by
volume growth and capacity scale-up. Key applications that would drive volume
growth for the next 3-5 years are polymer additives, agro-chemicals and
pharmaceuticals.
 Within the specialty chemicals business, benzene-based products form ~60-65%
of sales. Over the years, the share of forward integrated value-added products
has increased considerably, leading to an improvement in the profitability.
 Aarti has not only developed customized products, but also formulated co-
products to suit different applications in order to improve the efficiency of
operations and improve profitability.
 Furthermore, the company has diversified its business in terms of products,
customers and applications, which has helped to reduce volatility in business
significantly.
 Driven led by its superior execution, cost effectiveness, good product quality
and environmental compliance, Aarti has been able to win two major multi-year
contracts (to be executed over the next 10 years) worth INR140b over the past
nine months. The order size is significant, given its sales run-rate of INR32b
(FY17).
 Investment for one contract, which is worth INR40b, would be partly from
advance received from the customer. Commercialization of this contract is
expected from 2HFY20.
 Investment worth INR100b in the second contract would be fully funded from
advance received from the customer.
 Both the contracts are to support incremental demand for the customers’
products.
Research Analyst  There would be a pick-up in capacity utilization of the recently commissioned
Tushar Manudhane Toluene project over the medium term; utilization is expected to reach 60-65%
Tushar.Manudhane@motilaloswal.com by FY19.
Tel: + 91 22 3846 2498  Management guided for 10-15% CAGR in volumes (excluding business from the
INR100b contract) over the next 2-3 years.
13 March 2018 9
Pharmaceuticals – on a high growth path
 On the back of new products and increased traction in existing products (largely
in anti-cancer, anti-asthma, anti-hypertensive drugs and oncology drugs), Aarti
has been able to deliver 25% YoY growth in 9MFY18.
 The share of pharmaceuticals has grown from 9.8% in FY13 to 14% by FY17.
 Aarti successfully cleared USFDA inspection at its Tarapur unit in the recent past.
It has two manufacturing facilities that are USFDA-approved, and two
manufacturing facilities that are WHO-GMP approved.
 Management guided for 20% CAGR in this segment over the next 3-4 years.
Capex update
 Aarti incurred capex of ~INR3.9b in 9MFY18. The company intends to spend
INR11b-12b over the next two years toward setting up R&D infrastructure,
debottlenecking, increasing hydrogenation capacity and maintenance capex.
 Capex would be largely funded by internal accruals and some increase in debt.
Net debt to equity ratio is expected to be in the range of 1.0x to 1.2x over the
next 2-3 years.
13 March 2018 10
Financials and valuations
Consolidated - Income Statement (INR Million)
Y/E March FY12 FY13 FY14 FY15 FY16 FY17
Total Income from Operations 17,858 22,739 28,231 31,226 30,066 31,617
Change (%) 14.4 27.3 24.1 10.6 -3.7 5.2
Raw Materials 10,962 11,219 15,033 16,418 16,737 16,463
Employees Cost 471 654 788 937 1,207 1,523
Other Expenses 3,933 7,254 8,395 9,215 6,399 7,114
Total Expenditure 15,366 19,127 24,216 26,569 24,343 25,100
% of Sales 86.0 84.1 85.8 85.1 81.0 79.4
EBITDA 2,493 3,612 4,015 4,657 5,723 6,518
Margin (%) 14.0 15.9 14.2 14.9 19.0 20.6
Depreciation 549 828 885 820 985 1,225
EBIT 1,944 2,784 3,130 3,837 4,738 5,293
Int. and Finance Charges 718 954 1,178 1,380 1,170 1,173
Other Income 36 38 110 90 59 37
PBT bef. EO Exp. 1,262 1,868 2,061 2,548 3,627 4,156
EO Items 0 0 0 0 0 0
PBT after EO Exp. 1,262 1,868 2,061 2,548 3,627 4,156
Total Tax 362 538 540 610 946 881
Tax Rate (%) 28.7 28.8 26.2 24.0 26.1 21.2
Minority Interest -132 -14 -104 -122 112 118
Reported PAT 1,033 1,344 1,624 2,059 2,569 3,158
Adjusted PAT 1,033 1,344 1,624 2,059 2,569 3,158
Change (%) 26.7 30.2 20.8 26.7 24.8 22.9
Margin (%) 5.8 5.9 5.8 6.6 8.5 10.0
Consolidated - Balance Sheet

Equity Share Capital 396 396 443 443 417 411
Total Reserves 5,506 7,120 8,265 9,721 10,956 13,214
Net Worth 5,901 7,563 8,708 10,164 11,373 13,625
Minority Interest 33 43 43 59 521 639
Total Loans 6,278 8,490 10,389 12,023 12,916 15,639
Deferred Tax Liabilities 556 709 847 1,027 1,271 1,554
Capital Employed 12,768 16,804 19,986 23,272 26,081 31,456
Gross Block 8,540 12,298 14,701 16,781 20,740 26,472

Less: Accum. Deprn. 4,115 5,631 6,508 7,182 8,355 9,576
Net Fixed Assets 4,426 6,667 8,193 9,600 12,385 16,896
Goodwill on Consolidation 8 70 70 70 74 74
Capital WIP 544 687 1,174 1,930 3,130 2,695
Total Investments 936 954 1,172 1,392 413 470
Curr. Assets, Loans&Adv. 10,684 13,382 16,092 16,387 13,663 14,856

Inventory 3,259 4,622 6,061 5,517 4,952 5,714
Account Receivables 4,070 4,290 4,432 4,390 5,234 5,247
Cash and Bank Balance 106 124 149 337 290 285
Loans and Advances 3,250 4,347 5,450 6,143 3,187 3,610
Curr. Liability & Prov. 3,831 4,956 6,715 6,106 3,584 3,534
Account Payables 1,777 2,271 3,690 2,488 3,052 2,997
Other Current Liabilities 86 203 121 219 327 259
Provisions 1,967 2,483 2,905 3,399 205 278
Net Current Assets 6,854 8,426 9,377 10,281 10,078 11,321
Appl. of Funds 12,768 16,804 19,986 23,272 26,081 31,456
13 March 2018 11
Ratios
Basic (INR)
EPS 12.6 16.4 19.8 25.1 31.3 38.5
Cash EPS 19.3 26.5 30.6 35.1 43.3 53.4
BV/Share 71.9 92.1 106.0 123.8 138.5 165.9
DPS 3.5 4.5 5.1 6.3 10.5 1.0
Payout (%) 31.8 30.7 30.0 30.3 39.9 3.1
Valuation (x)
P/E 46.3 37.1 30.2
Cash P/E 33.1 26.8 21.7
P/BV 9.4 8.4 7.0
EV/Sales 3.4 3.6 3.5
EV/EBITDA 23.0 18.9 17.0
Dividend Yield (%) 0.3 0.4 0.4 0.5 0.9 0.1
FCF per share -1.4 -0.2 3.3 5.5 15.1 -7.3
Return Ratios (%)
RoE 18.8 20.0 20.0 21.8 23.9 25.3
RoCE 12.5 14.2 13.6 14.5 15.3 15.7
RoIC 13.2 15.1 14.2 15.7 16.7 16.6
Working Capital Ratios
Fixed Asset Turnover (x) 2.1 1.8 1.9 1.9 1.4 1.2
Asset Turnover (x) 1.4 1.4 1.4 1.3 1.2 1.0
Inventory (Days) 67 74 78 64 60 66
Debtor (Days) 83 69 57 51 64 61
Creditor (Days) 36 36 48 29 37 35
Leverage Ratio (x)
Current Ratio 2.8 2.7 2.4 2.7 3.8 4.2
Interest Cover Ratio 2.7 2.9 2.7 2.8 4.1 4.5
Net Debt/Equity 0.9 1.0 1.0 1.0 1.1 1.1
Consolidated - Cash Flow Statement

OP/(Loss) before Tax 1,262 1,868 2,061 2,513 3,627 4,156
Depreciation 549 828 885 820 985 1,225
Interest & Finance Charges 718 954 1,178 1,380 1,170 1,173
Direct Taxes Paid -438 -600 -526 -583 -978 -975
(Inc)/Dec in WC -857 -737 -340 -688 964 -869
CF from Operations 1,234 2,313 3,259 3,442 5,768 4,711
Others -26 -15 -109 -47 -32 -11
CF from Operating incl EO 1,208 2,298 3,150 3,395 5,736 4,701
(Inc)/Dec in FA -1,323 -2,314 -2,879 -2,947 -4,498 -5,299
Free Cash Flow -115 -16 272 448 1,238 -598
(Pur)/Sale of Investments 3 10 76 -42 -40 8
Others -22 16 -105 12 40 3
CF from Investments -1,342 -2,288 -2,908 -2,977 -4,499 -5,289
Issue of Shares 139 0 0 0 0 0
Inc/(Dec) in Debt 978 1,305 1,376 1,633 837 1,762
Interest Paid -718 -954 -1,178 -1,380 -1,170 -1,173
Dividend Paid -252 -342 -415 -483 -952 -6
Others -35 0 0 0 0 0
CF from Fin. Activity 111 9 -218 -230 -1,284 583
Inc/Dec of Cash -23 19 24 189 -47 -5
Opening Balance 129 106 124 149 337 290
Closing Balance 106 124 149 337 290 285
13 March 2018 12
Hikal
Company background
 Established in 1988, Hikal is a leading sustainable technology driven company
serving the crop protection and pharmaceutical industries. It is among the few
global companies that provide customized, cost-effective and sustainable
solutions, from R&D to commercial manufacturing. It is the first Indian company
to be a member of Rx-360, a global pharmaceutical supply chain consortium for
upholding world-class quality standards.
Key takeaways
 Hikal is shifting its competency from being a contract manufacturer to a product

manufacturing company.
 The company has made plans to launch at least two products a year. Currently,
it has around 8-10 products in initial stages of development.
 Hikal’s product prices range from USD5.5/kg to USD38,000/kg
 Raw material issues: Most of the company’s raw materials are obtained from
China. Post China’s crackdown on polluting industries to reduce the carbon
footprint, the company is facing problems in getting its raw material at pre-
determined costs. Also, most of its raw materials are a derivative of crude oil.
Thus, the price fluctuations ultimately boil down to crude oil price movements.
 High employee expenses: Hikal believes in providing quality training to its staff,
and thus, there is lot of poaching for its key men. The company has to pay
higher remuneration to retain such staff, thereby increasing the employee cost.
 Make in India success: The company believes that if the government’s policies
are apt, India could be the next chemical hub. Among all the other emerging
markets globally, India is by far the most stable country – politically,
economically as well as demographically.
 Stable debt-to-equity ratio: The company is no longer looking forward for
raising any further capital. Also, Hikal’s rating has got upgraded to A- which is
quite stable.
 Ever greening: This is one of the main burning issues in the pharmaceutical
industry today. Companies are trying to extend the patents of products (whose
initial patents are on the verge of expiry) in order to retain royalty payments.
This is a big concern for generic pharma companies as they lose the right to
make generic versions of expired patented drugs.
 Reducing lead time: Currently, the lead time of raw materials supply from
Shanghai to the company’s Taloja plants is almost 30 days. Although this is
decent enough, the company is working toward reducing the lead time to make
its systems more efficient.
13 March 2018 13
Change (%) 38.9 -8.0 25.5 5.1 6.6 10.5
Raw Materials 3,129 2,610 3,758 4,270 4,642 5,094
Employees Cost 637 702 803 908 1,097 1,193
Other Expenses 1,883 1,982 1,914 1,773 1,807 2,097
% of Sales 78.2 79.6 77.6 79.2 80.7 81.1
EBITDA 1,577 1,357 1,871 1,824 1,809 1,956
Margin (%) 21.8 20.4 22.4 20.8 19.3 18.9
Depreciation 453 491 550 642 673 691
EBIT 1,124 867 1,321 1,182 1,136 1,264
Int. and Finance Charges 664 599 680 601 622 499
Other Income 51 63 341 16 18 34
PBT bef. EO Exp. 511 331 981 598 532 800
EO Items 0 0 0 0 0 0
PBT after EO Exp. 511 331 981 598 532 800
Total Tax 51 78 342 194 120 162
Tax Rate (%) 9.9 23.6 34.9 32.4 22.5 20.2
Reported PAT 460 253 639 404 412 638
Adjusted PAT 460 253 639 404 412 638
Change (%) 24.3 -45.1 153.0 -36.7 2.0 54.9
Margin (%) 6.4 3.8 7.7 4.6 4.4 6.2

Total Reserves 4,142 4,338 4,883 5,160 5,474 6,048
Net Worth 4,306 4,503 5,047 5,325 5,638 6,212
Total Loans 5,325 5,836 5,459 5,471 5,050 5,062
Deferred Tax Liabilities 8 86 325 285 300 329
Gross Block 9,223 9,930 10,318 10,961 11,472 12,566

Less: Accum. Deprn. 2,830 3,325 3,879 4,568 5,241 5,883
Net Fixed Assets 6,393 6,605 6,439 6,394 6,232 6,683
Capital WIP 756 485 612 617 661 628
Total Investments 31 31 31 31 31 31

Inventory 1,928 2,571 3,113 3,140 2,911 2,636
Account Receivables 1,020 846 887 1,280 1,123 1,600
Provisions 201 157 307 299 227 177
Misc Expenditure 0 0 0 0 0 0
Appl. of Funds 9,639 10,425 10,831 11,082 10,988 11,604
13 March 2018 14
Ratios
Basic (INR)
EPS 5.6 3.1 7.8 4.9 5.0 7.8
Cash EPS 11.1 9.0 14.5 12.7 13.2 16.2
BV/Share 52.4 54.8 61.4 64.8 68.6 75.6
DPS 1.2 0.5 0.9 1.0 1.0 0.6
Payout (%) 24.9 19.0 13.6 24.5 24.0 9.3
Valuation (x)
P/E 48.4 47.5 30.6
Cash P/E 18.7 18.0 14.7
P/BV 3.7 3.5 3.1
EV/Sales 2.8 2.6 2.4
EV/EBITDA 13.6 13.5 12.5
Dividend Yield (%) 0.5 0.2 0.4 0.4 0.4 0.3
FCF per share 10.1 4.2 12.5 6.5 15.4 7.1
Return Ratios (%)
RoE 11.1 5.7 13.4 7.8 7.5 10.8
RoCE 11.1 7.1 10.4 7.6 8.3 9.4
RoIC 11.6 7.1 8.7 7.9 8.6 9.7
Asset Turnover (x) 0.7 0.6 0.8 0.8 0.9 0.9
Inventory (Days) 97 141 136 131 114 93
Debtor (Days) 52 46 39 53 44 56
Creditor (Days) 58 67 59 60 51 51
Leverage Ratio (x)
Current Ratio 2.5 3.2 3.0 3.2 3.3 3.4
Net Debt/Equity 1.2 1.3 1.0 1.0 0.9 0.8

OP/(Loss) before Tax 511 331 981 598 532 800
Depreciation 453 491 550 642 673 691
Interest & Finance Charges 492 512 670 589 610 473
(Inc)/Dec in WC -13 -720 -360 -713 113 -233
CF from Operations 1,357 559 1,641 984 1,802 1,535
Others 9 52 -97 38 54 100
CF from Operating incl EO 1,365 611 1,544 1,022 1,856 1,635
(Inc)/Dec in FA -535 -269 -513 -486 -588 -1,053
Free Cash Flow 830 341 1,032 536 1,268 582
(Pur)/Sale of Investments 0 0 0 0 0 0
Others 9 14 335 12 23 24
CF from Investments -526 -255 -178 -473 -565 -1,029
Inc/(Dec) in Debt -252 415 -466 -37 -526 57
Interest Paid -505 -571 -692 -604 -611 -531
Dividend Paid -115 -115 -87 -48 -99 -158
Others 0 0 0 0 0 0
CF from Fin. Activity -871 -270 -1,244 -688 -1,236 -633
Inc/Dec of Cash -32 86 122 -140 55 -27
Opening Balance 101 69 155 277 137 192
Closing Balance 69 155 277 137 192 165
13 March 2018 15
Seya Industries
Company background
 Established in 1990, Seya Industries is an emerging leader in the chemical
industry. The company is engaged in the manufacture and export of pigment,
pharmaceuticals, agrochemicals and rubber chemical intermediates. While
offering many standard chemicals and specialty compounds, Seya also provides
specially modified or custom formulations.
Key takeaways
 Expansion including backward and forward integration: Seya is setting up

capacity for backward integration for ortho nitro chloro benzene (ONCB), which
will be operational from FY21. It has also incurred capex for increasing
production of mono chloro benzene (MCB) and para chloro benzene (PNCB).
Seya is also working on forward integration into ortho anisidine (OA) and fast
red B base (FRBB). The company has set up a captive fuming sulphuric acid plant
– this is because the cost for bringing the acid to its factory from Birla Copper,
along with the logistics and insurance, used to be INR6,000-6,400/MT, whereas
Birla Copper ex-factory price was only INR1,500-1,600/MT. The sulphuric acid
plant releases a lot of steam in its creation process, which is further absorbed by
the other plants. Hence, this has significantly brought down fuel & power
expenses. Backward and forward integration is expected to help the company to
reduce its operational expenses and increase profits.
 Required clearances: Approval for expansion was taken way back in 2012, but
the environmental clearance came in 2016. Post completion of the project, the
company would be getting the operating clearance after all the necessary
checks are done.
 Portfolio: Seya’s product portfolio comprises:
 3,3 dichloro benzidine, di chloro benzene, para nitro aniline – 75%
 Nitro chloro benzene – 25%
 In the future, the company expects its product portfolio to comprise:
 Current products – 45%-50%
 Ortho anisidine, fast red B base – 20%
 Sulphur-based products – 30-35%
 Energy efficiency: For the new plants, the company has a deal with Thermax to
have plant design such that only 30ppm of SOx is emitted as a pollutant
compared to the 100ppm standard in India. They have zero liquid discharge
from their plants.
 Specialty chemicals: The company is planning to move into specialty chemicals
like ortho anisidine (OA), fast red B base (FRBB) and sulphur-based products.
These products will be sold mostly to its existing clientele. There will be hardly a
10% increase in new clientele, and thus, there is very little chance of losing out
focus on the main clients.
 Currently, depreciation is around INR180m, which is expected to go up to
~INR520m post FY21, when the new plants become functional.
13 March 2018 16
Standalone - Income Statement (INR Million)
Total Income from Operations 304 593 1,377 2,532 2,949 3,320
Change (%) 37.8 95.2 132.1 83.9 16.5 12.6
Raw Materials 219 403 1,051 2,036 2,168 2,240
Employees Cost 5 12 15 17 22 29
Other Expenses 58 125 167 144 276 312
Total Expenditure 282 539 1,232 2,197 2,466 2,581
% of Sales 92.8 90.9 89.5 86.8 83.6 77.7
EBITDA 22 54 145 335 483 739
Margin (%) 7.2 9.1 10.5 13.2 16.4 22.3
Depreciation 15 35 89 106 109 139
EBIT 8 18 56 229 373 600
Other Income 3 5 15 7 18 9
PBT bef. EO Exp. 11 23 59 137 264 467
EO Items 0 0 0 0 0 0
PBT after EO Exp. 11 23 59 137 264 467
Total Tax 2 4 25 7 -3 47
Tax Rate (%) 18.9 19.1 42.8 5.0 -1.3 10.0
Reported PAT 9 18 34 130 268 421
Adjusted PAT 9 18 34 130 268 421
Change (%) 91.1 111.6 85.2 285.8 106.0 57.0
Margin (%) 2.8 3.1 2.4 5.1 9.1 12.7
Standalone - Balance Sheet

Eq. Share Warrants & App. Money 1,513 1,513 1,513 1,513 0 711
Preference Capital 0 0 0 0 1,513 1,513
Total Reserves 359 378 411 542 781 2,752
Net Worth 1,982 2,000 2,034 2,164 2,404 5,179
Total Loans 689 930 1,518 1,933 3,932 2,400
Gross Block 3,153 3,287 4,062 4,121 4,649 5,031

Less: Accum. Deprn. 320 376 465 570 678 815
Net Fixed Assets 2,833 2,911 3,598 3,551 3,971 4,216
Capital WIP 1,049 419 67 1,457 1,609 2,135
Curr. Assets, Loans&Adv. 354 1,052 1,395 1,099 1,489 1,631

Account Receivables 147 101 75 524 664 792
Loans and Advances 37 768 890 139 520 500
Curr. Liability & Prov. 1,566 1,452 1,483 1,965 693 319
Account Payables 165 100 105 4 27 48
Other Current Liabilities 1,340 1,346 1,363 1,929 588 223
Provisions 60 6 16 32 78 48
Net Current Assets -1,212 -399 -88 -866 796 1,311
Appl. of Funds 2,670 2,931 3,577 4,142 6,376 7,662
E: MOSL Estimates
13 March 2018 17
Ratios
Basic (INR)
EPS 0.4 0.9 1.7 6.4 12.4 19.9
Cash EPS 1.1 2.6 6.0 11.6 17.8 26.7
BV/Share 97.4 98.3 99.9 106.3 118.1 254.5
DPS 0.0 0.0 0.0 0.0 0.6 1.2
Payout (%) 0.0 0.0 0.0 0.0 4.9 5.8
Valuation (x)
P/E 91.5 47.1 29.3
Cash P/E 50.5 32.9 21.9
P/BV 5.5 4.9 2.3
EV/Sales 5.5 5.4 4.3
EV/EBITDA 41.3 32.8 19.3
Dividend Yield (%) 0.0 0.0 0.0 0.0 0.1 0.2
FCF per share -32.3 -9.3 -22.9 -64.5 -26.3 -34.4
Return Ratios (%)
RoE 0.4 0.9 1.7 6.2 11.7 11.1
RoCE 0.4 0.7 1.3 5.9 7.6 7.9
RoIC 0.5 0.7 1.1 7.2 12.3 14.6
Asset Turnover (x) 0.1 0.2 0.4 0.6 0.5 0.4
Inventory (Days) 164 89 70 60 35 34
Debtor (Days) 176 62 20 76 82 87
Creditor (Days) 198 61 28 1 3 5
Leverage Ratio (x)
Current Ratio 0.2 0.7 0.9 0.6 2.1 5.1
Net Debt/Equity 0.3 0.4 0.7 0.9 1.6 0.5
Standalone - Cash Flow Statement

Depreciation 15 35 89 106 109 139
Interest & Finance Charges 0 -2 1 92 125 139
Direct Taxes Paid -2 -4 0 0 0 0
(Inc)/Dec in WC 1,321 -10 -124 -191 -330 -38
CF from Operations 1,342 41 24 137 171 661
Others 2 -2 -4 0 -16 -7
CF from Operating incl EO 1,344 39 20 137 156 655
(Inc)/Dec in FA -2,001 -228 -486 -1,448 -691 -1,355
Free Cash Flow -657 -189 -466 -1,312 -536 -700
Others 0 2 4 855 -15 -15
CF from Investments -2,001 -227 -482 -594 -706 -1,370
Issue of Shares 0 0 0 0 0 1,683
Inc/(Dec) in Debt 688 189 589 403 677 -819
Interest Paid 0 -1 -12 -99 -127 -141
Dividend Paid 0 0 0 0 0 0
Others 0 3 11 7 3 0
CF from Fin. Activity 689 192 589 310 552 723
Inc/Dec of Cash 32 5 127 -147 2 7
Opening Balance 2 34 39 165 18 20
Closing Balance 34 39 165 18 20 27
13 March 2018 18
The Waterbase Company
About the company
The Waterbase Company was established in 1987 in Nellore (Andhra Pradesh) and
belongs to the Karan Chand Thappar Group. It manufactures shrimp feed for the
domestic market and exports processed shrimps.
Key takeaways
Growth opportunities
 Three potential growth areas are Feed, Hatchery, and Farm care products.
 Feed growth will come from new regions such as Gujarat, Orissa and West
Bengal within India. Outside India, Thailand is still grappling with shrimp
diseases. Thus, there is a very large potential for India’s shrimp industry to
continue growing.
 The trial run for the hatchery has commenced. 250m PL seeds hatchery will be
operational from 1QFY19.
 The company sells farm care products that enhance sustainable agricultural
practices. Its intent is to capture the entire value chain – seeds, feed, farming,
processing, and supplements (probiotic, etc.).
Expansion plans (to set-up a hatchery) and seed quality

 The company is in the process of setting up a hatchery with capacity of 500
million PL seeds; the plan will be executed in two phases of 250m PL each.
 Currently, trial run of the first phase – 250m PL – is under progress. The
hatchery (phase 1) will commence operations in 1QFY19.
 Total market size for seeds is 70b.
 On quality of seeds - excessive spawning in order to accelerate seed production
is not desirable as this could result in poor quality seeds after a point. An
average of 2,00,000 eggs is ideal, post which the shrimp should ideally be sold
for meat.
Shrimp feed – market structure, market share and feed quality

 Shrimp feed - 90% is organized market, 10% is unorganized.
 Market share in feeds is as follows: Avanti feeds – 45%, CP Foods - 25%,
Waterbase – 7%, Growell – 6-7%.
 According to management, the quality of feed available in the market from
several players is comparable; it is about the brand and ability to sell in order to
establish oneself in the market.
Other takeaways
 Shrimp prices does not affect feed price.
 North AP accounts for 45% of total AP shrimp business.
 Last two years Avanti has been in the no. 1 position, and CP no. 2 position.
 There is overcapacity in the feed business – consolidation is inevitable.
 No plans to enter fish meal business at the moment.
13 March 2018 19
Change (%) 121.2 51.8 45.3 21.6 8.0 7.3
Raw Materials 689 1,105 1,588 1,996 2,200 2,387
Employees Cost 56 67 86 109 146 163
Other Expenses 186 276 371 362 565 364
Total Expenditure 930 1,449 2,045 2,466 2,911 2,915
% of Sales 89.9 92.3 89.6 88.9 97.1 90.6
EBITDA 105 121 237 309 87 301
Margin (%) 10.1 7.7 10.4 11.1 2.9 9.4
Depreciation 25 28 18 14 37 55
EBIT 80 93 219 295 50 246
Other Income 7 6 14 19 19 19
PBT bef. EO Exp. 68 76 204 302 26 179
EO Items 0 0 0 0 0 0
PBT after EO Exp. 68 76 204 302 26 179
Total Tax 12 16 69 107 4 63
Tax Rate (%) 17.6 20.8 33.6 35.5 16.5 35.5
Reported PAT 56 60 136 195 22 115
Adjusted PAT 56 60 136 195 22 115
Change (%) 715.9 6.6 126.2 43.7 -88.8 428.9
Margin (%) 5.4 3.8 5.9 7.0 0.7 3.6

Total Reserves 285 345 481 606 746 859
Net Worth 542 602 867 992 1,132 1,245
Total Loans 203 303 141 124 529 660
Deferred Tax Liabilities -39 -10 -3 11 12 26
Capital Employed 706 896 1,004 1,126 1,673 1,931
Gross Block 542 565 575 617 635 712

Less: Accum. Deprn. 386 413 430 447 36 90
Net Fixed Assets 156 152 145 170 598 621
Capital WIP 5 4 1 9 33 30
Curr. Assets, Loans&Adv. 922 1,159 1,430 1,479 1,443 1,795

Curr. Liability & Prov. 381 424 574 532 401 515
Provisions 24 14 79 193 27 26
Net Current Assets 541 735 856 947 1,042 1,279
Appl. of Funds 706 896 1,004 1,126 1,673 1,931
13 March 2018 20
Ratios
Basic (INR)
EPS 1.5 1.6 3.5 5.1 0.6 3.0
Cash EPS 2.1 2.3 4.0 5.4 1.5 4.4
BV/Share 14.1 15.6 22.5 25.7 29.3 32.3
DPS 0.0 0.0 0.0 1.5 0.5 1.0
Payout (%) 0.0 0.0 0.0 35.0 106.4 40.2
Valuation (x)
P/E 54.4 486.9 92.1
Cash P/E 50.7 180.2 62.4
P/BV 10.7 9.4 8.5
EV/Sales 3.8 3.6 3.5
EV/EBITDA 33.8 125.7 37.1
Dividend Yield (%) 0.0 0.0 0.0 0.5 0.2 0.4
FCF per share 1.7 2.3 0.4 1.9 1.6 -4.7
Return Ratios (%)
RoE 11.1 10.5 18.5 21.0 2.1 9.7
RoCE 9.6 9.5 16.2 19.1 4.1 9.6
RoIC 11.3 11.4 19.8 24.2 3.7 10.0
Asset Turnover (x) 1.5 1.8 2.3 2.5 1.8 1.7
Inventory (Days) 111 82 78 51 44 80
Debtor (Days) 121 106 77 75 84 93
Creditor (Days) 63 46 45 34 27 38
Leverage Ratio (x)
Current Ratio 2.4 2.7 2.5 2.8 3.6 3.5
Net Debt/Equity 0.1 0.2 -0.1 -0.2 0.3 0.4

Interest & Finance Charges 2 6 -5 -16 28 73
(Inc)/Dec in WC -10 17 -123 -88 77 -378
CF from Operations 78 113 25 124 95 -112
Others 0 0 0 0 26 6
CF from Operating incl EO 78 113 25 124 120 -106
(Inc)/Dec in FA -14 -25 -8 -50 -59 -76
Free Cash Flow 64 88 17 74 61 -182
(Pur)/Sale of Investments 0 -1 0 0 1 0
Others 7 -31 14 20 17 213
CF from Investments -8 -56 6 -30 -41 136
Inc/(Dec) in Debt -52 -1 -78 -10 -62 -68
Interest Paid -9 -12 -9 -3 -43 -86
Dividend Paid 0 0 0 -34 -23 0
Others 0 0 9 -1 -3 -7
CF from Fin. Activity -50 -13 51 -48 -131 -161
Inc/Dec of Cash 20 43 82 46 -52 -130
Opening Balance 103 124 167 249 295 243
Closing Balance 124 167 249 295 243 113
13 March 2018 21
Cotton Expert
TEXTILE
Key takeaways
INDUSTRY
 India is the world’s number-1 cotton producer (share: 24.72%), number-2 cotton
consumer (share: 20.87%), and number-2 cotton exporter.
 Cotton price is likely to be firm due to fall in arrivals and availability of good
quality cotton.
 Farmers are holding good quality cotton on hopes of better prices.
 Current production in India is likely to be 36m bales versus 33.7m bales last
year.
 Yield in the current season declined due to rainfall at the time of harvesting and
impact of pink bollworm.
 Global cotton consumption is likely to take over global production.
 Cotton has also attracted lot of speculators during the season. Hedge funds are
currently bullish on cotton prices.
 A chain of hurricanes just at the time of harvesting has negatively impacted the
quantity and quality of the US crop. This has impacted delivery schedules.
 Reserve stocks in China are depleting faster than expected. The cotton sowing
area in China is also falling. However, consumption is increasing. According to
the urbanization plan published in 2012, the Chinese government wants 100m
farmers to move into metropolitan areas by 2020 and 250m farmers by 2025.
 Global cotton closing stock is at a seven-year low.
 Nuziveedu, Rasi and Kaveri Seeds are key players that have developed good
quality cotton seeds.
13 March 2018 22
Retail Dealer
About the expert: The expert is a wholesaler of undergarments. He only deals in
Dollar Industries’ products. He supplies retailers from Churchgate to Borivali and
from CST to Thane. His warehouse is in Bhiwandi. He makes 8-10% margin and the
retailer makes 35-40% profit on the distributor price.
Key takeaways
 Success of Jockey: Jockey has been a success story only due to its premium
quality products at affordable prices. India never had a premium segment in its
undergarment section. Everything was produced for the masses. Jockey broke
this trend by targeting the rising middle class. Though margins for the retailer
are lower on Jockey products, the brand pull entices retailers to sell them. They
make up for the low margins by huge volumes.
 Failure of other international brands in India: Brands like Hanes could not leave
a mark on Indian customers. This is mainly because they did not consider the
Indian body type while making their products. They sold international standard
sizes, which were too big for the average Indian man. Also, they depended on
foreign stars for advertising, which left little recall value for Indian customers.
 No price wars: Most undergarment companies are located in and around
Kolkata. The city’s guild for undergarments is strong and controls the business
rules. Prices are determined from there and the probability of price wars is low.
Also, the guild does not allow companies to provide any offers like BOGO (Buy
One Get One) to increase their sales.
 Kids and ladies sections to see growth: Earlier, there were no big brands in kid’s
innerwear. Seeing that as a potential, companies have started kidswear and it
has seen considerable growth. Also, many companies that were earlier only in
menswear have launched their ladieswear section and have seen considerable
growth in this segment, as well.
 Credit period flexibility to retain retailers: Due to intensifying competition,
distributors are using various measures to retain their retailers. Some have
increased their credit period from 30 days to 60 days, though the manufacturer
gives only 30 days’ credit to the distributor. Also, distributors have started giving
away more profit to the retailers.
13 March 2018 23
Arvind Ltd
About the company
Established in the year 1897, Arvind Limited is headquartered in Ahmedabad,
Gujarat. It is one of the pioneers of the jeans revolution in India. It is India's largest
denim manufacturer and the world’s fourth-largest denim producer and exporter. It
retails its own brands like Flying Machine, Newport and Excalibur, and licensed
international brands like Arrow and Tommy Hilfiger through its nationwide retail
network. Arvind also runs three clothing and accessories retail chains – the Arvind
Store, Unlimited and Megamart, which stock company brands.
Key takeaways
 The company is confident of maintaining 15% EBITDA margin in its textiles

division in the medium term.
 Sephora, which caters to the beauty and cosmetics segment, has broken even.
GAP is yet to break even.
 Discretionary consumer spending has been slow this year. The company has
been seeing similar trends in the fourth quarter as well.
 The company targets 100 Unlimited brand stores by this year-end and intends to
open 30 every year.
 Margin has been increasing due to higher revenue and less impact of End of
Season sales in the current year vis-à-vis last year.
 Historically, the company has not invested much in textiles, as more focus was
on brands. With brands becoming self-sufficient, a large part of the investments
will go into textiles.
 The company intends to invest INR15b in textiles and a large proportion will go
into verticalization.
 Arvind has ~150 stores and it intends to grow “The Arvind Store” franchise. All
Arvind stores are now franchisee-owned and franchisee-operated.
 Working capital challenges remain. However, the company does not intend to
increase revenue at the cost of higher working capital.
 In the branded segment, the company’s major revenue comes from Exclusive
Brand Outlets (EBO): 40-42%, wholesale: ~25%, Large Format Stores (LFS): 20-
25%, and online: 10%. In the retail segment, 90-80% is EBO and the balance 10%
is online.
 The company maintains its guidance of 15% of revenue growth and ~150bp
margin expansion in the brands business.
 Arvind is expanding its facilities and setting up a garmenting unit in Ranchi,
Research Analyst Jharkhand. Under the state textile policy, the Jharkhand government has offered
Chintan Modi significant incentives linked to job creation. The company also plans to invest in
Chintan.Modi@motilaloswal.com other regions, including Andhra Pradesh and Gujarat, and set up garmenting
Tel: + 91 22 3982 5422 units in these geographies.
13 March 2018 24
Net Sales 49,251 52,925 68,621 78,514 80,106 92,355
Change (%) 20.6 7.5 29.7 14.4 2.0 15.3
EBITDA 6,022 6,874 9,340 10,129 9,511 9,433
Margin (%) 12.2 13.0 13.6 12.9 11.9 10.2
Depreciation 1,614 2,043 2,252 2,124 2,405 2,971
EBIT 4,408 4,831 7,088 8,005 7,106 6,463
Int. and Finance Charges 3,091 3,153 3,545 3,946 3,586 2,884
Other Income - Rec. 1,185 806 694 932 821 780
PBT bef. EO Exp. 2,502 2,483 4,237 4,991 4,341 4,358
EO Expense/(Income) -2,450 0 164 543 -14 181
PBT after EO Exp. 4,953 2,483 4,073 4,448 4,354 4,178
Current Tax 622 58 163 1,060 1,059 1,350
Deferred Tax -28 -56 385 12 187 -353
Tax Rate (%) 12.0 0.1 13.4 24.1 28.6 23.9
Reported PAT 4,359 2,481 3,525 3,377 3,108 3,181
Less: Minority Interest 0 3 13 35 54 19
Net Profit 4,359 2,484 3,539 3,411 3,162 3,200
PAT Adj for EO items 2,202 2,484 3,681 3,824 3,152 3,338
Change (%) 33.6 12.8 48.2 3.9 -17.6 5.9
Margin (%) 4.5 4.7 5.4 4.9 3.9 3.6
13.71
Equity Share Capital 2,580 2,580 2,582 2,582 2,582 2,584
Total Reserves 17,738 19,959 23,248 24,656 23,882 33,098
Net Worth 20,318 22,540 25,830 27,239 26,464 35,682
Minority Interest 91 108 242 348 556 1,514
Deferred Liabilities 189 58 435 471 675 817
Total Loans 21,283 24,608 29,920 33,967 34,879 28,216
Gross Block 39,668 42,875 46,709 52,878 57,969 62,897

Less: Accum. Deprn. 13,737 15,930 17,782 20,796 23,201 26,172
Net Fixed Assets 25,932 26,945 28,927 32,082 34,768 36,726
Capital WIP 1,918 2,076 1,347 1,000 1,468 958
Total Investments 417 678 1,293 586 4,238 2,767

Inventory 11,261 14,129 16,281 18,450 19,205 23,828
Cash and Bank Balance 709 1,856 1,663 833 609 539
Provisions 1,006 891 1,078 1,290 563 575
Appl. of Funds 41,881 47,313 56,427 62,024 62,574 66,229

E: MOSL Estimates
13 March 2018 25
Ratios
Basic (INR)
EPS 16.9 9.6 13.7 13.2 12.2 12.4
Cash EPS 14.8 17.5 23.0 23.0 21.5 24.4
BV/Share 78.7 87.4 100.0 105.5 102.5 138.1
DPS 1.0 1.7 2.4 2.6 2.4 2.4
Payout (%) 6.9 20.1 20.1 23.4 24.1 23.5
Valuation (x)
P/E 41.1 28.9 30.0 32.4 32.0
Cash P/E 22.6 17.2 17.2 18.4 16.2
P/BV 4.5 4.0 3.8 3.9 2.9
EV/Sales 2.5 2.0 1.8 1.8 1.5
EV/EBITDA 19.3 14.8 14.1 15.1 14.6
Dividend Yield (%) 0.4 0.6 0.6 0.6 0.6
Return Ratios (%)
RoE 23.4 11.6 14.6 12.9 11.8 10.3
RoCE 12.2 12.7 13.1 11.6 9.2 8.8
Asset Turnover (x) 1.2 1.1 1.2 1.3 1.3 1.4
Inventory (Days) 83.5 97.4 86.6 85.8 87.5 94.2
Debtor (Days) 47 51 53 53 35 32
Creditor (Days) 83 97 86 76 86 79
Leverage Ratio (x)
Debt/Equity 1.0 1.1 1.2 1.2 1.3 0.8

NP/(Loss) Before Tax and EO Items 4,953 2,483 4,073 4,448 5,165 4,358
Depreciation 1,614 2,043 2,252 2,124 2,559 2,971
Interest & Finance Charges 2,786 3,153 3,312 3,946 3,811 2,884
Direct Taxes Paid 839 620 1,078 1,308 1,225 997
(Inc)/Dec in WC -1,874 -1,700 -4,486 -3,142 -768 -3,748
Others -3,288 -461 -191 -483 -593 -181
(inc)/dec in FA -2,324 -2,815 -3,349 -5,386 -5,551 -4,419
Free Cash Flow 1,029 2,085 534 198 3,400 869
(Pur)/Sale of Investments 136 -281 -706 -26 -70 7,400
Others 2,523 -213 -1,680 -462 644 1,935
CF from Investments 335 -3,308 -5,734 -5,874 -4,977 4,916
(Inc)/Dec in Debt -672 3,253 5,311 4,190 1,654 -6,663
Interest Paid -2,947 -3,342 -3,353 -3,976 -3,801 -2,884
Dividend Paid 0 -298 -496 -611 -784 -747
Others 52 -58 188 -148 -1,267 19
CF from Fin. Activity -3,563 -445 1,660 -541 -4,198 -10,273
Inc/Dec of Cash 124 1,147 -192 -830 -225 -69
Add: Beginning Balance 585 709 1,856 1,664 833 609
Closing Balance 709 1,856 1,664 833 609 539
E: MOSL Estimates
13 March 2018 26
Welspun
About the company
Welspun India is the largest home textiles company globally, with presence across
the bed, bath and flooring categories. It is the number-1 home textiles supplier to
the US, with a market share of 22% in towels and 11% in sheets. The US contributes
66-68% of revenue, followed by Europe (17-18%), Rest of the World (9-10%) and
India (6-7%). Welspun is a preferred supplier to 17 of the top 30 global retail giants.
Key takeaways
 Implementation of Wel-Trak: Welspun’s focus on traceability of cotton is

evident from its patented Wel-Trak process, supplemented by Oritain. The
process verifies fiber from the origin and, at every stage of production, ensures
rigorous authentication of cotton.
 Focus on innovative products: Around 36% of Welspun’s sales come from
innovative products. The company has filed 27 new inventions globally.
 According to the management, innovative products like hygro-cotton will create
stickiness with customers and entry barriers for other players.
 Impact of online sales: The management witnessed a marked level of de-
stocking for majority of its customers on the back of the shift from offline to
online; this process was significantly accelerated this year.
 Focus on brands: The management has spent a substantial amount towards
branding in India. Focus continues to be on expanding Spaces and Christy stores.
Welspun has increased the number of Christy stores in China to 36 from 24 in
the last quarter.
 Impact of government incentives: On an overall basis, collective incentives will
be neutral in comparison with pre-GST incentives.
 Focus on online sales: According to the management, the current share of
online sales stands at 15%, up significantly from 5% in 2014. Revenue
contribution from online sales stands at 2% for Welspun, which will increase,
going forward.
 FY17 – effective utilization and capacity: Effective utilization stands at 97%
(capacity: 80,000 tonnes) for Towels, 86% for Sheets (capacity: 90m meters) and
85% (capacity: 10m square meters) for Rugs.
 Planned investments: Investment of ~INR4.5b has been planned in FY18; new
flooring solutions will be the main focus area.
 Focus on sustainability: The management believes that its focus on
sustainability will help reap dividends going forward, as it will increase stickiness
with the customers.
 Operational efficiency: The company focuses on collaboration with suppliers for
lead time reduction via exclusive set-up of Welspun ancillary units.
 New markets: The company will focus on increasing presence in new markets.
US business will contribute 68% of sales, going forward.
 Non-US business is likely to account for a larger share of incremental revenue,
with Europe contributing 17-18%, followed by ROW (Japan, Middle-East,
Australia, Russia and South-Africa: 9-10%), and India (6-7%).
 New channels: The management will focus on new channels for incremental
growth. It has also tied up with leading hotel chains and wellness centers.
13 March 2018 27
Change (%) 50.1 12.7 19.9 22.2 10.8 12.1
Raw Materials 15,999 17,684 22,673 25,443 26,594 30,396
Employees Cost 3,050 2,766 3,400 4,460 5,367 6,373
Other Expenses 10,477 10,142 8,499 10,837 11,352 18,450
% of Sales 91.2 83.8 79.0 76.2 73.1 83.2
EBITDA 2,866 5,915 9,211 12,742 15,927 11,186
Margin (%) 8.8 16.2 21.0 23.8 26.9 16.8
Depreciation 1,378 1,449 6,863 3,329 3,718 5,054
EBIT 1,488 4,466 2,348 9,412 12,209 6,132
Other Income 461 492 1,042 949 905 806
PBT bef. EO Exp. 30 2,982 1,037 7,533 10,745 5,355
EO Items 0 0 0 0 0 0
PBT after EO Exp. 30 2,982 1,037 7,533 10,745 5,355
Total Tax 193 733 199 2,090 3,254 1,731
Tax Rate (%) 637.0 24.6 19.2 27.7 30.3 32.3
Minority Interest -29 0 -83 45 126 48
Reported PAT -134 2,248 921 5,398 7,365 3,576
Adjusted PAT -134 2,248 921 5,398 7,365 3,576
Change (%) -1,055.0 -1,781.6 -59.1 486.3 36.5 -51.5
Margin (%) -0.4 6.2 2.1 10.1 12.4 5.4

Equity Share Capital 890 1,000 1,004 1,005 1,005 1,005
Total Reserves 6,433 8,901 10,093 13,314 18,696 22,967
Net Worth 7,428 9,902 11,097 14,319 19,700 23,971
Total Loans 19,621 20,279 30,293 30,851 32,478 33,114
Deferred Tax Liabilities 1,502 1,917 434 641 597 1,466
Gross Block 23,547 25,401 34,213 43,148 35,363 43,768

Less: Accum. Deprn. 8,403 9,082 15,767 18,663 3,687 8,618
Net Fixed Assets 15,144 16,319 18,446 24,485 31,676 35,149
Goodwill on Consolidation 1,618 1,754 1,839 1,785 1,809 1,741
Capital WIP 1,233 542 5,324 1,564 1,832 564
Total Investments 1,205 931 1,115 1,420 285 1,257

Inventory 7,293 8,205 10,094 11,006 11,046 12,810
Cash and Bank Balance 1,482 1,724 2,332 3,252 1,243 1,628
Other Current Liabilities 1,301 1,444 3,649 4,152 2,699 3,214
Provisions 448 341 1,390 1,941 1,452 2,528
Appl. of Funds 28,802 32,347 42,141 46,189 53,188 58,907
E: MOSL Estimates
13 March 2018 28
Ratios
Basic (INR)
EPS -0.1 2.2 0.9 5.4 7.3 3.6
Cash EPS 1.2 3.7 7.7 8.7 11.0 8.6
BV/Share 7.4 9.9 11.0 14.3 19.6 23.9
DPS 0.0 0.4 0.3 1.0 1.3 0.7
Payout (%) 0.0 19.6 38.3 23.5 20.6 22.1
Valuation (x)
P/E 11.3 8.3 17.0
Cash P/E 7.0 5.5 7.1
P/BV 4.3 3.1 2.5
EV/Sales 1.7 1.6 1.4
EV/EBITDA 6.9 5.8 8.3
Dividend Yield (%) 0.0 0.6 0.5 1.7 2.1 1.1
FCF per share 2.4 0.9 -1.6 3.7 2.8 1.9
Return Ratios (%)
RoE -1.9 25.9 8.8 42.5 43.3 16.4
RoCE -40.9 13.1 7.7 17.3 18.8 8.6
RoIC -32.7 12.5 6.1 18.6 18.9 7.9
Asset Turnover (x) 1.1 1.1 1.0 1.2 1.1 1.1
Inventory (Days) 82 82 84 75 68 70
Debtor (Days) 28 27 34 30 52 53
Creditor (Days) 54 44 38 32 46 44
Leverage Ratio (x)
Current Ratio 2.5 3.1 2.6 2.6 2.5 2.5
Net Debt/Equity 2.3 1.8 2.4 1.8 1.6 1.3

OP/(Loss) before Tax 826 3,013 1,037 7,533 10,745 5,355
Depreciation 1,378 1,449 6,863 3,329 3,718 5,054
Direct Taxes Paid -527 -420 -309 -1,768 -2,393 -1,067
(Inc)/Dec in WC 653 -1,928 -3,974 -2,252 -530 -1,522
Others 168 -213 -228 -23 -400 -769
(Inc)/Dec in FA -1,787 -2,756 -7,163 -5,672 -10,478 -6,435
Free Cash Flow 2,386 953 -1,653 3,719 2,801 1,887
(Pur)/Sale of Investments -301 849 -2,459 -362 925 -790
Others 1,241 -57 519 813 462 278
CF from Investments -847 -1,963 -9,102 -5,221 -9,091 -6,947
Issue of Shares 1 19 11 1,004 1,201 0
Inc/(Dec) in Debt -331 635 6,968 -527 -2,797 317
Interest Paid -1,904 -1,979 -2,576 -3,127 -2,573 -1,253
Dividend Paid 0 -178 -203 -599 -2,028 -53
Others 0 0 0 0 0 0
CF from Fin. Activity -2,234 -1,502 4,201 -3,249 -6,198 -990
Inc/Dec of Cash 1,093 243 608 920 -2,009 385
Opening Balance 389 1,482 1,724 2,332 3,252 1,243
Closing Balance 1,482 1,724 2,332 3,252 1,243 1,628
13 March 2018 29
Raymond
Company background
Raymond is a diversified group, having businesses across textiles, apparel,
garmenting, denim, FMCG, engineering of auto components, and tools & hardware.
Key takeaways
Textiles business
 The domestic menswear fabric market is INR230b-240b, of which INR100b-110b
is suiting fabrics and INR130b-140b is shirting fabrics. About 40% of the
menswear fabric market is estimated to be organized. Long-term growth for the
industry is expected to be in mid-single digits.
 Raymond is strongly positioned in the textile industry, with near-100% brand
recall, and is among the most trusted brands in India. It is the number-1 player
in worsted suiting fabrics in India, one of the world’s largest manufacturers of
worsted suiting fabric, and a manufacturer of the world’s finest fabric: Super
250s. It has a wide product portfolio (20,000+ SKUs), extensive price range
(INR300/meter to INR300,000/meter), and a large distribution network (~20,000
POS across 600 cities and towns, 170+ wholesalers, 1,450+ MBOs, and +800 The
Raymond Shops). Its unique tailoring propositions of Custom Tailoring, Made to
Measure and Online Tailoring further strengthen its competitive advantage.
 Its strategy is to continue product & service innovations, asset light network
expansion, and market & category expansion, while at the same time sustaining
margins. The increase in wool price is being mitigated mainly by improving
product mix, combination of spot buys and hedging, and strategic relationships
with 4-5 vendors.
 Raymond continues product innovation through expansion of its Techno series
(such as Technosmart and Technostretch), supported by service innovations in
tailoring. This along with opening of franchisee-based tailoring hubs (20 hubs
opened by December 2017), which facilitate quality tailoring, will enlarge the
tailoring community’s capacities and capabilities. The company intends to drive
growth by further increasing channel penetration in tier 3-5 towns via 100%
franchisee-based mini-TRS (53 stores opened by December 2017). The target is
to open 300 mini TRS in two years.
 In 3QFY18, Raymond Branded Textiles grew 18% (excluding GST impact), with
16% growth in suiting and 28% growth in shirting. Wedding season and recovery
in wholesale channel post GST stabilization drove revenue growth while EBITDA
margin expanded 2.3% largely on strong sales growth and reduction in
discretionary expenses.
 In 4Q, at the retail sector level, consumer sentiment was relatively low in the
beginning of January. However, it has gradually picked up with the continuation
of EOSS period (in apparel sector). Also, with the restarting of wedding season
from mid-January, the trade channels are expected to be in growth phase. At
the overall quarter level, the growth momentum is expected to continue.
13 March 2018 30
Other segments
 Raymond Branded Apparel has been growing at 15% QoQ for the past couple of
years.
 It also enhanced its capacities in B2B garmenting by setting up a garmenting
plant in Ethiopia (inaugurated in 1QFY18) and in B2B shirting through its linen
plant in Amravati (inaugurated in 3QFY18).
 Engineering segments: Auto Components continues to maintain profitable
growth. Transformation is underway in the Tools & Hardware segment.
 In FMCG, the strategic focus areas are: category expansion, channel-specific
focus, and leveraging the Raymond brand. Recently, it acquired JV partner’s
stake in the Kamasutra brand. Also, it recently revitalized the male grooming
products portfolio, with the launch of One Park Avenue.
 On the real estate front, Raymond is in the process of securing regulatory
approvals and has a top management team in place.
13 March 2018 31
Change (%) 22.2 11.6 10.6 17.3 -4.1 4.1
Raw Materials 13,335 15,808 17,975 23,345 21,954 23,575
Employees Cost 4,754 5,745 5,656 6,663 6,921 7,535
Other Expenses 14,704 16,843 17,981 19,766 19,373 19,856
% of Sales 87.8 92.2 90.4 92.2 93.2 94.5
EBITDA 4,536 3,249 4,444 4,232 3,520 2,947
Margin (%) 12.2 7.8 9.6 7.8 6.8 5.5
Depreciation 1,658 1,890 1,958 1,619 1,589 1,569
EBIT 2,878 1,358 2,486 2,613 1,931 1,378
Other Income 817 915 729 988 1,287 921
PBT bef. EO Exp. 2,044 367 1,246 1,597 1,321 519
PBT after EO Exp. 2,044 367 1,246 1,597 1,321 519
Total Tax 614 250 298 439 465 218
Tax Rate (%) 30.0 68.0 23.9 27.5 35.2 42.1
Minority Interest -128 -170 -128 31 7 45
Reported PAT 1,558 287 1,076 1,128 848 255
Adjusted PAT 1,558 287 1,076 1,128 848 255
Change (%) 190.0 -81.6 274.6 4.8 -24.8 -69.9
Margin (%) 4.2 0.7 2.3 2.1 1.6 0.5

Total Reserves 13,010 13,175 14,048 14,800 16,110 16,118
Net Worth 13,623 13,789 14,661 15,414 16,724 16,731
Total Loans 17,466 17,532 19,006 18,810 20,627 21,398
Deferred Tax Liabilities -20 -6 -46 59 -601 -717
Gross Block 27,005 28,190 29,683 31,110 13,199 14,699

Less: Accum. Deprn. 13,623 15,223 17,220 18,466 1,569 3,127
Net Fixed Assets 13,382 12,967 12,464 12,644 11,630 11,572
Capital WIP 1,260 1,743 1,740 1,958 2,403 4,122
Total Investments 5,084 5,241 5,147 4,270 6,093 6,405

Inventory 9,171 9,477 10,925 11,578 11,733 12,887
Cash and Bank Balance 339 381 810 1,293 903 697
Other Current Liabilities 3,535 4,334 3,162 3,715 4,572 4,630
Provisions 899 616 760 754 513 622
Appl. of Funds 31,210 31,439 34,327 35,008 37,398 38,105
13 March 2018 32
Ratios
Basic (INR)
EPS 25.4 4.7 17.5 18.4 13.8 4.2
Cash EPS 52.4 35.5 49.4 44.8 39.7 29.7
BV/Share 222.0 224.6 238.9 251.1 272.5 272.6
DPS 2.5 1.0 2.0 3.0 3.0 3.0
Payout (%) 11.4 24.9 13.4 19.7 25.7 86.8
Valuation (x)
P/E 49.1 65.4 217.0
Cash P/E 20.2 22.7 30.4
P/BV 3.6 3.3 3.3
EV/Sales 1.4 1.5 1.4
EV/EBITDA 17.2 21.4 25.8
Dividend Yield (%) 0.3 0.1 0.2 0.3 0.3 0.3
FCF per share 1.5 20.5 12.1 25.5 15.5 10.8
Return Ratios (%)
RoE 12.1 2.1 7.6 7.5 5.3 1.5
RoCE 8.7 2.3 7.5 7.7 5.8 3.5
RoIC 8.7 1.8 7.5 7.0 4.5 2.9
Asset Turnover (x) 1.2 1.3 1.3 1.5 1.4 1.4
Inventory (Days) 90 83 87 78 83 87
Debtor (Days) 62 65 67 62 74 71
Creditor (Days) 41 46 47 47 42 56
Leverage Ratio (x)
Current Ratio 2.3 2.1 2.5 2.4 2.6 2.2
Net Debt/Equity 0.9 0.9 0.9 0.9 0.8 0.9

OP/(Loss) before Tax 2,044 656 1,600 1,597 1,673 619
Depreciation 1,658 1,890 1,958 1,619 1,589 1,569
(Inc)/Dec in WC -2,096 -2 -2,599 -205 -489 638
Others -422 -718 -403 -279 -395 -135
(Inc)/Dec in FA -2,229 -2,000 -1,176 -2,238 -2,222 -2,779
Free Cash Flow 90 1,257 742 1,562 949 664
(Pur)/Sale of Investments 184 187 479 502 -392 -53
Others 65 204 395 918 233 399
CF from Investments -1,979 -1,609 -302 -817 -2,381 -2,433
Inc/(Dec) in Debt 1,261 307 812 -245 879 945
Interest Paid -1,516 -1,759 -1,936 -2,132 -1,875 -1,979
Dividend Paid -61 -154 -63 -123 -183 -182
Others 0 0 0 0 0 0
CF from Fin. Activity -317 -1,606 -1,187 -2,500 -1,179 -1,216
Inc/Dec of Cash 23 42 429 483 -389 -206
Opening Balance 316 339 381 810 1,293 903
Closing Balance 339 381 810 1,293 903 697
13 March 2018 33
Trident
Company background
 Trident is one of the largest integrated home textile producers in the world and
also manufactures wheat straw-based paper. The company has the largest terry
towel capacity in India (90,288 tonnes). Trident has been operating in terry
towel business for more than a decade and has long-standing relationships with
clients such as Wal-Mart, JC Penny, Target and IKEA.
Key takeaways
Bed and bath linen business

 Due to the uneven procurement cycle and destocking by some of the large
customers in the US, industry volumes came under pressure in 2QFY18. The
trend continued in 3QFY18 as well.
 Destocking has been happening due to an increasing proportion of online sales
in the mid- and high-end segment.
 Bed linen volumes increased 44% YoY, while bath linen volumes declined 12%
YoY in 9MFY18.
 Average capacity utilization in 9MFY18 stood at 45% in the bath linen business
and 42% in the bed linen business. The company guided for 50% utilization in
the current quarter.
 Management believes that mature businesses like towels are majorly impacted
by destocking.
Paper business
 Revenue remained flat YoY, despite a 7% increase in sales volume, primarily due
to a change in the product mix. 9MFY18 copier paper sales stood at 48%, as
against 52% for the full-year FY17.
 9M average capacity utilization stood at 89%.
Focus on the domestic market

 The domestic business grew at 45-46% YoY in 9MFY18, albeit off a low base.
 The company has a domestic market share is ~7-9%. The company operates
~450 multi-brand outlets, and its presence across the e-commerce channels is
expected to further boost to its overall domestic share.
 Online sellers will be able to manage their e-commerce ecosystem seamlessly in
terms of order flow, physical product flow and information flow.
13 March 2018 34
Change (%) 8.7 22.1 15.9 -2.8 -2.4 27.8
Raw Materials 16,256 18,415 20,521 19,309 17,286 22,916
Employees Cost 2,015 2,379 2,870 3,872 4,295 5,794
Excise Duty 455 494
Other Expenses 6,345 7,379 8,429 8,230 7,778 9,351
% of Sales 89.1 83.5 81.4 82.6 80.3 81.3
EBITDA 3,001 5,553 7,276 6,608 7,297 8,882
Margin (%) 10.9 16.5 18.6 17.4 19.7 18.7
Depreciation 2,075 2,614 2,684 3,213 3,366 4,125
EBIT 925 2,939 4,592 3,395 3,931 4,757
Other Income 202 224 163 345 334 1,035
PBT bef. EO Exp. -591 811 2,652 1,680 2,813 4,382
EO Items 0 0 0 0 0 0
PBT after EO Exp. -591 811 2,652 1,680 2,813 4,382
Total Tax -153 318 681 501 392 1,016
Tax Rate (%) 26.0 39.2 25.7 29.8 13.9 23.2
Minority Interest -3 0 30 0 0 -7
Reported PAT -435 493 1,940 1,179 2,421 3,372
Adjusted PAT -435 493 1,940 1,179 2,421 3,372
Change (%) -164.8 -213.4 293.5 -39.3 105.4 39.3
Margin (%) -1.6 1.5 5.0 3.1 6.5 7.1

Equity Share Capital 3,058 3,108 3,111 5,086 5,094 5,096
Total Reserves 3,425 3,953 5,737 9,467 19,267 22,473
Net Worth 6,504 7,061 9,278 14,554 24,361 27,568
Total Loans 22,837 22,398 18,623 25,801 36,592 29,733
Deferred Tax Liabilities 760 1,070 1,082 1,242 1,582 1,655
Gross Block 33,323 34,056 34,858 48,688 70,389 71,122
Less: Accum. Deprn. 11,843 14,374 16,902 20,049 23,415 27,540
Net Fixed Assets 21,480 19,682 17,956 28,639 46,974 43,582
Capital WIP 64 281 363 2,219 571 1,098
Total Investments 555 639 1,152 309 723 1,054
Inventory 5,204 6,911 6,429 7,508 9,065 7,747
Cash and Bank Balance 230 336 250 170 819 1,326
Provisions 49 71 239 450 148 217
Appl. of Funds 30,101 30,530 28,983 41,597 62,535 58,956
13 March 2018 35
Ratios
Basic (INR)
EPS -0.9 1.0 3.8 2.3 4.8 6.6
Cash EPS 3.2 6.1 9.1 8.6 11.4 14.7
BV/Share 12.8 13.9 18.2 28.6 47.8 54.1
DPS 0.0 0.0 0.3 0.6 0.9 1.2
Payout (%) 0.0 0.0 8.1 28.9 22.6 22.6
Valuation (x)
P/E 28.9 14.1 10.1
Cash P/E 7.8 5.9 4.5
P/BV 2.3 1.4 1.2
EV/Sales 1.6 1.9 1.3
EV/EBITDA 9.0 9.6 7.0
Dividend Yield (%) 0.0 0.0 0.4 0.8 1.3 1.9
FCF per share -3.8 5.9 12.0 7.2 -11.6 18.0
Return Ratios (%)
RoE -7.4 7.3 23.7 9.9 12.4 13.0
RoCE 3.1 6.5 12.3 7.7 7.2 7.5
RoIC 2.6 6.1 12.1 7.2 6.8 6.3
Asset Turnover (x) 0.9 1.1 1.3 0.9 0.6 0.8
Inventory (Days) 69 75 60 72 89 60
Debtor (Days) 25 25 25 20 25 29
Creditor (Days) 22 16 22 24 22 18
Leverage Ratio (x)
Current Ratio 4.1 5.2 4.4 4.0 6.2 5.5
Net Debt/Equity 3.4 3.0 1.9 1.7 1.4 1.0

OP/(Loss) before Tax -591 811 2,652 1,680 2,766 4,382
Depreciation 2,075 2,614 2,684 3,213 3,376 4,125
Direct Taxes Paid -39 -113 -584 -347 -600 -1,016
(Inc)/Dec in WC 1,060 -1,767 435 -977 -1,424 1,550
Others -29 -53 255 -68 -60 0
(Inc)/Dec in FA -6,095 -797 -1,345 -1,789 -11,214 -1,259
Free Cash Flow -1,935 3,005 6,123 3,652 -5,926 9,192
(Pur)/Sale of Investments -92 -83 -411 192 -250 -331
Others 83 37 -58 396 132 668
CF from Investments -6,105 -844 -1,814 -1,200 -11,332 -922
Issue of Shares 512 64 433 187 611 2
Inc/(Dec) in Debt 3,655 -555 -4,062 -1,966 7,809 -6,859
Interest Paid -1,705 -2,362 -2,106 -2,056 -1,367 -1,410
Dividend Paid -323 0 -5 -486 -360 -761
Others -32 0 0 0 0 7
CF from Fin. Activity 2,107 -2,853 -5,740 -4,321 6,694 -9,022
Inc/Dec of Cash 163 105 -86 -80 649 507
Opening Balance 67 230 336 250 170 819
Closing Balance 230 336 250 170 819 1,327
13 March 2018 36
Himatsingka
Company background
The Himatsingka Group is a vertically integrated home textile major, with a global
footprint. The group focuses on the manufacture, retail and distribution of home
textile products. On the manufacturing front, the group operates among the largest
capacities in the world for producing upholstery fabrics, drapery fabrics and bed
linen products. Spread across Asia, Europe and North America, its retail and
wholesale distribution divisions carry some of the most prestigious brands in the
home textile space and cater to private label programs of major retailers across
these geographies.
Key takeaways
Branded sales – a key focus area

 Revenues from the branded segment stood at INR11b in 9MFY18, as against
INR12b for the full-year FY17.
 The company has increased its focus on branded sales, given that they have the
potential to enhance quality/sustainability of revenues and boost relative
pricing power. Management intends to increase the share of own brands in
overall sales to 75% from 50% currently.
 The distribution business is mainly driven by licensed brands such as Calvin
Klein, Kate spade and Barbara Barry, and own brands such as Pimacott,
Homegrown Cotton, Oganicott, Bellora and Atmosphere.
 Himatsingka charges a premium of 25-30% versus peers on the same thread
count.
Emphasis on traceability of cotton

 The company successfully launched Pimacott – a credible cotton track and trace
technology – in FY17.
 Himatsingka introduced a DNA-tagging technology to ensure authentication of
cotton.
Market updates
 Government has increased ROSL rates on cotton made-ups by 70bp to 2.2%,
effective 1 October 2017.
 The Merchandise Exports from India Scheme (MEIS) rate has been increased
from 2% to 4%.
 On an overall basis, collective incentives will be neutral in comparison to pre-
GST incentives.
Other highlights
 The company has planned a capex of INR12.81b for brownfield expansion (twice
the current capacity of 23 million meters) of sheeting facility, spinning plant
(commenced operations in February 2018) and construction of terry facility
(annual capacity 25,000 tonnes per annum).
 Focus on increasing non-US revenue share to over 40%. The major focus will be
on European region through FY20.
13 March 2018 37
Change (%) 15.9 18.3 20.2 -4.2 -2.8 13.1
Raw Materials 9,076 11,006 13,192 12,512 11,242 12,267
Employees Cost 1,522 1,730 2,019 2,000 1,869 2,048
Other Expenses 2,242 2,580 3,101 2,943 2,848 3,292
% of Sales 89.9 90.7 90.2 89.7 84.4 82.3
EBITDA 1,447 1,578 2,000 2,007 2,954 3,777
Margin (%) 10.1 9.3 9.8 10.3 15.6 17.7
Depreciation 556 522 544 446 665 580
EBIT 891 1,057 1,457 1,560 2,289 3,197
Other Income 29 90 47 209 187 132
PBT bef. EO Exp. 392 494 676 915 1,541 2,394
EO Items 55 24 -41 0 0 0
PBT after EO Exp. 448 517 634 915 1,541 2,394
Total Tax 108 -12 89 -30 289 573
Tax Rate (%) 24.2 -2.3 14.1 -3.3 18.7 23.9
Minority Interest 9 -44 -88 -9 0 0
Reported PAT 331 573 633 954 1,253 1,821
Adjusted PAT 289 549 669 954 1,253 1,821
Change (%) -274.1 90.3 21.8 42.7 31.2 45.4
Margin (%) 2.0 3.3 3.3 4.9 6.6 8.5

Total Reserves 5,192 5,864 6,958 7,557 8,405 10,180
Net Worth 5,685 6,356 7,450 8,049 8,897 10,673
Minority Interest 3 -200 -332 0 0 0
Total Loans 6,984 7,030 8,047 7,562 10,070 14,073
Deferred Tax Liabilities 112 65 155 128 -687 -365
Gross Block 9,024 9,119 9,534 9,461 14,676 17,226

Less: Accum. Deprn. 4,189 4,590 5,153 5,274 7,612 7,971
Net Fixed Assets 4,835 4,529 4,382 4,187 7,064 9,255
Goodwill on Consolidation 4,350 5,365 6,055 6,396 3,526 3,414
Capital WIP 89 60 109 463 437 1,129

Inventory 4,270 4,075 6,383 5,543 5,842 7,539
Cash and Bank Balance 84 290 266 264 1,221 2,036
Loans and Advances 853 951 1,734 1,922 2,577 4,409
Other Current Liabilities 241 230 247 230 555 1,042
Provisions 350 256 359 554 454 264
Appl. of Funds 12,783 13,251 15,321 15,739 18,280 24,381
E: MOSL Estimates
13 March 2018 38
Ratios
Basic (INR)
EPS 2.9 5.6 6.8 9.7 12.7 18.5
Cash EPS 8.6 10.9 12.3 14.2 19.5 24.4
BV/Share 57.7 64.6 75.7 81.7 90.4 108.4
DPS 0.5 1.0 1.5 2.0 2.5 2.5
Payout (%) 17.3 20.1 27.3 24.9 23.8 16.3
Valuation (x)
P/E 34.4 26.2 18.0
Cash P/E 23.4 17.1 13.7
P/BV 4.1 3.7 3.1
EV/Sales 2.1 2.2 2.1
EV/EBITDA 20.0 14.1 11.9
Dividend Yield (%) 0.1 0.3 0.4 0.6 0.7 0.7
FCF per share 13.8 19.0 0.8 24.2 5.4 -22.5
Return Ratios (%)
RoE 5.3 9.1 9.7 12.3 14.8 18.6
RoCE 5.5 9.0 9.0 11.8 11.6 11.6
RoIC 5.4 8.5 9.0 10.8 11.8 12.9
Asset Turnover (x) 1.1 1.3 1.3 1.2 1.0 0.9
Inventory (Days) 109 88 115 104 113 129
Debtor (Days) 21 15 2 10 12 12
Creditor (Days) 52 48 56 52 38 47
Leverage Ratio (x)
Current Ratio 2.3 2.2 2.3 2.3 3.4 3.6
Net Debt/Equity 1.2 1.1 1.0 0.9 1.0 1.1

OP/(Loss) before Tax 448 518 634 915 1,253 1,821
Depreciation 556 522 544 446 665 580
(Inc)/Dec in WC -183 327 -1,413 261 -970 -1,365
CF from Operations 1,281 1,976 498 2,335 1,547 1,382
Others -99 32 -11 -53 263 474
CF from Operating incl EO 1,181 2,008 487 2,283 1,810 1,857
(Inc)/Dec in FA 178 -141 -412 100 -1,277 -4,076
Free Cash Flow 1,359 1,867 75 2,383 534 -2,220
(Pur)/Sale of Investments -20 106 8 9 25 67
Others -27 -929 6 -814 141 13
CF from Investments 131 -964 -398 -705 -1,111 -3,996
Inc/(Dec) in Debt -594 -788 853 -455 1,594 4,199
Interest Paid -714 0 -867 -976 -980 -1,067
Dividend Paid -21 -50 -99 -149 -356 -178
Others 0 0 0 0 0 0
CF from Fin. Activity -1,328 -838 -113 -1,579 258 2,955
Inc/Dec of Cash -16 206 -24 -2 957 815
Opening Balance 100 84 290 266 264 1,221
Closing Balance 84 290 266 264 1,221 2,036
13 March 2018 39
Kewal Kiran Clothing
Company background
 Incorporated in 1981 and headquarted in Mumbai, Kewal Kiran Clothing Limited
is among the few large branded apparel manufacturers in India. The company
has consumers in Asia, the Middle East and CIS. The company designs,
manufactures and markets branded jeans, as well as a wide range of apparel
products for men and women. Killer, Easies, LawmanPg3 and Integriti are its
iconic apparel brands.
Key takeaways
 Kewal Kiran witnessed ~4% YoY growth in the Jeans category, which accounts
for >65% of the company’s total product portfolio.
 The company’s profitability remained stable even amid demonetization- and
GST-related issues.
 It sells mostly to distributors, and a small percentage of sales go as
consignments to national chains.
 E-commerce wave: E-com sites are in popular culture these days for readymade
apparel. These e-com companies have been promoting themselves using the
discount model, which is extremely disruptive in nature and expected to be
detrimental to the industry in the long run. Kewal Kiran does not support the
discount model to gain popularity, but provides discounts during the festive
season. Such discounts are on old pieces, which anyways need to be cleared
before pushing newer inventory to the stores.
 Tax issues: In spite of the input tax credit benefit introduced by the
government, the company has ended up paying more tax post GST. Also, it was
not possible for Kewal Kiran to pass on the entire load to the customers. Thus,
to maintain profitability, it had to push up volumes.
 Strategy: Kewal Kiran is not looking for expansion into newer domains, as it
believes that the company is too small at the moment. Management believes
that for successful expansion, a minimum of INR100b of investment is needed,
which the company is not willing to shell out as of today.
 Promotion of casual wear: With corporates (IT Industry, BPOs, startups, etc.)
promoting more of casual wear to offices, demand for casual wear clothing is
expected to increase at a healthy rate in the near future. The company wishes to
capitalize on the same and is looking to promote more of its casual wear
segment.
 The company is expecting growth of 12-15% both in jeans and casual categories
over the coming five years.
13 March 2018 40
Change (%) 37.4 -1.3 16.3 11.3 12.2 10.0
Raw Materials 1,129 1,067 1,269 1,790 1,955 2,021
Employees Cost 292 341 383 453 511 596
Other Expenses 1,106 1,075 1,158 959 1,172 1,532
% of Sales 77.5 77.1 75.0 76.8 77.8 80.6
EBITDA 734 736 934 965 1,040 996
Margin (%) 22.5 22.9 25.0 23.2 22.2 19.4
EBIT 671 677 883 928 999 948
Other Income 118 122 118 80 70 286
PBT bef. EO Exp. 763 772 971 981 1,035 1,182
EO Items 0 0 0 0 0 0
PBT after EO Exp. 763 772 971 981 1,035 1,182
Total Tax 242 239 301 318 356 329
Tax Rate (%) 31.7 30.9 31.0 32.5 34.4 27.8
Reported PAT 521 534 670 662 680 853
Adjusted PAT 521 534 670 662 680 853
Change (%) 12.8 2.4 25.6 -1.2 2.6 25.5
Margin (%) 16.0 16.6 17.9 15.9 14.5 16.6

Total Reserves 2,132 2,415 2,783 3,075 2,864 3,457
Net Worth 2,256 2,539 2,906 3,198 2,987 3,581
Total Loans 149 141 119 114 289 405
Deferred Tax Liabilities -17 -20 -18 -12 -5 5
Gross Block 745 788 816 962 1,043 1,139

Less: Accum. Deprn. 311 353 390 422 443 472
Net Fixed Assets 434 436 427 540 600 667
Capital WIP 9 7 0 43 26 73
Total Investments 316 1,216 1,667 1,781 1,615 1,902

Account Receivables 505 479 637 774 1,090 1,062
Cash and Bank Balance 1,016 608 342 432 212 642
Curr. Liability & Prov. 448 565 681 793 962 965
Provisions 151 171 242 208 185 214
Net Current Assets 1,628 1,001 913 937 1,031 1,349
Appl. of Funds 2,387 2,660 3,007 3,300 3,272 3,990
E: MOSL Estimates
13 March 2018 41
Ratios
Basic (INR)
EPS 42.3 43.3 54.4 53.7 55.1 69.2
Cash EPS 47.3 48.1 58.5 56.8 58.5 73.1
BV/Share 182.9 205.9 235.7 259.4 242.3 290.4
DPS 17.0 17.5 21.0 25.0 60.0 17.5
Payout (%) 46.7 47.0 45.2 55.4 131.0 30.4
Valuation (x)
P/E 29.0 28.3 22.5
Cash P/E 27.5 26.7 21.4
P/BV 6.0 6.4 5.4
EV/Sales 4.5 4.1 3.7
EV/EBITDA 19.6 18.6 19.1
Dividend Yield (%) 1.1 1.1 1.3 1.6 3.8 1.1
FCF per share 23.7 48.8 31.8 45.1 28.9 54.1
Return Ratios (%)
RoE 24.6 22.3 24.6 21.7 22.0 26.0
RoCE 24.3 21.7 24.2 21.5 21.3 24.5
RoIC 50.4 49.9 66.7 61.3 53.2 49.0
Asset Turnover (x) 1.4 1.2 1.2 1.3 1.4 1.3
Inventory (Days) 36 38 47 35 43 36
Debtor (Days) 57 54 62 68 85 75
Creditor (Days) 18 26 27 27 37 28
Leverage Ratio (x)
Current Ratio 4.6 2.8 2.3 2.2 2.1 2.4
Net Debt/Equity -0.5 -0.7 -0.7 -0.7 -0.5 -0.6

OP/(Loss) before Tax 763 773 971 981 1,035 1,182
Interest & Finance Charges -72 -46 13 15 24 44
(Inc)/Dec in WC -134 151 -247 121 -252 92
CF from Operations 375 709 517 835 530 1,071
Others -6 -47 -95 -82 -61 -260
CF from Operating incl EO 369 662 422 753 469 811
(Inc)/Dec in FA -77 -61 -30 -197 -113 -143
Free Cash Flow 292 601 392 556 356 667
(Pur)/Sale of Investments -124 -875 -374 -75 200 -33
Others 66 148 29 31 13 4
CF from Investments -135 -788 -374 -242 100 -172
Inc/(Dec) in Debt 92 -8 0 -5 175 116
Interest Paid -21 -24 -25 -22 -29 -44
Dividend Paid -329 -251 -267 -394 -935 -282
Others 0 0 -22 0 0 0
CF from Fin. Activity -258 -282 -314 -422 -789 -209
Inc/Dec of Cash -23 -408 -266 90 -219 430
Opening Balance 1,039 1,016 608 342 432 212
Closing Balance 1,016 608 342 432 212 642
13 March 2018 42
S P Apparels Ltd
About the company
S.P. Apparels (SPAL) is India’s leading manufacturer and exporter of infant &
children garments (knitwear segment) in the 0-8 years category to the UK’s marquee
retailers Tesco, Primark, ASDA, Mothercare and Dunnes. Incremental orders from
fast-growing clients and expansion to new geographies (the US) are expected to
drive sustained revenue growth. SPAL is a differentiated children’s wear exporter, as
it manufactures design-specific medium-sized orders and has realisations almost 3x
that of competitors.
Key takeaways
 S P Apparels expects its revenues to grow 15%, led by an increase in utilization

and capacity addition. It also expects 18-20% EBITDA margin, going ahead.
 Domestic retail brand Crocodile delivered 88% YoY growth in 3QFY18 on a low
small base, with an EBITDA margin of 14% .
 The company’s current capacity stands at 4,200 machines, with close to 80%
utilization. S P Apparels is in the process to add 350 machines in a phased
manner.
 S P Apparels currently has seven customers, and it will be adding three new
customers by end-April, of which two are based out of the US. The company
intends to maintain diversification in terms of customers as well as product mix,
going ahead. Reducing currency, customer and geographical risks would be one
of the company’s agenda, going ahead.
 Around 80% of its workforce comprises women from the villages residing in the
nearby areas of factories. Absenteeism among its workers is one of the key
issues faced by the company and they have been addressing the same by
educating workers on that front.
 One sewing machine can generate INR1.5m of revenue per annum.
 The company hedges 80% of its forex exposure.
13 March 2018 43
Change (%) NA 6.9 5.2 4.8 12.8 19.3
Raw Materials 1,506 1,700 2,069 2,063 2,042 2,543
Employees Cost 745 786 761 1,000 1,211 1,473
Other Expenses 1,154 1,249 1,040 975 1,390 1,268
% of Sales 85.0 87.2 85.8 85.4 87.2 83.1
EBITDA 602 550 639 689 685 1,073
Margin (%) 15.0 12.8 14.2 14.6 12.8 16.9
Depreciation 163 169 176 200 201 208
EBIT 439 381 463 489 484 866
Other Income 10 4 12 67 49 210
PBT bef. EO Exp. 46 41 119 244 280 941
EO Items 0 0 0 0 0 0
PBT after EO Exp. 46 41 119 244 280 941
Total Tax -45 21 54 148 94 335
Tax Rate (%) -96.7 51.1 45.6 60.5 33.4 35.6
Minority Interest -7 -3 -2 -4 -2 -13
Reported PAT 97 23 67 100 188 619
Adjusted PAT 97 23 67 100 188 619
Change (%) NA -75.9 185.5 50.0 88.0 228.5
Margin (%) 2.4 0.5 1.5 2.1 3.5 9.7

Eq. Share Warrants & App. Money 0 0 0 0 0 0
Preference Capital 200 200 273 273 200 200
Total Reserves 413 437 503 593 956 3,451
Net Worth 781 805 944 1,033 1,327 3,903
Minority Interest -44 -48 -50 -53 -59 -72
Total Loans 3,925 3,596 3,312 2,763 2,594 1,660
Gross Block 3,678 4,011 4,028 4,125 4,313 4,713

Less: Accum. Deprn. 901 1,059 1,221 1,411 1,642 1,841
Net Fixed Assets 2,777 2,952 2,808 2,714 2,671 2,872
Capital WIP 265 0 0 0 36 0

Inventory 1,229 1,257 1,253 1,073 1,275 1,024
Account Receivables 568 509 542 743 816 1,343
Curr. Liability & Prov. 630 831 874 1,137 1,379 946
Account Payables 540 623 744 980 1,186 817
Provisions 36 27 41 104 145 87
Appl. of Funds 4,764 4,475 4,379 4,060 4,234 5,889
13 March 2018 44
Ratios
Basic (INR)
EPS 3.9 0.9 2.7 3.7 5.7 23.8
Cash EPS 10.3 7.6 9.7 11.7 13.7 32.0
BV/Share 31.0 32.0 37.5 41.1 52.7 155.0
DPS 0.0 0.0 0.0 0.0 0.0 0.0
Payout (%) 0.0 0.0 0.0 1.3 4.8 0.7
Valuation (x)
P/E 97.5 63.3 15.3
Cash P/E 31.1 26.4 11.3
P/BV 8.8 6.9 2.3
EV/Sales 2.5 2.2 1.6
EV/EBITDA 17.2 17.0 9.7
Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0 0.0
FCF per share 7.3 27.6 20.7 27.2 19.8 17.6
Return Ratios (%)
RoE 12.4 3.0 7.6 10.1 16.0 23.7
RoCE NA 4.1 6.0 5.5 9.2 14.6
RoIC NA 4.4 6.2 5.0 7.7 12.6
Asset Turnover (x) 0.8 1.0 1.0 1.2 1.3 1.1
Inventory (Days) 112 107 101 83 87 59
Debtor (Days) 52 43 44 57 56 77
Creditor (Days) 49 53 60 76 81 47
Leverage Ratio (x)
Current Ratio 3.7 2.8 2.7 2.1 2.0 3.5
Net Debt/Equity 4.9 4.4 3.3 2.6 1.9 0.2

Depreciation 162 168 175 198 207 224
Direct Taxes Paid -10 -10 -15 -29 100 -387
(Inc)/Dec in WC -280 272 -62 124 -377 -400
CF from Operations 334 824 569 853 492 489
Others -26 -38 17 -20 4 -50
(Inc)/Dec in FA -125 -92 -65 -148 3 3
Free Cash Flow 184 695 521 686 499 442
(Pur)/Sale of Investments 4 0 3 -2 -12 -580
Others 50 3 3 11 -244 -418
CF from Investments -71 -90 -59 -138 -253 -994
Issue of Shares 0 0 73 0 0 2,003
Inc/(Dec) in Debt 202 -392 -141 -447 61 -977
Interest Paid -401 -303 -376 -323 -254 -185
Dividend Paid 0 0 0 0 -7 -44
Others 0 0 0 0 0 0
CF from Fin. Activity -199 -695 -444 -770 -200 796
Inc/Dec of Cash 39 3 83 -75 43 241
Opening Balance 19 58 61 144 69 111
Closing Balance 58 61 144 69 111 352
13 March 2018 45
Dollar Industries Limited
About the company
Dollar Industries Limited was promoted by Dindayal Gupta under the name Bhawani
Textiles, and now has created substantial presence in India under the Dollar
umbrella. The company is present across segments in the innerwear space with its
brands Big Boss, Force NXT, Missy, Champion, Ultra, Force Go Wear, Footprints, etc.
Its brands are also exported in over 10 countries, including the UAE, Oman, Jordan,
Qatar, Kuwait, Bahrain, Yemen, Iraq, Nepal and Sudan. Dollar manufactures more
than 350 products across all innerwear segments.
Key takeaways
 The company grew its revenue at a 12% CAGR (FY13-17) to INR9b. It expects to
cross INR10b in revenues by FY19 and INR20b by FY23.
 Dollar expects gradual expansion in its EBITDA margin (150bp in the next one
year to 15% v/s 13.5% in 9MFY18), driven by mix improvement, cap on absolute
adspend, and operating leverage.
 The company has not witnessed any structural shift from unorganized to
organized trade. However, it believes that easing of GST-related hurdles, along
with E-way bill implementation, will make it difficult for unorganized players to
compete. Hence, it would create a large opportunity for organized players.
 Dollar sees strong potential in the branded women innerwear market. Under its
brand Missy, the company offers some products such as leggings. It plans to
offer a comprehensive portfolio to capitalize on the opportunity.
 The company intends to shift its focus from sales incentive-led push model
(trade margins for retailers stand at 30% and for distributors at 12-15%) to a
brand pull-led model. To this end, the company would look to move its ad spend
toward some of the premium/semi-premium brands like Force NXT. It would,
however, cap ad spends to INR860m at least for the next two years.
 Dollar has entered into a 50-50 JV partnership with PEPE Jeans Europe B.V. –
this is a 10-year exclusive agreement with a renewal clause. The company plans
to formally launch PEPE Jeans by July 2018.
 The company has not planned any major capex, as it has outsourced most of its
processes. It, thus, believes that capacity would not be a constraint.
 Dollar is planning an EBO channel, particularly for its Force NXT brand, and
Chaos for its Missy Brand, which will help it enhance consumer experience.
Brand Type of Product/ Caters to… Revenue Breakup Price Point (INR)
Dollar Big Boss Premium Men Wear 44% 100-200
Dollar Missy For women 5.5% 80-600
Dollar Ultra Thermal 6% 150-300
Champion Kids For kids 1.5% 150
Regular Economy Range 35% 75-125
Force Go Wear Casual Athleisure 6.5% 150-500
Force NXT Super Premium 1.5% 200-300
13 March 2018 46
Change (%) NA 33.2 14.1 5.1 13.5 9.2
Raw Materials 0 2,743 3,657 3,773 3,574 3,916
Employees Cost 0 32 42 62 91 195
Other Expenses 4,197 2,837 2,765 2,846 3,886 3,927
% of Sales 92.5 92.9 93.8 92.3 91.9 89.6
EBITDA 338 429 426 559 666 935
Margin (%) 7.5 7.1 6.2 7.7 8.1 10.4
Depreciation 91 100 89 114 137 148
EBIT 247 329 338 446 528 787
Other Income 26 31 34 65 83 86
PBT bef. EO Exp. 128 166 206 308 409 667
EO Items 0 0 0 0 0 0
PBT after EO Exp. 128 166 206 308 409 667
Total Tax 40 54 69 113 146 233
Tax Rate (%) 31.3 32.6 33.4 36.8 35.6 34.9
Reported PAT 88 112 137 195 264 435
Adjusted PAT 88 112 137 195 264 435
Change (%) NA 27.1 22.7 42.0 35.4 64.9
Margin (%) 1.9 1.8 2.0 2.7 3.2 4.8

Total Reserves 708 808 934 1,126 1,378 1,701
Net Worth 786 886 1,012 1,204 1,455 1,809
Total Loans 1,448 1,577 1,512 1,806 2,330 2,163
Gross Block 739 558 756 1,337 1,455 1,514

Less: Accum. Deprn. 182 0 0 483 618 766
Net Fixed Assets 556 558 756 854 837 748
Capital WIP 4 0 0 4 6 0

Account Receivables 918 1,103 1,414 1,852 1,932 2,265
Curr. Liability & Prov. 602 866 918 1,162 1,345 1,322
Account Payables 248 498 624 785 1,018 934
Provisions 54 125 20 2 64 173
Appl. of Funds 2,298 2,511 2,553 3,055 3,826 3,996
13 March 2018 47
Ratios
Basic (INR)
EPS 1.6 2.1 2.5 3.6 4.9 8.0
Cash EPS 3.3 3.9 4.2 5.7 7.4 10.7
BV/Share 14.5 16.3 18.7 22.2 26.8 33.4
DPS 0.1 0.2 0.2 0.0 0.2 1.0
Payout (%) 10.2 9.7 9.8 0.0 5.3 15.0
Valuation (x)
P/E 122.2 90.3 54.7
Cash P/E 77.2 59.4 40.9
P/BV 19.8 16.4 13.2
EV/Sales 3.5 3.2 2.9
EV/EBITDA 45.6 39.1 27.7
Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0 0.2
FCF per share -2.2 3.3 2.9 -8.0 -0.8 3.8
Return Ratios (%)
RoE 11.2 13.4 14.5 17.6 19.8 26.6
RoCE NA 10.3 9.9 11.7 11.6 14.7
RoIC NA 9.8 9.5 10.4 10.2 13.5
Asset Turnover (x) 2.0 2.4 2.7 2.4 2.1 2.2
Inventory (Days) 94 75 57 61 93 83
Debtor (Days) 74 67 75 93 86 92
Creditor (Days) 20 30 33 40 45 38
Leverage Ratio (x)
Current Ratio 3.9 3.3 3.0 2.9 3.2 3.5
Net Debt/Equity 1.7 1.6 1.4 1.4 1.5 1.1

Depreciation 91 100 88 114 137 148
(Inc)/Dec in WC -330 -137 63 -489 -561 -539
CF from Operations 29 243 409 34 76 258
Others 34 26 33 -3 0 7
(Inc)/Dec in FA -181 -92 -287 -463 -121 -61
Free Cash Flow -119 177 155 -433 -45 203
Others 72 0 4 252 1 5
CF from Investments -109 -92 -283 -211 -120 -56
Inc/(Dec) in Debt 308 145 -94 387 251 -4
Interest Paid -173 -187 -156 -202 -194 -197
Dividend Paid -8 -10 -11 -12 0 -12
Others -1 0 0 -2 0 -2
CF from Fin. Activity 126 -53 -261 171 57 -215
Inc/Dec of Cash 79 125 -102 -10 13 -7
Opening Balance -2 77 202 100 91 104
Closing Balance 77 202 100 91 104 97
13 March 2018 48
NOTES
13 March 2018 49
Explanation of Investment Rating
Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL > - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of
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the end of the month immediately preceding the date of publication of the Research Report. MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act
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however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though there
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MOSL Agri & Textile Conference: Opportunities immense

despite prevailing challenges

Sumant Kumar - Research analyst (Sumant.Kumar@motilaloswal.com); +91 22 3846 4702

Agrochemicals Expert-1 (Dealer)................................................................................................................. 5

Agrochemicals Expert-2 (Dealer)................................................................................................................. 6

Seeds & Agri Expert .................................................................................................................................... 7

Farmer -1 (Bihar) & Farmer -2 (Maharashtra) ............................................................................................ 8

Companies ............................................................................................................................................... 9-19

Aarti Industries ...................................................................................................................................... 9

Seya Industries ..................................................................................................................................... 16

The Waterbase Company .................................................................................................................... 19

Cotton Expert ............................................................................................................................................. 22

Companies ............................................................................................................................................. 24-46

Arvind Ltd ............................................................................................................................................. 24

Kewal Kiran Clothing............................................................................................................................ 40

S P Apparels Ltd ................................................................................................................................... 43

Dollar Industries Limited ..................................................................................................................... 46

Agrochemical: An opportunity in adversity

Chemicals: Specialty chemicals is the way forward

Textile: Business likely to return to normalcy

 Adherence to environmental norms key to success: The expert put a lot of

 Specialty amines, phosphates, nitrobenzene, ONCB, PNCB, para-amino phenols,

Seeds market in India

Problems faced by Indian seeds industry

National Agriculture Market (NAM)

Specialty chemicals – on a strong footing

Consolidated - Balance Sheet

Gross Block 8,540 12,298 14,701 16,781 20,740 26,472

Curr. Assets, Loans&Adv. 10,684 13,382 16,092 16,387 13,663 14,856

Consolidated - Cash Flow Statement

 Hikal is shifting its competency from being a contract manufacturer to a product

Consolidated - Balance Sheet

Gross Block 9,223 9,930 10,318 10,961 11,472 12,566

Curr. Assets, Loans&Adv. 4,137 4,790 5,615 5,879 5,826 6,028

Consolidated - Cash Flow Statement

 Expansion including backward and forward integration: Seya is setting up

Standalone - Balance Sheet

Gross Block 3,153 3,287 4,062 4,121 4,649 5,031

Curr. Assets, Loans&Adv. 354 1,052 1,395 1,099 1,489 1,631

Standalone - Cash Flow Statement

Expansion plans (to set-up a hatchery) and seed quality

Shrimp feed – market structure, market share and feed quality

Standalone - Balance Sheet

Gross Block 542 565 575 617 635 712

Curr. Assets, Loans&Adv. 922 1,159 1,430 1,479 1,443 1,795

Standalone - Cash Flow Statement

 The company is confident of maintaining 15% EBITDA margin in its textiles

Gross Block 39,668 42,875 46,709 52,878 57,969 62,897

Curr. Assets, Loans&Adv. 25,827 32,635 42,066 46,089 41,447 46,254

Appl. of Funds 41,881 47,313 56,427 62,024 62,574 66,229

Consolidated - Cash Flow Statement

 Implementation of Wel-Trak: Welspun’s focus on traceability of cotton is

Consolidated - Balance Sheet

Gross Block 23,547 25,401 34,213 43,148 35,363 43,768

Curr. Assets, Loans&Adv. 16,160 19,033 24,961 27,699 29,160 33,870

Consolidated - Cash Flow Statement

Consolidated - Balance Sheet

Gross Block 27,005 28,190 29,683 31,110 13,199 14,699

Curr. Assets, Loans&Adv. 19,992 21,584 24,729 27,527 28,206 29,446

Consolidated - Cash Flow Statement

Bed and bath linen business

Focus on the domestic market

Consolidated - Balance Sheet