Niveshdaily: From Research Desk

NiveshDaily
February 13, 2017

INDICES
Indices Previous (day) Close % chg From Research Desk
Sensex 28334.3 0.0 %
Nifty 8793.6 0.2%

(As on 12th February, 2017)
 Result Preview
SKF India | Rating: BUY | Target: Rs 1693
SKF is expected to continue to track automotive growth with recent volume drop
impacting margins marginally.

Sunteck Realty (SRL) | Rating: BUY | Target: Rs 358
With moderate growth in revenue and expansion in EBITDA margin, the company is likely
to show a PAT growth of 577% Y‐0‐Y though on Q‐o‐Q basis PAT is likely to witness a
decline of 90.1%.

 Result Update
SQS India BFSI Ltd (Thinksoft Global Services Ltd)
Facing the global IT headwinds
Ipca Lab
Wait for resolution of regulatory issues continues. Maintain Buy rating with target of Rs
581

Aurobindo Pharma
Maintain Buy with target price of Rs 1054 (previous target Rs 1012)
Gail (India) Ltd
Largely inline with estimate, beats EBITDA estimates as LPG & liquid hydrocarbon
business margin rise. Maintain our HOLD rating with revised target price of Rs. 549

Mahindra & Mahindra (M&M)
Inline with estimates. Maintain BUY with target of 1721
 First Cut Analysis
J.B. Chemicals & Pharmaceuticals Ltd.
Rating & target price changed to UR from Buy & target price of Rs 413.
Idea Cellular Ltd.
First PAT loss in 40 quarters since IPO. Maintain HOLD with previous TP to Rs. 102

 Analyst Meet Update
Power Grid (PGCIL)
Solid performance continues for successive quarters, post attending Q3FY17 Analyst
Meet, revised our estimates with a new TP of Rs 236

 Nivesh Auto Monthly ‐ January 2017

 Result Today in INSL Universe

Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in
IndiaNivesh Securities Limited | Research Analyst SEBI Registration No. INH000000511
IndiaNivesh Research 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800

IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.

Daljeet S. Kohli Result Preview
Head of Research

Tel: +91 22 66188826
daljeet.kohli@indianivesh.in SKF India | Rating: BUY | Target: Rs 1693
(In Rs. mn) Q3FY17E Q2FY17 Q3FY16 q‐q change y‐y change
Sriram R
Revenue 6447 7126 6083 ‐9.5 6
Research Associate EBIDTA 708 840 816 ‐15.7 ‐13.3
Tel: +91 22 61151621 PAT 517 603 581 ‐14.2 ‐11.1
r.sriram@indianivesh.in Margins bps
EBITDA Margin 11.00% 11.80% 13.40% ‐81 ‐244
Rajiv Bharati PAT Margin 8.00% 8.50% 9.60% ‐44 ‐154
Research Analyst Source: Company; IndiaNivesh Research

Tel: +91 22 66188818 SKF is expected to continue to track automotive growth with recent volume drop
rajiv.bharati@indianivesh.in impacting margins marginally.

Valuation
At CMP of Rs. 1423 stock is trading at 17x FY18E EPS. We revise the rating to BUY with a
revised target price of Rs. 1693 (20xFY18E EPS).

IndiaNivesh Research February 13, 2017

Daljeet S. Kohli Sunteck Realty (SRL) | Rating: BUY | Target: Rs 358
Head of Research
Rs Mn (consolidated) Q3FY17E Q2FY17 Q3FY16 Q‐o‐Q % Y‐o‐Y %
Tel: +91 22 66188826 Net Sales 632 2,061 71 ‐69.3 790.1
daljeet.kohli@indianivesh.in EBITDA 158 1,264 16 ‐87.5 887.5
PAT 95 961 14 ‐90.1 577.1
Monami Manna EPS 1.58 16.02 0.23 ‐90.1 577.1
Research Analyst Margin (%) Basis Points (BPS)
EBITDA % 25.0% 61.3% 22.5% ‐3,633 246
Tel: +91 22 6 66188848
PAT % 15.0% 46.6% 19.7% ‐3,162 ‐472
monami.manna@indianivesh.in
Source: Company Filings; IndiaNivesh Research

Updates
 In Q3FY17, Sunteck is expected to show a strong Y‐o‐Y revenue growth of 790.1% Y‐o‐Y
mainly on a low base, however on Q‐o‐Q basis revenue is likely to witness a decline of
69.3% as Sunteck had Rs 639.7mn as one‐off item in Q2FY17 as proceeds from its sale
of Mulund land parcel.
 Also due to the effecto of demonetization, pre‐sales momentum for Sunteck remained
soft for its ODC‐Goregaon project as well as not enough sale happened in its Signia
Pearl project or BKC Signature Island project.
 EBITDA margin is likely to expand 246bps Y‐o‐Y on a low base, however on Q‐o‐Q basis
margin is expected to fall drastically due to high base for Mulund land sale in the
previous quarter.
 With moderate growth in revenue and expansion in EBITDA margin, the company is
likely to show a PAT growth of 577% Y‐0‐Y though on Q‐o‐Q basis PAT is likely to
witness a decline of 90.1%.

Key things to watch out
 Impact of demonetization on its pre‐sales and booking volume
 Pre‐sales volume and status of its ODC‐Goregaon project.
 Revenue recognition pipeline over next few quarters on the basis of newly adopted
POCM method.
 Status of other ongoing projects.

Valuation
We have valued SRL using DCF method, wherein we have calculated value of its real estate
business comprising ongoing and forthcoming projects, planned projects, pending value
from completed development projects and completed annuity projects. Our DCF method
yields a NAV of Rs 398/share for SRL. Applying a 10% discount to our NAV, we arrive at a
target price of Rs 358/share for SRL. At the CMP of Rs 247, SRL is currently available at a
steep discount of 37.9% to its NAV of Rs 398, which is quite attractive given the company’s
future growth potential. We have a BUY rating on the stock with a target price of Rs 358.
We will revisit our rating and target price after Q3FY17 results.


SQS India BFSI Ltd

(Thinksoft Global Services Ltd)
Facing the global IT headwinds

Rs. Mn Q3FY17 Q2FY17 Q3FY16 Q‐o‐Q% Y‐o‐Y% INSPL est Variance% Comments

Current Previous Revenue 609 684 671 ‐11.0% ‐9.2% 749 ‐18.7% Bel.est
CMP : Rs 691 EBITDA 74 104 126 ‐28.8% ‐41.3% 143 ‐48.3% Bel.est
PAT 38 59 74 ‐35.6% ‐48.6% 86 ‐55.8% Bel.est
Rating : HOLD Rating : HOLD Source: Company, IndiaNivesh Research
Target : Rs 765 Target : Rs 765
(NR‐Not Rated) SQS India BFSI Ltd Q3FY17 result was way below our estimate on all front. Rupee
STOCK INFO revenue went‐down by ~11% Q/Q to Rs609mn (v/s INSL est of Rs.749mn). EBITDA
INDEX during the quarter declined ~41.3% Q/Q to Rs.74mn with margin of 12.2% . During
BSE 533121 the quarter, SQS BFSI reported forex loss at Rs.24 mn (v/s Forex loss of Rs. 30 mn in
NSE SQSBFSI Q2FY17). Net other income (Inc. forex) stood same at Rs.1mn (v/s Rs.1mn in
Bloomberg SQSI IN
Q2FY17). Depreciation run‐rate increased to Rs.15mn (v/s Rs.13 mn in Q2FY17).
Reuters SQSI.NS
Sector Information Technology
During the quarter, tax rate stood at ~36.7% [to Rs.22mn] v/s ~35.9% [to Rs.33 mn]
Face Value (Rs) 10 in Q2FY17. Reported net profit went‐down ~56% Q/Q to Rs.38 mn (v/s Rs.59 mn in
Equity Capital (Rs mn) 107 Q2FY17).
Mkt Cap (Rs mn) 7,259
52w H/L (Rs) 1,240 / 660
Results FY16 FY17 Q/Q % Y/Y %
Avg Daily Vol (BSE+NSE) 13,107
Rs millions Q3 Q2 Q3 Change Change
SHAREHOLDING PATTERN % Revenue from Operations 671 684 609 ‐10.96% ‐9.24%
(as on Dec,2016) Total Income 671 684 609
Promoters 53.90 Employee costs ‐433 ‐410 ‐391 ‐4.63% ‐9.70%
Public & Others 46.10 As a % of sales 64.5% 59.9% 64.2%

Other expenditure ‐112 ‐170 ‐144 ‐15.29% 28.57%
STOCK PERFORMANCE(%) 3m 6m 12m As a % of sales 16.7% 24.9% 23.6%
SQSI IN Equity (6.9) (26.0) (28.2) EBITDA 126 104 74 ‐28.85% ‐41.27%
SENSEX 1.0 0.5 13.4 EBITDA margin 18.8% 15.2% 12.2%
Source: Bloomberg, IndiaNivesh Research Depreciation ‐11 ‐13 ‐15 15.38% 36.36%

SQSI IN Equity v/s SENSEX As a % of sales 1.6% 1.9% 2.5%
EBIT 115 91 59 ‐35.16% ‐48.70%
EBIT Margin 17.1% 13.3% 9.7%
Net financials & Other income 1 1 1 0.00% 0.00%
Earnings before Tax 116 92 60 ‐34.78% ‐48.28%
Taxes ‐42 ‐33 ‐22 ‐33.33% ‐47.62%
% of EBT 36.2% 35.9% 36.7%
Net Income 74 59 38 ‐35.59% ‐48.65%
Net Margin 11.0% 8.6% 6.2%

Source: Bloomberg, IndiaNivesh Research EPS ‐ Basic 6.9 5.5 3.6

Source: Company, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826


Saptarshi Mukherjee
Research Associate
Tel: +91‐2266188818
saptarshi.mukherjee@indianivesh.in

IndiaNivesh Securities Limited|Research Analyst SEBI Registration No:INH0000000511
IndiaNivesh Securities Ltd 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800


Q3FY17 Result Update | SQS India BFSI Ltd (Thinksoft Global Services Ltd)
Growth across Key Geography
APAC [Cont. 38.5% of Rev] went‐up by ~5.5% Q/Q. and USA [Cont. 10.2% of Rev]
witnessed strong growth of 5.1% Q/Q which was partially offset by Europe [Cont.
51.3% of Rev] went‐down by 4.6% Q/Q. During the quarter, the company’s domestic
business grew by ~13.4% Q/Q; partially offset by 1.4% Q/Q decline in the
international business (Contri| 89%). Active clients during the quarter were 60 [v/s
56 active clients in Q3FY17]. Company has added 7 clients during this quarter which
was 6 clients sequentially. During this quarter, company has 12 clients, up by 2
clients (US$1 to 6mn: Clients category).

Key Segments Delivered Growth
Revenue from Banking (Cont. 52.3% of Rev) segment witnessed a material uptick of
10.1% Q/Q along with a sharp uptick in insurance business up~16.2% Q/Q (Cont.
14.3% of Rev). This was partially offset by de‐growth in Capital Market & Treasury
(Cont. 5.3% of Rev | down 25% Q/Q), and Cards & Payments (Cont. 28% of Rev |
down 15.4% Q/Q). Employee count during the quarter was 874 which was 925 in
Q2FY17. DSO for the quarter was 56 days (v/s 63 days in Q2FY17)

Top‐10 clients Update
SQS’s Top‐10 client (Cont. 62% of Rev) reported 1.6% Q/Q $‐revenue de‐growth
followed by 2.7% Q/Q growth in Non‐Top 10 clients (Cont. 38% of Rev). During the
quarter, Top 5 client account grew by 4.7% Q/Q and contributed nearly 44% of the
overall revenue.

Concall update:
 Business from retail banks will continue to do well while the growth in
investment banking in UK is expected to be muted. Company sees positive
development in Ireland and DACH
 Company expects group revenue to be in the range of 18‐20% in the coming
quarters.
 Utilization remains marginally lower than the previous quarters at 66%.
 As the project was over, billing from one large client was stopped in Q3FY17
which led to lower topline.
 Currently, Top10 clients contribute 62% of the total revenue and company is
focusing to tap large clients ($1‐6mn). Group revenue for the quarter was 17%
as compared to 15.5% in Q2FY17.
 Company is getting prominent response in robotic process automation.
 Company is seeing more business opportunities in Europe and UK followed by
Asia markets. Once US starts contributing meaningfully to the topline, then
only re‐rating will be done.

Outlook
SQS is likely to take couple of quarters to contribute revenue from captive businesses
[Trissential LLC and Galmont Consulting LLC]. In our view, this would be key revenue
booster for SQS India BFSI Ltd over medium‐to‐long‐term. Long‐term outlook on SQS
remains intact. Management is geared to deliver high growth over medium‐to‐long‐
term on back of increasing presence in US and higher share from parent.

IndiaNivesh Research 13 Feb 2017 2 of 5

Valuation
At CMP of Rs.691, the stock is trading at P/E multiple of 11.3x FY18E earning
estimate. In our view, the overall benefit of integration shall start delivering growth
FY18 onwards. The real booster will be from US, which could deliver significant
growth going‐ahead. However, major risk to our estimate is lack of revenue traction
in US, despite consecutive acquisition by the parent. We maintain HOLD with target
price of Rs.765 (12.5x FY18E) on SQS India.


Income Statement (Consolidated)

Y E March (Rs m) FY14 FY15 FY16 FY17E FY18E
Net sales 1,944 2,142 2,641 2,919 4,664
Growth (%) 20 10 23 11 60
Operating expenses (1,547) (1,726) (2,101) (2,336) (3,679)
Operating profit 397 416 540 583 985
Other operating income 0 0 0 0 0
EBITDA 397 416 540 583 985
Growth (%) 31.6 4.6 29.9 8.1 68.8
Depreciation (57) (52) (41) (60) (66)
Other income 102 (27) 65 49 60
EBIT 442 337 564 573 978
Finance cost (20) (16) (3) 0 0
Exceptional item 0 0 0 0 0
Profit before tax 422 320 561 573 978
Tax (current + deferred) (122) (104) (193) (191) (332)
Profit / (Loss) for the period 300 216 368 381 647
Associates, Min Int 0 0 0 0 0
Reported net profit 300 216 368 381 647
Extraordinary item 0 0 0 0 0
Adjusted net profit 300 216 368 381 647
Growth (%) 55 (28) 70 4 70
Balance Sheet (Consolidated)
Y E March (Rs m ) FY14 FY15 FY16 FY17E FY18E
Share capital 103 106 106 106 106
Reserves & surplus 980 913 984 1,251 1,703
Net Worth 1,082 1,018 1,090 1,356 1,808
Minority Interest 0 0 0 0 0
Total Liabilities 105 372 477 1,055 1,217
Non‐current liabilities 96 72 0 0 0
Long‐term borrowings 96 73 0 0 0
Deferred tax liabilities 0 0 0 0 0
Other Long term liabilities 0 0 0 0 0
Long term provisions 0 (1) 0 0 0
Current Liabilities 9 300 477 1,055 1,217
Short term borrowings 0 0 0 0 0
Trade payables 0 0 0 0 0
Other current Liabilities 9 300 477 1,055 1,217
Short term provisions 0 0 0 0 0
Total Liabilities and Equity 1,188 1,390 1,567 2,411 3,025

Non Current Assets 128 139 166 182 288
Net Block 306 260 252 251 346
Goodwill 0 0 0 0 0
Non‐current Investments 0 0 0 0 0
Long‐term loans and advances 0 0 0 0 0
Deferred tax Assets 6 7 6 6 6
Other non current Assets 97 129 156 172 276
Current Assets 1,060 1,251 1,401 2,241 2,804
Inventories 0 0 0 0 0
Sundry Debtors 558 567 544 614 981
Cash & Bank Balances 502 684 857 1,626 1,822
Other current Assets 0 0 0 0 0
Loans & Advances 0 0 0 0 0
Current Investments 0 0 0 0 0
Total (Assets) 1,188 1,390 1,567 2,423 3,091


Cash Flow Statement (Consolidated)

Y E March (Rs m) FY14 FY15 FY16 FY17E FY18E
Profit before tax 422 320 561 573 978
Depreciation 57 52 41 60 66
Change in working capital (113) 280 201 508 (205)
Total tax paid (118) (105) (193) (191) (332)
Others (82) 43 (62) (49) (60)
Cash flow from operations (a) 166 591 549 900 448
Capital expenditure (70) (30) (41) (60) (68)
Change in investments 0 0 0 0 0
Others 157 (61) 39 33 (43)
Cash flow from investing (b) 87 (90) (2) (28) (111)
Free cash flow (a+capex) 96 561 508 839 379
Equity raised/(repaid) 1 3 0 0 0
Debt raised/(repaid) (18) (23) (73) 0 0
Dividend (incl. tax) 0 0 0 0 0
Others (121) (300) (299) (115) (195)
Cash flow from financing (c) (138) (320) (373) (115) (195)
Net change in cash (a+b+c) 115 181 174 757 142
Reconciliation of Other balances 0 0 0 12 66
Cash as per Balance Sheet 502 684 857 1,626 1,822

Key Ratios (Consolidated )
Y E March FY14 FY15 FY16 FY17E FY18E
Adjusted EPS (Rs) 29.4 21.2 34.8 36.1 61.2
Growth 54.5 (28.0) 64.4 3.6 69.6
Dividend/share (Rs) 0.0 0.0 0.0 0.0 0.0
Dividend payout ratio 0.0 0.0 0.0 0.0 0.0
EBITDA margin 20.4 19.4 20.4 20.0 21.1
EBIT margin 22.8 15.7 21.4 19.6 21.0
Net Margin 15.4 10.1 13.9 13.1 13.9
Tax rate (%) 28.9 32.4 34.4 33.4 33.9
Debt/Equity(x) 0.1 0.1 0.0 0.0 0.0
Inventory Days 0 0 0 0 0
Sundry Debtor Days 105 97 75 77 77
Trade Payable Days 0 0 0 0 0
Du Pont Analysis ‐ ROE
Net margin 15.4 10.1 13.9 13.1 13.9
Asset turnover (x) 1.8 1.7 1.8 1.5 1.7
Leverage factor (x) 1.1 1.2 1.4 1.6 1.7
ROE(%) 30.6 20.6 34.9 31.2 40.9
RoCE (%) 40.7 29.7 51.7 46.8 61.8
Valuation (x)
PER 27.5 38.2 23.3 22.5 13.2
PCE 23.2 30.9 21.0 19.4 12.0
Price/Book 7.6 8.1 7.9 6.3 4.7
EV/EBITDA 19.8 18.4 14.3 11.9 6.8


Ipca Lab
Wait for resolution of regulatory issues continues. Maintain Buy rating

with target of Rs 581
Ipca reported mixed performance: Revenue in line with expectation but
Current Previous
miss on both EBITDA as well as PAT level. Wait for resolution of regulatory
CMP : Rs 519
issues continues. Maintain Buy rating with target of Rs 581
Rating : BUY Rating : BUY Rs.mn Q3FY17 Q3FY16 Q2FY17 Y‐y (%) Q‐q (%) INSL Est Variance(%)
Target : Rs 581 Target : Rs 611 Revenue 7,418 6,830 8,659 8.6 (14.3) 7,605 (2.5)
EBIDTA 1,015 781 1,089 29.9 (6.8) 1,171 (13.3)
(NR‐Not Rated)
Adjusted PAT 453 271 471 67.5 (3.9) 603 (24.8)
STOCK INFO PAT 423 304 557 39.1 (23.9) 603 (29.8)
INDEX Source: Company, IndiaNivesh Research

BSE 524494
NSE IPCALAB Key result highlights
Bloomberg iPCA IN Ipca Laboratories (IPCA IN) reported mixed set of numbers in Q3FY17. Export
Reuters IPCA.NS Formulation (EF) showed muted growth of only 3% while Domestic Formulation (DF)
Sector Pharma sales grew 9% impacted by demonetization. Domestic API segment sales bounced
Face Value (Rs) 2
back with growth of 23% y‐y & exports API grew by 14% y‐y. Sequentially sales took a
Equity Capital (Rs mn) 252
beating in all segments & overall declined by 14%.
52w H/L (Rs) 660 / 402 In EF, UK took a sharp beating due to Brexit leading to steep depreciation of Pound.
Avg Daily Vol (BSE+NSE) 97,664 UK sales for the company de‐grew 16%. The company did not sell anything to US as

HCQS sales to its partner were fully stocked up last year same quarter. Management
STOCK PERFORMANCE(%) 3m 6m 12m had earlier also guided that US sales of HCQS may happen again only Q2 or Q3FY18E.
IPCA (12.6) 3.5 (16.9) Institutional business was down from Rs 240 mn in Q3FY16 to Rs 210 mn in Q3FY17
SENSEX 3.0 2.0 19.3 & Russian sales were lower by around 25% during the same period.
Source: Bloomberg, IndiaNivesh Research
DF was impacted by demonetization along with pricing issues (NELM & ban on FDC).
IPCA v/s SENSEX However management believes those issues are behind & expect t to grow in double
digit in quarters to come. Against DF industry growth of 6% in Q3FY17 Ipca grew by
9% on y‐y basis.
Overall top line for the company grew by 8.6% (down 14% q‐q) to Rs 7.4bn against
our estimate of Rs 7.6 bn. EBITDA for the quarter grew by 30% Y‐y with EBITDA
margin improving from 11.4% in Q3FY16 to 13.7% in Q3FY17 & 12.6% in Q2FY17.
This, sharp uptick in margin has come from savings in material costs. However we
wish to highlight that last year same quarter the company took a one time hit of Rs
244.7 mn on account of write off related to Global Fund arising out of regulatory
Daljeet S. Kohli issues. Adjusting for the one off in previous period improvement in material costs is
Head of Research just 20 bps. Against our estimate of EBITDA of Rs 1.17 bn the company reported
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in EBITDA of Rs 1.01 bn. In the past two post results concall management has been

guiding for improvement in margins but due to muted topline & largely fixed
employee & other expenses it has not been able to increase the margins.
Management has also clarified that while major costs associated with remedial

action for re‐inspection of sites is already incurred but some remedial costs will

continue in future too.



Q3FY17 Result Update | Ipca Lab
Key concall takeaways

Update on remedial action taken for various sites: Management mentioned that till
now they have not invited USFDA for re‐inspection of their plants. They hope to do
so by year end for 2 of the formulation plants. That means in Feb or March 2017 Ipca
will be inviting USFDA to come for audit of formulation plants. However for API
plants management expects the same action to happen around June –July 2017. We
believe even if these timelines are met by the company, any clarity on resolution of
regulatory issues will come somewhere around H2FY18E or later. Hence financials of
FY18E are likely to remain subdued.

Tax rate: Due to losses in FY17 the company had about Rs 240 mn of unabsorbed
depreciation. Since this year Ipca is making profits that unabsorbed depreciation is
being reversed over 4 quarters since Q1FY17. Hence additional amount of deferred
tax of Rs 70 mn is being created every quarter. As a consequence tax rate each
quarter is very high. This situation will remain till Q4FY17E. Post that, according to
management, the company shall go back to normal tax rate of around 22% (MAT
rate).

Filings in US & R&D expense: Management guided to file for 8‐10 products in FY18E
& R&D expenses is likely to be ~5% of net sales in FY18E.
Capex is likely to be in the range of Rs 2.2‐2.5 bn in FY18E.

Financials: In order to factor in 9MFY17 performance, stabilization of currencies in
Russia & UK & DF expected to come back to historical growth trajectory, we have
tweaked our estimates for FY17E & FY18E. We have modeled ~100 bps improvement
in EBITDA margins on back of better topline & controlled costs. However we have
not built in any upside from resolution of regulatory issues resulting in growth in US
business as we believe the same is at least 6‐9 months away from now. Due to
uncertainty on regulatory issues we have not rolled our estimates to FY19E.

Quick financials:
Estimates
Rs mn
FY17E FY18E
Sales 32,454 37,970
EBITDA 4,994 6,220
PAT 2,686 3,671
EPS (Rs) 21.3 29.1

Valuation & outlook
At CMP of Rs 519, the stock is trading at 24.3x FY17 EPS of Rs 21.3 & 17.8x of FY18E
EPS of Rs 29.1. While the overhang of FDA issues will keep the share price
suppressed, in our opinion the market has already factored the known negative &
any resolution of USFDA issues may trigger sharp re‐rating of the stock. The current
valuation also seems to be undemanding therefore we maintain Buy rating with
target price of Rs 581(20xFY18E EPS unchanged) v/s previous target of Rs 611.

IndiaNivesh Securities Ltd 13 Feb 2017 2 of 5

Quarterly results summary
Standalone Results (according to Ind As)
Particulars (Rs Mn except EPS) Q3FY17 Q3FY16 Y‐o‐Y (%) Q2FY17 Q‐o‐Q (%)
Net Sales 7,418 6,830 8.6 8,659 (14.3)
Other operating income 89 113 (21.2) 191 (53.4)
Total Income 7,507 6,943 8.1 8,851 (15.2)
Consumpti on of raw material 2,427 2,510 (3.3) 3,196 (24.1)
Empoyee Cost 1,611 1,489 8.2 1,760 (8.5)
Other Expenditure 2,365 2,050 15.4 2,614 (9.5)
Total Expenditure 6,403 6,048 5.9 7,570 (15.4)
EBITDA (Adj) 1,015 781 29.9 1,089 (6.8)
Depreci ation & Ammortization 432 400 7.9 429 0.5
EBIT 583 381 52.9 660 (11.6)
Other Income 149 162 (8.0) 253 (41.4)
Interest 57 89 (36.8) 68 (16.4)
Pre‐tax Profit 675 454 48.9 845 (20.1)
Tax 222 183 21 374 (41)
Net Profit Adjusted) 453 271 67.5 471 (3.9)
Forex Gai n (loss)/EO Items (30) 34 (188) 85 (135)
Net Profit (Reported) 423 304 39.1 557 (23.9)
Adj EPS (Di l) 3.6 2.1 67.5 3.7 (3.9)
O/ Share ( In Milli on) 126 126 ‐ 126 ‐

Key ratios
Particulars (%) Q3FY17 Q3FY16 Bps Q2FY17 Bps
Gross Margins 67.3 63.3 403 63.1 419
EBITDA margin (Adj) 13.7 11.4 224 12.6 110
Net Margin 6.1 4.0 215 5.4 67
Material cost/Net Sales 32.7 36.7 (403) 36.9 (419)
Employee Cost/ Net Sales 21.7 21.8 (8) 20.3 139
Other Expenditure/ Net Slaes 31.9 30.0 187 30.2 169.7
Tax Rate 34.4 37.6 (316) 40.2 (578.8)


Revenue mix
Particulars (Rs mn) Q3FY17 Q3FY16 Y‐o‐Y (%) Q2FY17 Q‐o‐Q (%)
Domestic Formulation 3,352 3,084 8.7 4,044 (17.1)
Domestic API 343 278 23.4 382 (10.2)
Total Domestic Sales 3,696 3,362 9.9 4,426 (16.5)
Export Formulations 2,335 2,264 3.1 2,640 (11.6)
Export API 1,278 1,120 14.2 1,463 (12.7)
Total Export Sales 3,613 3,384 6.8 4,103 (12.0)
Net Sales 7,308 6,745 8 8,529 (14.3)


Financial Statements (Standalone)
Income statement
Y E March (Rs m) FY13 FY14 FY15 FY16 FY17E FY18E
Net sales 27,388 31,818 30,599 27,761 32,454 37,970
Growth % 19.1% 16.2% ‐3.8% ‐9.3% 16.9% 17.0%
Expenditure
Raw Material 10,910 11,274 11,431 10,466 11,034 12,910
Employee cost 3,766 4,779 5,396 6,017 6,890 7,960
Other expenses 6,895 8,244 8,820 8,435 9,536 10,880
EBITDA 5,817 7,522 4,953 2,843 4,994 6,220
Growth % 20.3% 29.3% ‐34.2% ‐42.6% 75.7% 24.6%
EBITDA Margin % 21.2% 23.6% 16.2% 10.2% 15.4% 16.4%
Deprecaition 840 1,009 1,772 1,697 1,709 1,926
EBIT 4,977 6,513 3,181 1,146 3,285 4,295
EBIT Margin % 18.2% 20.5% 10.4% 4.1% 10.1% 11.3%
Other Income 583 745 610 628 743 994
Interest 313 246 256 297 190 190
PBT 5,247 7,012 3,535 1,477 3,837 5,098
Tax 1,300 1,517 1,016 171 1,151 1,427
Effective tax rate % 24.8% 21.6% 28.7% 11.6% 30.0% 28.0%
Extraordi nary items (633) (721) 43 (392) ‐ ‐
Less: Minority Interest
Adjusted PAT 3,947 5,495 2,519 1,307 2,686 3,671
Growth% 18.5% 39.2% ‐54.2% ‐48.1% 105.6% 36.6%
PAT margin % 14.4% 17.3% 8.2% 4.7% 8.3% 9.7%
Reported PAT 3,314 4,774 2,561 914 2,686 3,671
Growth% 18.3% 44.0% ‐46.3% ‐64.3% 193.7% 36.6%

Balance sheet
Share Capital 252 252 252 252 252 252
Reserves & Surplus 15,446 19,564 22,081 22,809 24,904 27,693
Net Worth 15,699 19,816 22,333 23,061 25,156 27,946
Non Current Liabilities
Long term borrowing 3,662 2,921 5,014 4,865 4,865 4,865
Deferred Tax liabilities 1,304 1,471 1,742 1,693 1,693 1,693
Other Loang Term Liabilities 4 4 32 31 30 30
Long term Provisions 122 145 177 202 202 202
5,092 4,541 6,965 6,791 6,790 6,790
Current Liabilities
Short term borrowings 1,571 1,380 3,210 1,085 1,085 1,085
Trade payables 2,655 3,374 3,026 4,152 4,378 5,122
Other current liabilities 1,652 2,514 2,349 2,956 3,455 4,042
Short term provisions 419 547 354 183 183 183
6,297 7,814 8,939 8,376 9,101 10,433
Total Liabilities 27,088 32,171 38,237 38,228 41,048 45,169
Assets
Net Block 12,045 14,710 20,199 20,970 20,884 20,857
Non Current Investments 218 288 819 965 965 965
Long term laons & Advances 977 1,338 1,289 1,077 1,077 1,077
Current Assets
Inventories 7,335 8,385 9,170 8,319 9,726 11,379
Sundry Debtors 4,159 4,485 3,536 3,677 4,299 5,029
Cash & Banak Balances 547 695 1,132 1,620 2,228 3,674
Other Current Assets 496 655 468 252 295 345
Loans & Advances 1,311 1,617 1,625 1,348 1,576 1,844
13,848 15,836 15,931 15,217 18,124 22,272
Total assets 27,088 32,171 38,237 38,228 41,048 45,169


Cash Flow
PBT 4,614 6,291 3,577 1,085 3,837 5,098
Depreciation 840 1,009 1,772 1,697 1,709 1,926
Interest 313 246 256 297 190 190
Other non cash charges 19 76 (208) 143 ‐ ‐
Changes i n working capital (1,000) (1,048) (100) 1,919 (1,574) (1,370)
Tax (917) (1,302) (745) (291) (1,151) (1,427)
Cash flow fromoperations 3,869 5,271 4,554 4,851 3,012 4,416
Capital expenditure (2,286) (3,839) (6,733) (2,423) (1,623) (1,899)
Free Cash Flow 1,583 1,432 (2,179) 2,428 1,389 2,518
Other income 100 140 207 104 ‐ ‐
Investments (448) (45) (331) 290 ‐ ‐
Cash flow from investments (2,634) (3,744) (6,857) (2,029) (1,623) (1,899)
Equity capital raised (440) ‐ ‐ ‐ ‐ ‐
Loans availed or (repaid) 445 (440) 3,231 (1,684) ‐ ‐
Interest paid (318) (283) (313) (302) (190) (190)
Dividend paid (incl tax) (468) (661) (369) (153) (591) (881)
Cash flow from Financing (781) (1,384) 2,550 (2,140) (781) (1,071)
Net change in cash 453 144 246 682 608 1,447
Cash at the beginning of the year 93 531 695 1,132 1,620 2,228
Adjust 1 21 190 (194) ‐ ‐
Cash at the end of the year 547 695 1,132 1,620 2,228 3,674

Key ratios
Y E March FY13 FY14 FY15 FY16 FY17E FY18E
EPS (Rs) Core 31.3 43.5 20.0 10.4 21.3 29.1
EPS Reported 26.3 37.8 20.3 7.2 21.3 29.1
Cash EPS (Rs) 37.9 51.5 34.0 23.8 34.8 44.3
DPS (Rs) 4.7 7.2 4.1 0.0 4.7 7.0
BVPS (Rs) 124.4 157.0 177.0 182.7 199.3 221.4
ROCE 14.6% 17.1% 6.6% 3.4% 6.5% 8.1%

ROE 33.4% 35.4% 15.8% 6.4% 15.3% 18.2%
Inventories Days 98 96 109 109 109 109

Sundry Debtors Days 55 51 42 48 48 48
Trades Payable Days 89 109 97 145 145 145
PER (x) 17.7 12.7 27.7 42.6 20.7 15.2

P/BV (x) 4.4 3.5 3.1 2.4 2.2 2.0
EV/EBITDA (x) 12.8 9.8 15.5 21.1 11.9 9.3
Dividend Yield % 0.9% 1.3% 0.7% 0.0% 1.1% 1.6%
m cap/sales (x) 2.5 2.2 2.3 2.0 1.7 1.5
net debt/equity (x) 0.3 0.2 0.3 0.2 0.1 0.1
net debt/ebitda (x) 0.8 0.5 1.4 1.5 0.7 0.4


Aurobindo Pharma
Maintain Buy with target price of Rs 1054 (previous target Rs 1012)

Despite large number of approvals high growth remains elusive. Expansion
Current Previous
of capacities in US is likely to help in monetizing large number of approvals
CMP : Rs 679
in place. Maintain Buy with target price of Rs 1054 (previous target Rs
Rating : BUY Rating : BUY 1012)
(NR‐Not Rated)
Aurobindo Pharma’s (ARBP) financial performance for Q3FY17 was in‐line
STOCK INFO with our estimates. Net sales increased by 12% y‐y impacted by slow sales
INDEX in Europe & ROW. However US sales were in‐line with estimates. Due to
BSE 524804 controlled costs at all levels gross margin & EBITDA margin were
NSE AUROPHARMA
maintained. ARBP management has sounded positive on growth prospects
Bloomberg ARBP IN
Reuters ARBN.NS both in oral/solids as well as injectables in US in remaining part of fiscal.
Sector Pharma The company is likely to launch 13 new products in US in Q4FY17.
Face Value (Rs) 1 Integration of European business (Actavis) & Natrol is going as guided
Mkt Cap (Rs mn) 397,506 earlier. ARBP is expanding capacities in Aurolife & Auromed which will help
52w H/L (Rs) 895 / 582 it in monetizing larger number of opportunities & prepare the company
Avg Daily Vol (BSE+NSE) 2,174,810 against any adverse action by US administration regarding inward looking

manufacturing policies.
STOCK PERFORMANCE(%) 3m 6m 12m
ARBP IN Equity (14.3) (8.9) (1.7) We remain positive on ARBP on the back of robust ANDA pipeline, subject
SENSEX 3.0 2.0 19.3 to regulatory approval, and improvement in profitability from turnaround

of Actavis and Natrol.
ARBP IN Equity v/s SENSEX
At CMP of Rs 679, the stock is trading at attractive valuation of 15.2x FY17E
EPS of Rs 44.6 and 14x FY18E EPS of Rs 48.4 & 12.9x FY19E EPS of Rs 52.7.
We value ARBP at (unchanged) 20x FY19 EPS to arrive at target of Rs 1054
(Rs 1012 earlier).
Rs.mn Q3FY17 Q3FY16 Y‐O‐Y % Q2FY17 Q‐O‐Q % INSL Est Variance(%)
Revenue 38,445 34,321 12.0 37,135 3.5 37,968 1.3
EBIDTA 9,152 8,230 11.2 9,292 (1.5) 9,049 1.1
Source: Bloomberg, IndiaNivesh Research Adjusted PAT 5,811 5,217 11.4 5,857 (0.8) 5,736 1.3

Daljeet S. Kohli Rep. PAT 5,811 5,350 8.6 6,026 (3.6) 5,736 1.3

Head of Research Source: Company, IndiaNivesh Research
Tel: +91 22 66188826

Key result highlights:
 Net sales came in at Rs38.45bn, up 12.5% y‐y, for the quarter. Y‐y sales
growth is driven by 11% y‐y growth in US sales, 12% growth in ARV &
11.6% growth in API. Only 3% growth in ROW sales & 10% in Europe

dragged the overall performance. According to management, US sales
were impacted to the extent of 4% by one time charge on account of
discounts given in the market.
 Gross margin maintained at 55% & EBITDA margin was recorded at 23.4%
(‐12 bps y‐y, ‐118 bps q‐q). EBITDA & Adjusted PAT both grew by 11.2% y‐y
to Rs 9.15 bn & Rs5.81 bn respectively



Q3FY17 Result Update | Aurobindo Pharma
Key Concall highlights:
 US contributed ~45% to total revenues & grew at 11% y‐y on back of new
launches in the oral & injectable segments & growth in Natrol business. In
Q3FY17, ARBP launched total 11 products in US out of which 8 were in oral
solids & 3 were in injectable. The management guided to launch ~13 new
products over the remaining FY17 out of which ~7‐9 products will be from
injectable stable. Some of these products are niche opportunities with
decent large size.
 Aurobindo US which markets oral solids in US witnessed 9% de‐growth q‐q
due to severe price erosion in existing as well as new products. There was
a one‐time impact of discounts offered to customers which resulted in
around 4% de‐growth in sales. In oral solids the company launched 8 new
products in Q3FY17 taking total launches to 19 in 9MFY17. ARBP filed 5
ANDA in orals in Q3FY17.
 Management mentioned now the price erosion is visible not only in
existing products but even in new launches. This stiff competition is
attributed to larger numbers of players getting approvals & customer
consolidation. According to management price erosion witnessed by ARBP
was to the tune of 7% q‐q 7 13% y‐y.
 Despite severe price erosion management maintained guidance of 15‐20%
growth in US on back of new launches in oral solids, injectables, Natrol.
AuroHealth & Aurolife.
 ARBP is expanding the capacity of Aurolife by 3x as it is gaining traction in
tender business in US.
 Auromedics which manufactures injectables has continued strong growth
of 91% y‐y recording sales of $45mn in Q3FY17. In this division the
company launched 3 new products taking total tally to 10 in 9MfY17. ARBP
has filed 89 ANDA in injectables out of which it has received approvals for
50 including 2 received in Q3FY17. Management expects to launch 3 new
product in injectables in Q4FY17E.
 AuroHealth which manufactures & markets OTC products in US has
expanded its product basket to 85 products & is serving 22 customers.
 Injectable shall be high growth driver for US. The company intends to
launch ~7‐9 products in this segment & these launches will be early
launches which will lead to gaining higher market share. Management
guided injectable segment to continue growing at 40‐50% compounding
rate for at least next 2‐3 years.
 ARBP received 22 ANDA approvals in Q3FY17 (including 3 tentative). Till
3QFY17, ARBP has 421 ANDA filing on cumulative basis and 118 ANDAs are
pending for approval. The company filed for 9 new ANDAs in Q3FY17
including 5 in oral & 4 in injectable category.
 Europe sales came in at Rs8.55bn, increase of ~10% y‐y for the quarter.
ARBP continue to improve profitability of Europe business by shifting
manufacturing to relatively low cost units in India and improving efficiency
of operation of Actavis business. According to management they have
shifted 42 products cumulatively till Q3FY17. Management maintained
guidance of ~7‐8% EBITDA margin for Actavis by FY18.
 ARBP is expecting approval for Meropenem very soon. They have already
started preparing launch quantity. The company has had 2 inspections in
this regard but awaiting approval.
 ARV sales have been gone up ~12% y‐y (+22% q‐q) to Rs 3.4 bn in Q3FY17.
However management clarified sales did not include DTG sales which shall
reflect in numbers from Q1FY18E onwards. The company has started

manufacturing API of DTG & expect gradual ramp up in sales of DTG by Q3‐
Q4FY18E.
 API sales grew ~12% y‐y along with improvement in margins.
 ARBP has taken over a portfolio of 4 products in Biosimilar space from TL
Pharma. ARBP will further develop these products & will undertake clinical
trials etc. This would mean an approximate expense of ~$80mn on all
these 4 products. However management specified that the R&D expense
will be spread out to 18‐24 months
 ARBP expects to start clinical trials of these 4 biosimilar products by end of
FY18E or FY19E. ARBP may look at out‐licensing opportunities in this space
in order to mitigate risks 7 reduce costs
 ARBP is already developing portfolio of 8 biossimilar products on its own.
Post the takeover of products from TL Pharma, the company will have total
of 12 products in biosimilar basket.
 R&D spent for the Q3FY17 was Rs1.3bn (3.3% of net sales). However due
to acquisition of biosimilar products R&D costs may go up substantially in
next 2‐3 years. According to management R&D expense can go up to 5‐6%
of net sales in next 2 years & up to 8‐9% of net sales in years when the
clinical trials for biosimilar products will start. We believe increased costs
will dent the company’s margins if it is not able to monetize its large basket
of approvals faster.

Outlook: ARBP is likely to launch 13 new products in US in remaining FY17 with
approximately 3 in injectable segment. The company has few interesting
opportunities to be monetized in FY18 including Meropenem, Vancomycin,
Sevelemer, Fortamet, Epzicom, Valcyte & Rosuvastatin, Tenofovir subject to
regulatory approvals. We believe the company will be able to make up any loss in US
business due to competition/price erosion by launching new products & gaining
volume share. Natrol portfolio is likely to witness good growth with addition of new
products. Actavis integration is going well & as more products get transferred to
Indian sites profitability would improve going forward. We remain positive on ARBP
on the back of robust ANDA pipeline, subject to regulatory approval, and
improvement in profitability from turnaround of Actavis and Natrol.

Valuation: At CMP of Rs 679, the stock is trading at attractive valuation of 15.2x
FY17E EPS of Rs 44.6 and 14x FY18E EPS of Rs 48.4 & 12.9x FY19E EPS of Rs 52.7. We
value ARBP at (unchanged) 20x FY19 EPS to arrive at target of Rs 1054 (Rs 1012
earlier).


Quarterly financial summary
(Consolidated nos as per Ind‐As)
(Rs Mn) Q3FY17 Q3FY16 Y‐o‐Y Q2FY17 Q‐o‐Q
Net Sales 38,445 34,321 12.0 37,135 3.5
Other Operating Income 617 634 (2.7) 619 (0.3)
Total Income 39,062 34,955 11.7 37,754 3.5
Consumption of raw material 17,300 15,536 11.4 16,299 6.1
Empoyee Cost 4,421 4,010 10.2 4,266 3.6
Other Expenditure 8,189 7,179 14.1 7,898 3.7
Total Expenditure 29,910 26,725 11.9 28,462 5.1
EBITDA 9,152 8,230 11.2 9,292 (1.5)
Depreciation & Ammortization 1,050 995 5.6 1,102 (4.7)
EBIT 8,102 7,235 12.0 8,190 (1.1)
Other Income 83 69 20.8 83 0.2
Interest Expenses/ (income) 225 227 (0.9) 175 28.3
Pre‐tax Profit 7,960 7,077 12.5 8,097 (1.7)
Tax 2,148 1,860 15.5 2,240 (4.1)
Adjusted Net Profit 5,811 5,217 11.4 5,857 (0.8)
Minority interest ‐ 3 (100.0) 1 (100.0)
Other adjustments +OCI ‐ 129 (100.0) 168 (100.0)
Reported Net Profit 5,811 5,350 8.6 6,026 (3.6)
Adj EPS (Rs) 10.0 8.9 11.4 10.0 (0.8)
Adj O/ Share ( In Million) 584 584 ‐ 584 ‐


Key ratios
Q3FY17 Q3FY16 Bps Q2FY17 Bps
Gross Margins 55.0 54.7 27 56.1 (111)
EBITDA margin 23.4 23.5 (12) 24.6 (118)
Net Margin 15.1 15.2 (8) 15.8 (66)
Material cost+ Purchased goods/Net Sa 45.0 45.3 (27) 43.9 111
Employee Cost/ Net Sales 11.5 11.7 (18) 11.5 1
Other Expenditure/ Net Slaes 21.3 20.9 38 21.3 3
Tax Rate 27.0 25.8 118 27.1 (11)

Revenue mix
Gross Sale (Rs Mn) Q3FY17 Q3FY16 Y‐o‐Y Q2FY17 Bps
Formulations 31,302 28,368 10.3 30,038 4.2
USA 17,451 15,706 11.1 17,351 0.6
Europe 8,554 7,786 9.9 8,134 5.2
RoW 1,878 1,822 3.1 1,768 6.2
ARVs 3,419 3,054 12.0 2,785 22.8
APIs 7,759 6,952 11.6 7,688 0.9
Total sales 39,061 35,320 10.6 37,726 3.5


Financial statement (consolidated)
Income statement
Y E March (Rs m) FY15 FY16 FY17E FY18E FY19E
Net sales 120,432 136,506 158,166 174,407 192,536
Growth % 49.8% 13.3% 15.9% 10.3% 10.4%
Expenditure
Raw Material 55,056 61,575 70,354 77,582 84,690
Employee cost 13,023 15,508 17,796 19,686 21,797
Other expenses 27,490 29,821 33,318 36,595 40,861
EBITDA 25,636 32,056 39,545 43,685 48,653
Growth % 23.8% 28.9% 33.6% 19.0% 20.0%
EBITDA Margin % 21.3% 23.5% 25.0% 25.0% 25.3%
Depreciation 3,326 3,926 4,563 5,927 7,731
EBIT 22,310 28,130 34,981 37,758 40,922
EBIT Margin % 18.5% 20.6% 22.1% 21.6% 21.3%
Other Income 967 1,663 1,829 2,012 2,213
Interest 1,599 2,568 1,129 1,043 972
PBT 21,678 27,225 35,681 38,727 42,164
Tax 5,966 7,444 9,634 10,456 11,384
Effective tax rate % 27.5% 27.3% 27.0% 27.0% 27.0%
Extraordinary items ‐ ‐ ‐ ‐ ‐
Less: Minority Interest 45 39 ‐ ‐ ‐
Adjusted PAT 15,712 19,782 26,047 28,271 30,780
Growth% 9.6% 25.9% 31.7% 8.5% #DIV/0!
PAT margin % 13.0% 14.5% 16.5% 16.2% 16.0%
Reported PAT 15,757 19,821 26,047 28,271 30,780
Growth% 27.7% 25.8% 31.4% 8.5% 8.9%


Balance sheet
Share Capital 292 585 585 585 585
Reserves & Surplus 51,267 69,982 94,108 120,400 149,025
Net Worth 51,559 70,567 94,693 120,985 149,610
Non Current Liabilities
Long term borrowing 13,615 8,472 8,000 7,500 7,000
Deferred Tax li abilities 2,105 2,365 2,365 2,365 2,365
Long term Provisions 244 235 235 235 235
15,964 11,072 10,600 10,100 9,600
Current Liabilities
Short term borrowings 25,021 32,290 27,290 22,290 17,290
Trade payables 20,511 25,268 28,870 31,836 34,753
Other current liabilities 13,650 15,374 17,813 19,642 21,684
Short term provisions 2,182 1,827 3,396 3,686 4,013
61,364 74,759 77,369 77,454 77,740
Total Liabilities 129,145 156,994 183,258 209,135 237,546
Assets
Net Block 41,253 52,635 63,889 78,891 98,114
Non Current Investments 1 1 1 1 1
Long term laons & Advances 4,903 4,342 4,342 4,342 4,342
Current Assets 46,157 56,979 68,232 83,234 102,458
Inventories 36,113 40,881 47,368 52,232 57,661
Sundry Debtors 35,392 41,719 48,339 53,303 58,843
Cash & Banak Balances 4,691 8,344 9,224 9,504 6,864
Other Current Assets 1,108 2,617 2,617 2,617 2,617
Loans & Advances 5,684 6,454 7,478 8,246 9,103
82,988 100,015 115,026 125,901 135,088
Total assets 129,145 156,994 183,258 209,135 237,546

Cash flow
PBT 21,678 27,225 35,681 38,727 42,164
Depreciation 3,326 3,926 4,563 5,927 7,731
Interest 709 793 1,129 1,043 972
Other non cash charges 28 393 ‐ ‐ ‐
Changes in working capital (8,417) (7,383) (6,520) (5,511) (6,541)
Tax (4,956) (7,358) (9,634) (10,456) (11,384)
Cash flow from operations 12,368 17,596 25,220 29,730 32,942
Capital expenditure (7,683) (15,682) (15,817) (20,929) (26,955)
Free Cash Flow 4,685 1,915 9,403 8,801 5,986
Other income 564 1,621 ‐ ‐ ‐
Investments (6,860) 260 ‐ ‐ ‐
Cash flow from investments (13,980) (13,801) (15,817) (20,929) (26,955)
Equity capital raised 68 72 ‐ ‐ ‐
Loans availed or (repaid) 3,408 2,169 (5,472) (5,500) (5,500)
Interest paid (739) (823) (1,129) (1,043) (972)
Dividend paid (incl tax) (1,805) (1,616) (1,823) (1,979) (2,155)
Others
Cash flow from Financing 932 (198) (8,425) (8,522) (8,626)
Net change in cash (680) 3,598 978 279 (2,640)
Cash at the beginning of the year 1,480 4,611 8,246 9,224 9,504
Adj on consolidation 3,890 136 ‐ ‐ ‐
Cash at the end of the year 4,691 8,344 9,224 9,504 6,864

Key ratios
Y E March FY15 FY16 FY17E FY18E FY19E
EPS (Rs) Core 27.0 33.9 44.6 48.4 52.7
EPS Reported 27.1 33.9 44.6 48.4 52.7
Cash EPS (Rs) 32.7 40.6 52.4 58.6 65.9
DPS (Rs) 1.9 2.4 3.1 3.4 3.7
BVPS (Rs) 89 121 162 207 256
ROCE 34.3% 36.2% 34.8% 30.2% 27.0%

ROE 30.5% 28.0% 27.5% 23.4% 20.6%
Inventories Days 109 109 109 109 109

Sundry Debtors Days 107 112 112 112 112
Trades Payabl e Days 136 150 150 150 150
PER (x) 25.2 20.0 15.2 14.0 12.9

P/BV (x) 7.7 5.6 4.2 3.3 2.7
EV/EBITDA (x) 16.7 13.4 10.7 9.5 8.5
Dividend Yield % 0.3% 0.3% 0.5% 0.5% 0.5%
m cap/sales (x) 3.3 2.9 2.5 2.3 2.1
net debt/equity (x) 0.7 0.5 0.3 0.2 0.1
net debt/ebitda (x) 1.4 1.1 0.7 0.5 0.4


Gail (India) Ltd
Largely inline with estimate, beats EBITDA estimates as LPG & liquid
hydrocarbon business margin rise. Maintain our HOLD rating with

revised target price of Rs. 549
GAIL reported strong performance in Q3FY17 on the back of better than expected
Current Previous margin from LPG & liquid hydrocarbons business. Top line stood at Rs. 123 bn (1.9%
CMP : Rs 483 higher than INSPL estimates). Natural gas trading volume increased by 7.4% YoY at
Rating : HOLD Rating : HOLD 82.79 mmscmd and Natural gas trading revenue decreased by 19% YoY to Rs.94.1bn.
Target : Rs 549 Target : Rs 458 EBITDA margin stood at 14% (expanded by 542/128 bps YoY/QoQ), higher than our
(NR‐Not Rated) expectation of 13.1%. Net profit increased by 45% YoY to Rs. 9.8 bn, below our
STOCK INFO expectation of Rs.10.2 bn due to marginally higher taxes, higher interest cost (up by
INDEX 5.1% YoY) and lower other income (up 4.6% YoY).
BSE 532155
Rs.Mn Q3FY17 Q2FY17 Q3FY16 Q‐o‐Q% Y‐o‐Y% INSPL Q3FY17E Variance%
NSE GAIL
Revenue 123,186 120,582 135,226 2.2% ‐8.9% 120853 1.9%
Bloomberg GAIL IN
EBITDA 17261 15347 11477 12.5% 50.4% 15835 9.0%
Reuters GAIL.NS
PAT 9,829 9,247 6,758 6.3% 45.4% 10175 ‐3.4%
Sector Oil & Gas
Face Value (Rs) 10 EPS 7.8 7.3 5.3 8.0
Equity Capital (Rs mn) 12,685

52w H/L (Rs) 494 / 290 GAIL natural gas trading business had been under stress as LNG procured via long‐
Avg Daily Vol (BSE+NSE) 2,499,607 term contract had turned out to be expensive than spot buys with no takers for the

gas. We believe GAIL still remains a key beneficiary of the favourable terms
STOCK PERFORMANCE(%) 3m 6m 12m negotiated with RasGas on the long‐term LNG contract. Due to Rasgas contract
GAIL IN Equity 7.6 29.3 39.7 renegotiation, the company’s gas trading and petrochemical businesses registered
SENSEX 3.0 2.0 19.3 strong profitability in Q3FY17. The petrochemical segment has swung from losses in
FY16 to profit in successive three quarters in FY17 and we expect that the feedstock
GAIL IN Equity v/s SENSEX cost should fall ~40% for GAIL’s petchem plant in FY17. We believe transmission
volumes have bottomed and will benefit from continued LNG pooling for power and
expansion of LNG import terminal at Dahej.

Valuation
We expect GAIL's earnings to grow at a CAGR of 33% for FY16‐19e and ROCE should
recover to 15.9% by FY19 (FY16 ROCE is 9.1%) led by turnaround in petrochemicals
and improvement in transmission profitability. We have tweaked our estimates for
FY17E & FY18E. We also introduce FY19E financials & roll over valuation to FY19. At
Daljeet S. Kohli
CMP of Rs. 483, stock is trading at 12.6x/11.4 FY18e/FY19e earnings. We value GAIL
Head of Research
Tel: +91 22 66188826 at 13x FY19E EPS of Rs. 42.2 to arrive at revised price target of Rs. 549 and maintain
daljeet.kohli@indianivesh.in our HOLD rating.

Rajiv Bharati
Research Analyst
Tel: 022‐66188818
rajiv.bharati@indianivesh.in

Saptarshi Mukherjee
Research Associate
Tel:+91‐2266188818
saptarshi.mukherjee@indianivesh.in

Financial Performance
YE March EBITDA
Net Sales EBITDA Adj.PAT Adj.EPS (Rs) RoE(%) Adj.P/E(x) EV / EBITDA (x)
(Rs Mn) Margin
FY15 567,420 46,962 30,392 24.0 8.3 10.8 20.2 14.5
FY16 519,142 42,681 22,989 18.1 8.2 7.7 26.6 15.3
FY17E 464,805 65,455 43,471 34.3 14.1 13.5 14.1 9.9
FY18E 511,211 71,840 48,546 38.3 14.1 13.5 12.6 8.8
FY19E 555,466 78,184 53,541 42.2 14.1 13.4 11.4 7.8


Q3FY17 Result Update | Gail (India) Ltd
Chapt er Title
Segment Wise performance
 Natural Gas transmission: Natural gas transmission revenue increased by 24%
YoY to Rs. 12.1 bn. Total Transmission volume stood at 102.7 mmscmd against
100.9/97.1 mmscmd in Q2FY17/Q3FY16. We expect transmission volumes have
bottomed out in FY16 and gas pooling volumes will be supportive in FY17 as
well. GAIL is handling 8‐9 mmscmd of volumes under the power pooling scheme.
FY18 growth will be fueled by completion of PLNG’s expansion at Dahej (5
mmtpa), of which GAIL has been contracted 2.5 mmtpa.
 Natural gas trading: Revenue decreased by 19% YoY in Q3FY17 despite 7.3% YoY
jump in Natural gas trading volume at 82.79 mmscmd. PBIT margin contracted
by 95 bps YoY to 3.2% due to change in LNG contract. Management indicated
that growth in FY18, FY19 might be limited to 5% each.
Segment wise revenue
Segment Revenues (Rs. mn) Q3FY17 Q2FY17 Q3FY16 Q‐o‐Q% Y‐o‐Y%
Natural Gas Trading 94,144 92,642 1,16,866 1.6% ‐19.4%
Transmission Services ‐ Natural Gas 12,140 11,864 9,789 2.3% 24.0%
Petrochemicals 14,057 13,578 8,041 3.5% 74.8%
LPG & Liquid Hydrocarbons 8,259 7,065 8,479 16.9% ‐2.6%
Transmission Services ‐ LPG 1,406 1,266 1,127 11.1% 24.7%
Others 1,732 2,022 2,120 ‐14.4% ‐18.3%
Total 1,31,738 1,28,437 1,46,422 2.6% ‐10.0%
Less: Inter Segment Revenue 8,798 8,047 11,664 9.3% ‐24.6%
Net sales/ Income from Operations 1,22,940 1,20,390 1,34,758 2.1% ‐8.8%

Segment wise PBIT
Segment PBIT (Rs. mn) Q3FY17 Q2FY17 Q3FY16 Q‐o‐Q% Y‐o‐Y%
Natural Gas marketing 3,005 3,292 4,835 ‐8.7% ‐37.8%
Transmission Services ‐ Natural Gas 6,267 6,424 4,207 ‐2.4% 49.0%
Petrochemicals 1,341 1,553 ‐1,635 ‐13.7%
LPG & Liquid Hydrocarbons 3,735 1,469 2,315 154.3% 61.3%
Transmission Services ‐ LPG 625 710 536 ‐12.0% 16.6%
Others 516 51 ‐127 904.9%
Total 15,488 13,499 10,131 14.7% 52.9%
Interest ‐1,601 ‐1,198 ‐1,524 33.6% 5.1%
Other un‐allocable expenditure net off un‐
949 1,454 624
allocable income ‐34.7% 52.2%
Total Profit Before Tax 14,836 13,755 9,230 7.9% 60.7%

 Petrochemical: Petchem business showed improvement of ~75%/3.5% YoY/QoQ
led by 61.7% jump in volumes at ~152 TMT. Petchem volume grew due to plant
stabilization process on account of expansion of existing facility. Out of 152 TMT
production the new PATA plant produced 35 TMT. We expect petrochemical
segment to improve further as Rasgas contract renegotiation will help to reduce
feedstock cost by ~40% for GAIL’s petchem plant.


Segment wise PBIT margin (%)
BPS
Segment PBIT Margin (%) Q3FY17 Q2FY17 Q3FY16
QoQ YoY
Natural Gas Trading 3.2 3.6 4.1 (36.2) ‐95
Transmission Services ‐ Natural Gas 51.6 54.1 43.0 ‐252 865
Petrochemicals 9.5 11.4 (20.3) NA NA
LPG & Liquid Hydrocarbons 45.2 20.8 27.3 2,443.8 1,791.8
Transmission Services ‐ LPG 44.4 56.1 47.5 ‐1164 ‐309

Quick Fundamentals (Rs. Mn)
GAIL India Ltd (Standalone) Q3FY17 Q2FY17 Q3FY16 Q‐o‐Q % Y‐o‐Y %
Net sales 122940.1 120390 134758 2.1% ‐8.8%
Other Operating Income 245.5 192.2 468.3 27.7% ‐47.6%
Total Revenue 123185.6 120582.2 135226.3 2.2% ‐8.9%
Cost of Revenues 105925 105234.8 123749.7 0.7% ‐14.4%
(Increase) / Decrease in Stock in Trade 762 ‐1832.5 221.5 ‐141.6% ‐927.3%
Consumption of raw material 7785.2 7767.4 8487.9 0.2% ‐8.5%
Purchase of Traded Goods 82424.2 83825.5 100010.4 ‐1.7% ‐16.2%
Employees Cost 2665.1 2495 2520.2 6.8% ‐1.0%
Other Expenditure 12288.5 12979.4 12509.7 ‐5.3% 3.8%
EBIDTA 17260.6 15347.4 11476.6 12.5% 50.4%
Depreciation 3579.1 3563.1 3356.4 0.4% 6.6%
EBIT 13681.5 11784.3 8120.2 16.1% 68.5%
Interest Expense 1601.3 1198.3 1524 33.6% 5.1%
Other income 2756 3168.7 2634.1 ‐13.0% 4.6%
PBT 14836.2 13754.7 9230.3 7.9% 60.7%
Exceptional Item 0 0 0 NA NA
Provision for taxation 5007 4508.2 2472.4 11.1% 102.5%
PAT 9829.2 9246.5 6757.9 6.3% 45.4%
PAT incl. comprehensive income 16134.8 17613.5 9369.4 ‐8.4% 72.2%
EPS (RS.) 7.75 7.29 5.33 6.3% 45.4%
Margin % Margin % Margin % Basis Points (BPS)
EBITDA % 14.0% 12.7% 8.5% 128.4116 552.4906
EBIT % 11.1% 9.8% 6.0% 133.3576 510.1515
PBT % 12.0% 11.4% 6.8% 63.68704 521.7961
PAT % 8.0% 7.7% 5.0% 31.09663 298.1705

Concall takeaways:
 Pricing pressure witnessed on petrochemical and liquid hydrocarbon businesses.
 Lower realization in petrochemical and polymer. Natural gas trading margin to
remain muted in FY18/FY19. Company is selling 16mn cubic feet gas on daily
basis to its clients on short term or mid‐term basis.
 New PATA plant utilization rate during third quarter was +80%.
 Capex plan for Jagdishpur‐Haldia pipeline during FY18 is expected to be Rs.10
bn. Jagdishpur‐Haldia pipeline project is basically divided into two parts: (1)
pipelines from Phulpur & Gobi and branches from Patna to Bareli are expected
to finish by FY18 and (2) the balancing Dhamra‐Haldia pipeline project by
December 2020. Inspite of increase in spot prices volume growth in LNG was not
impacted.

 Capex plan during Rs. 20 bn in FY18, Rs. 70 bn in FY19 and Rs. 100 bn in FY20.
There is no growth trigger is available in the coming two years due to PSGF
(expected to grow in the range of 5%) but once Jagdishpur‐Haldia pipeline
project is completed, the demand drive will be noticed from fertilizer companies
(eastern & south).
 Implied tariff for this quarter was 11471
 9MFY17 Petchem production from PATA‐2 was 92 TMT, ~135 TMT from PATA‐1.
Company has clocked 35 TMT in Q3FY17 so similar kind production is expected
in Q4FY17. In FY18, it is expected to reach the utilization rate to reach 90% in the
new expansion.
 With regard to the Kochi‐Koottanad‐Bengaluru/Mangalore Pipeline (Phase‐II), 2
districts from ROUs have been resolved. Section I is under construction and the
balance sections (II,III & IV) are expected to awards within 30 days time.
 The natural gas transmission segment have risen, is sustainable on account of
current tariff level and rising consumption.
 8 cargos from Oct till now from Dhabol and by the end of year, another 2‐3
cargos to come.
 Petrochemical raw material cost reduced in Q3FY17 mainly due to changes from
Qatar LNG to Spot LNG and optimization of operation.
 Lower offtake by south India based power producers continue to weigh on
revenue generated from the Dabhol terminal.


Income Statement (Standalone)

Net sales 567,420 519,142 464,805 511,211 555,466
Growth (%) (1) (9) (10) 10 9
Operating expenses (520,458) (476,461) (399,349) (439,371) (477,282)
Operating profit 46,962 42,681 65,455 71,840 78,184
EBITDA 46,962 42,681 65,455 71,840 78,184
Growth (%) (29.9) (9.1) 53.4 9.8 8.8
Depreciation (9,743) (13,131) (13,790) (15,108) (16,426)
Other income 8,609 8,577 15,000 16,498 17,926
EBIT 45,828 38,127 66,665 73,230 79,684
Finance cost (3,613) (6,400) (5,781) (5,239) (4,696)
Profit before tax 42,844 31,727 60,884 67,991 74,988
Tax (current + deferred) (12,452) (8,738) (17,413) (19,445) (21,447)
Profit / (Loss) for the period 30,392 22,989 43,471 48,546 53,541
Reported net profit 30,392 22,989 43,471 48,546 53,541
Adjusted net profit 30,392 22,989 43,471 48,546 53,541
Growth (%) (31) (24) 89 12 10
Balance Sheet (Standalone)
Y E March (Rs m ) FY15 FY16 FY17E FY18E FY19E
Share capital 12,685 12,685 12,685 12,685 12,685
Reserves & surplus 278,510 293,164 327,475 366,861 409,716
Net Worth 291,195 305,849 340,160 379,546 422,401
Total Liabilities 237,737 223,971 196,051 197,675 200,196
Non‐current liabilities 132,026 108,974 107,041 102,489 97,897
Long‐term borrowings 78,145 57,813 57,813 52,387 46,961
Deferred tax liabilities 33,087 40,471 40,471 40,471 40,471
Other Long term liabilities 20,794 10,690 8,757 9,631 10,465
Long term provisions 0 0 0 0 0
Current Liabilities 105,712 114,997 89,010 95,185 102,299
Short term borrowings 2,338 0 0 0 0
Trade payables 33,205 28,616 28,826 31,283 32,891
Other current Liabilities 53,611 70,307 45,184 50,802 56,308
Total Liabilities and Equity 528,932 529,820 536,211 577,220 622,597

Non Current Assets 398,879 411,229 417,439 442,331 465,906
Net Block 321,197 321,493 327,703 352,595 376,170
Goodwill 0 0 0 0 0
Non‐current Investments 43,224 45,343 45,343 45,343 45,343
Long‐term loans and advances 34,459 44,393 44,393 44,393 44,393
Other non current Assets 0 0 0 0 0
Current Assets 130,053 118,591 118,772 134,889 156,691
Inventories 20,811 17,449 16,477 18,524 19,715
Sundry Debtors 30,945 27,276 24,363 26,633 29,383
Cash & Bank Balances 11,416 17,939 21,777 32,701 47,672
Other current Assets 31,764 23,141 23,369 24,245 27,136
Loans & Advances 35,117 32,786 32,786 32,786 32,786
Total (Assets) 528,932 529,820 536,211 577,220 622,597


Cash Flow Statement (Standalone)

Depreciation 9,743 13,131 13,790 15,108 16,426
Change in working capital (29,947) 19,674 (22,330) 982 283
Total tax paid (5,029) (1,354) (17,413) (19,445) (21,447)
Others (14,073) (10,048) (11,098) (12,239) (14,209)
Cash flow from operations (a) 3,538 53,129 23,833 52,397 56,041
Change in investments (2,194) (2,119) 0 0 0
Others 18,351 20,274 26,839 29,355 30,784
Cash flow from investing (b) (2,737) 4,728 6,839 (10,645) (9,217)
Free cash flow (a+capex) (15,357) 39,703 3,833 12,397 16,040
Debt raised/(repaid) (14,778) (22,670) 0 (5,426) (5,426)
Dividend (incl. tax) 0 0 0 0 0
Others (14,199) (18,561) (24,902) (26,275) (27,259)
Cash flow from financing (c) (15,895) (51,334) (26,835) (30,827) (31,852)
Net change in cash (a+b+c) (15,094) 6,523 3,838 10,925 14,972
Reconciliation of Other balances 1 0 0 0 (2)
Cash as per Balance Sheet 11,416 17,939 21,777 32,701 47,672

Key Ratios (Standalone )
Adjusted EPS (Rs) 24.0 18.1 34.3 38.3 42.2
Growth (30.5) (24.4) 89.1 11.7 10.3
EBITDA margin 8.3 8.2 14.1 14.1 14.1
EBIT margin 8.1 7.3 14.3 14.3 14.3
Net Margin 5.4 4.4 9.4 9.5 9.6
Tax rate (%) 29.1 27.5 28.6 28.6 28.6
Debt/Equity(x) 0.3 0.2 0.2 0.1 0.1
Net margin 5.4 4.4 9.4 9.5 9.6
Asset turnover (x) 1.1 1.0 0.9 0.9 0.9
ROE(%) 10.8 7.7 13.5 13.5 13.4
RoCE (%) 11.1 9.1 15.5 15.8 15.9
Valuation (x)
PER 20.2 26.6 14.1 12.6 11.4
PCE 15.3 17.0 10.7 9.6 8.8
Price/Book 2.1 2.0 1.8 1.6 1.5
EV/EBITDA 14.5 15.3 9.9 8.8 7.8


Mahindra & Mahindra (M&M)

Inline with estimates. Maintain BUY with target of 1721
Q3FY17 results of Mahindra & Mahindra were largely in line with our estimates.
Current Previous M&M reported 2% YoY revenue growth at Rs. 110.1 bn in Q3FY17 led by 2% volume
CMP : Rs 1,278 growth. During the quarter, Tractor segment volumes were up by 22.3% YoY while
Rating : BUY Rating : BUY automotive segment volumes were down by 8% YoY. However, EBITDA margin
Target : Rs 1,721 Target : Rs 1,701 expanded by 22 bps YoY to 12%. PAT margin was up 184 bps at 10.2% on the back
(NR‐Not Rated) of 26% jump in other income and due to an item amounting to Rs 3.6 bn being
STOCK INFO recorded as an exceptional item. This income was a result of sale of investments in
INDEX subsidiary companies and a joint venture Adjusted PAT including tax impact
BSE 500520 (assuming tax at 27%) stands at Rs 8.32 bn which was in line with our estimate of
NSE M&M Rs 8.56 bn.
Bloomberg MM IN
Rs.mn Q3FY17 Q2FY17 Q3FY16 Q‐o‐Q % Y‐o‐Y % INSPL Q3FY17e Variance(%)
Reuters MAHM.NS
Revenue 1,10,103 1,06,091 1,10,043 5.1 2.0 1,10,472 ‐0.3
Sector Auto EBIDTA 12,994 12,331 12,801 5.4 1.5 13,664 ‐4.9
Face Value (Rs) 5 PAT 11,123 11,633 9,154 ‐29.4 21.5 8,567 29.8
Equity Capital (Rs mn) 3,105 Source: Company Filings; IndiaNivesh Research
Mkt Cap (Rs mn) 7,93,539
Concall Highlights
52w H/L (Rs) 1,509 / 1,091
 The management feels that effect of demonetization was higher in the rural area than
Avg Daily Vol (BSE+NSE) 9,76,847
urban area and by the end of March the company would crossover the temporary
SHAREHOLDING PATTERN % blip. Auto segment has already recovered.
(as on Dec, 2016)
 Price increase on account of BSIV would be Rs. 15,000‐20,000 on UVs and LCVs and 7‐
Promoters 26.8 8% or Rs. 0.15 mn on MHCV. Price increase for the month of January 2017 for Auto
Public & Others 73.2 and Tractor is 0.7% and 1% respectively. On YTD basis the same stood at 1.7% and 1%

respectively.
STOCK PERFORMANCE(%) 3m 6m 12m  Cost control programs have had a positive impact on other expenses going down on
MM IN Equity (3.3) (11.8) 8.1 YoY basis.
SENSEX 3.0 2.0 19.3  Steel prices (Cold Rolled), Rubber prices, Plastic prices (Polypropylene) are expected
Source: Bloomberg, IndiaNivesh Research to go up. The increase in material cost has been around 1% for the quarter and the

MM IN Equity v/s SENSEX company has tried to pass on most of them.
 Loss of excise benefit on Haridwar plant post Q4FY16 had an impact of Rs. 2 bn or 200
bps in Q3FY17, which was partly offset by IPS (incentive promotion scheme) of Rs.
260 mn. IPS is for Chakan facility as per the agreement with government of
Maharashtra.
 Inventory level is 60 days for tractor at plant and dealer level while for Auto it is 52‐53
days at plant and dealer level.
 The company announced it plans to make an investment of Rs. 15 bn at its Nasik and
Igatpuri plants in Maharashtra. The project constitutes development and
Source: Bloomberg, IndiaNivesh Research manufacture of its new product. The investment in the Nasik plant will be towards

Daljeet S. Kohli
manufacture of vehicles while investment in the Igatpuri plant will be for
Head of Research manufacturing and supply of engines. These projects qualify as “Ultra Mega Project”
Tel: +91 22 66188826 as conferred by Government of Maharashtra. The capacity increase would be from
daljeet.kohli@indianivesh.in 0.16 mn vehicles to 0.21 mn vehicles.

 U321 is a MPV which is being developed in their technical center at Detroit and will
Rajiv Bharati be manufactured in Nashik and would be launches in next one year. S201 (Tivoli
Research Analyst
platform) is expected to be launched during H2FY19. From the SsangYong stable,
Tel: 022‐66188818
Y400 will be launched in May 2017 and Q200 in Q2FY18. The company would launch
rajiv.bharati@indianivesh.in
the gasoline variant of XUV500 in the next quarter and will also launch the same in
Sriram R Scorpio later depending on response received by XUV500.
Research Associate
Tel:+91 22 61151621 Financial Performance

r.sriram@indianivesh.in
YE March
Net Sales EBITDA Adj.PAT Adj.EPS (Rs)
EBITDA
RoE(%) Adj.P/E(x) EV / EBITDA (x)
(Rs Mn) Margin
FY15
3,89,454 41,734 33,211 53.5 10.7 18.4 23.9 19.5
FY16 4,08,850 45,702 31,675 51.0 11.2 15.4 25.1 17.7
FY17E 4,55,151 52,342 38,155 61.4 11.5 16.5 20.8 15.1
FY18E 5,31,669 58,484 41,840 67.4 11.0 16.0 19.0 13.5
FY19E 6,01,077 66,118 45,720 73.6 11.0 15.6 17.4 11.8


Q3FY17 Result Update | Mahindra & Mahindra (M&M)
 The company’s cash tax rate for the quarter is at 21.5% cash. However the book tax rate
has been 27.5%. The benefit of R&D expense deduction which was 200% is now at 150%.
Hence, the effective tax rate will go up by 4%. It is guided to hover around 31%‐ 31.5% in
next fiscal.
 The management indicated that deadline for BSIV is likely to be based on
production and not registration and that is the intent of the law.
 Two Acquisitions done during the quarter:
o M&M acquired 75.1% stake in Turkish farm equipment company,
Hisarlar, for Rs. 1.3 bn targeting European market. The transaction
is expected to be completed by April 2017. Hisarlar, having market
share of 45% in soil preparation equipment, has about 870
employees in its two production units. It generated revenue of 205
mn Turkish Lira in 2015 (35% exports).
o M&M also acquired 60% stake in Netherland based fruit
distribution company OFD Holding BV through Mahindra Agri
Solutions Ltd for Rs. 360 mn (5 mn euros). OFD reported sales of 71
mn euros in the year ended October 2016. The deal is already
closed.
 M&M is also looking to merge its 2W division Mahindra Two Wheelers Ltd (91.26%
subsidiary) with the parent entity.

Valuation and Outlook
The passenger vehicles volumes have gone down as a result of increased
competition from UV space. LCV segment especially pickup trucks (Bolero) is yet to
see a recovery while the industry three wheeler growth both on the domestic as well
as on the exports front has been sluggish. Hence, on the Automotive front M&M has
not been able to deliver the expected numbers. However, good monsoon this year
brought cheers to the tractor industry, which as per the management is at the cusp
of the beginning of three year upcycle followed by 2 year down cycle. We believe
M&M is proxy to play on the above theme available at attractive valuation. We have
tweaked our estimates for FY17E & FY18E. We also introduce FY19E financials & roll
over valuation to FY19. At CMP of Rs. 1278 stock is trading at 19xFY18e and
17.4xFY19e standalone EPS. We maintain BUY rating on the stock with target price of
Rs. 1721 (valuing standalone business Rs. 1231 per share (16xFY19e earnings) and
Rs. 543 for other subsidiaries (25% discount to current market valuation).

Result Update | Mahindra & Mahindra (M&M)
apter Title
Quick Fundamentals (Rs. Mn) Q3FY17 Q2FY17 Q3FY16 QoQ % YoY %

Volume (Units) 1,97,356 1,87,837 1,93,554 5.1 2.0
Revenue 1,08,601 1,04,117 1,08,964 4.3 ‐0.3
Average Realization (Rs) 5,50,277 5,54,293 5,62,964 ‐0.7 ‐2
Other Operating Income 1,503 1,974 1,079 ‐24 39
Total Income 1,10,103 1,06,091 1,10,043 4 0
Cost of Revenues 97,110 93,760 1,03,272 4 ‐6
Raw Materials 79,586 75,981 79,722 5 0
Other Expenditure 10,669 11,201 11,131 ‐5 ‐4
Employee Expenses 6,855 6,578 6,389 4 7
EBIDTA 12,994 12,331 12,801 5 2
Depreciation 3,389 3,340 2,851 1 19
EBIT 9,605 8,991 9,950 7 ‐3
Interest Expense/(Income) 381 257 474 48 ‐19
Other income 1,101 7,075 873 ‐84 26
PBT 10,324 15,809 10,350 ‐35 0
Exceptional Item 3,638 0 628 NA NA
PBT (after exceptional Item) 13,962 15,809 12,107 ‐12 15
Provision for taxation 2,840 4,176 2,953 ‐32 ‐4
PAT 11,123 11,633 9,154 ‐4 22
Adjusted PAT Including Tax 8,322 11,633 8,526 ‐28 ‐2
Adj. EPS (RS.) 13.40 18.73 13.89 ‐28 ‐4
Margin % Basis Points (BPS)
EBITDA 12.0 11.8 11.7 12 22
EBIT 8.8 8.6 9.1 21 ‐29
PBT 9.5 15.2 9.5 ‐568 1
PAT 10.2 11.2 8.4 ‐93 184
Adj. PAT 7.7 11.2 7.8 ‐351 ‐16

Cost Analysis (% of Revenue) Q3FY17 Q2FY17 Q3FY16 bps QoQ bps YoY
Raw Materials (adj.) 73.3% 73.0% 73.2% 31 12
Employee Expenses 6.3% 6.3% 5.9% ‐1 45
Other Expenses 9.8% 10.8% 10.2% ‐93 ‐39

Segment‐wise Performance
During Q3FY17, automotive revenue was down 7% YoY as a result of 8% YoY drop in
volumes while revenue from farm equipment business was up by 22.3% YoY on
35.7% YoY pickup in volumes. Automotive segment’s EBIT margin contracted by 270
bps YoY to 4.5% while tractor segment’s margin expanded by 197 bps YoY to 17.3%.

Segment Q3FY17 Q2FY17 Q3FY16 QoQ % YoY %
Revenue
Auto 74530.8 78300.9 80171.8 ‐4.8 ‐7.0
Farm 43221.4 35342.1 35927.4 22.3 20.3
Others 89.3 82.3 52.8 8.5 69.1
Total 117841.5 113725.3 116152.0 3.6 1.5
EBIT
Auto 3354.5 4514.7 5776.8 ‐25.7 ‐41.9
Farm 7459.1 6253.2 5492.3 19.3 35.8
Others 5.5 5.2 19.1 5.8 ‐71.2
Total 10819.1 10773.1 11288.2 0.4 ‐4.2
Margin Basis Points(bps)
Auto 4.5 5.8 7.2 ‐127 ‐270
Farm 17.3 17.7 15.3 ‐44 197

Income Statement (Standalone)

Net sales 3,89,454 4,08,850 4,55,151 5,31,669 6,01,077
Growth (%) (4) 5 11 17 13
Operating expenses (3,47,720) (3,63,148) (4,02,809) (4,73,186) (5,34,959)
Operating profit 41,734 45,702 52,342 58,484 66,118
EBITDA 41,734 45,702 52,342 58,484 66,118
Growth (%) (11.6) 9.5 14.5 11.7 13.1
Depreciation (9,749) (11,086) (12,902) (14,723) (17,941)
Other income 11,847 9,236 13,000 13,780 14,607
EBIT 43,832 43,852 52,441 57,541 62,784
Finance cost (2,143) (1,553) (1,200) (1,000) (1,000)
Tax (current + deferred) (8,478) (10,624) (13,086) (14,701) (16,064)
Profit / (Loss) for the period 33,211 31,675 38,155 41,840 45,720
Reported net profit 33,211 31,675 38,155 41,840 45,720
Adjusted net profit 33,211 31,675 38,155 41,840 45,720
Growth (%) (11) (5) 20 10 9
Balance Sheet (Standalone)
Y E March (Rs m ) FY15 FY16 FY17E FY18E FY19E
Share capital 2,957 2,963 2,963 2,963 2,963
Reserves & surplus 1,90,719 2,14,109 2,42,042 2,73,423 3,07,714
Net Worth 1,93,676 2,17,072 2,45,005 2,76,386 3,10,677
Total Liabilities 1,36,954 1,47,051 1,63,604 1,78,733 1,92,566
Non‐current liabilities 56,952 62,541 67,291 67,291 67,291
Long‐term borrowings 40,453 33,394 38,144 38,144 38,144
Deferred tax liabilities 9,797 22,426 22,426 22,426 22,426
Other Long term liabilities 6,702 6,721 6,721 6,721 6,721
Long term provisions 0 0 0 0 0
Current Liabilities 80,002 84,510 96,313 1,11,442 1,25,275
Short term borrowings 1,063 3,481 3,481 3,481 3,481
Trade payables 64,325 67,636 75,264 87,440 98,714
Other current Liabilities 0 0 0 0 0
Total Liabilities and Equity 3,30,630 3,64,123 4,08,610 4,55,119 5,03,243

Non Current Assets 2,47,003 2,71,530 2,91,479 3,23,313 3,53,583
Net Block 81,082 95,184 1,00,133 1,16,967 1,32,237
Goodwill 0 0 0 0 0
Non‐current Investments 1,31,382 1,35,204 1,50,204 1,65,204 1,80,204
Long‐term loans and advances 0 0 0 0 0
Other non current Assets 34,539 41,142 41,142 41,142 41,142
Current Assets 83,628 92,593 1,17,130 1,31,806 1,49,660
Inventories 24,376 26,897 30,556 35,339 39,815
Sundry Debtors 25,580 25,121 26,865 31,012 35,080
Cash & Bank Balances 20,648 22,970 43,501 46,479 53,553
Other current Assets 0 0 0 0 0
Loans & Advances 13,024 17,605 16,208 18,975 21,212
Total (Assets) 3,30,631 3,64,123 4,08,610 4,55,119 5,03,243


Cash Flow Statement (Standalone)

Depreciation 9,749 11,086 12,902 14,723 17,941
Change in working capital (1,235) (4,553) 7,797 3,432 3,052
Total tax paid (7,578) 2,005 (13,086) (14,701) (16,064)
Others 2,143 1,553 1,200 1,000 1,000
Cash flow from operations (a) 44,768 52,389 60,053 60,994 67,713
Change in investments (17,583) (3,822) (15,000) (15,000) (15,000)
Others (3,473) (6,603) 0 0 0
Cash flow from investing (b) (40,833) (35,613) (32,851) (46,557) (48,211)
Free cash flow (a+capex) 24,990 27,202 42,203 29,438 34,502
Debt raised/(repaid) 1,063 (4,641) 4,750 0 0
Dividend (incl. tax) 8,719 9,265 10,894 12,239 13,373
Others (18,314) (19,103) (22,315) (23,698) (25,803)
Cash flow from financing (c) (12,791) (14,454) (6,671) (11,459) (12,429)
Net change in cash (a+b+c) (8,857) 2,322 20,531 2,978 7,073
Reconciliation of Other balances 0 0 0 0 0
Cash as per Balance Sheet 20,648 22,970 43,501 46,479 53,553

Key Ratios (Standalone )
Adjusted EPS (Rs) 53.5 51.0 61.4 67.4 73.6
Growth (10.7) (4.6) 20.5 9.7 9.3
EBITDA margin 10.7 11.2 11.5 11.0 11.0
EBIT margin 11.3 10.7 11.5 10.8 10.4
Net Margin 8.5 7.7 8.4 7.9 7.6
Tax rate (%) 20.3 25.1 25.5 26.0 26.0
Debt/Equity(x) 0.2 0.2 0.2 0.2 0.1
Net margin 8.5 7.7 8.4 7.9 7.6
Asset turnover (x) 1.2 1.2 1.2 1.2 1.3
ROE(%) 18.4 15.4 16.5 16.0 15.6
RoCE (%) 18.3 16.4 17.5 17.4 17.2
Valuation (x)
PER 23.9 25.1 20.8 19.0 17.4
PCE 18.5 18.6 15.5 14.0 12.5
Price/Book 4.1 3.7 3.2 2.9 2.6
EV/EBITDA 19.5 17.7 15.1 13.5 11.8


J.B. Chemicals &

Pharmaceuticals Ltd.
Rating & target price changed to UR from Buy & target price of Rs 413.

DF double digit growth maintained while EF remains impacted by currency
Current Previous related issues. Traction in US business likely to gain momentum post USFDA
CMP : Rs 333 approval. Rating & target price changed to UR from Buy & target price of Rs
Rating : UR Rating : BUY 413.
Target : Rs UR Target : Rs 413 Rs.mn Q3FY17 Q3FY16 Y‐y (%) Q2FY17 Q‐q (%) INSL Est Variance(%)
(NR‐Not Rated) Revenue 2,701 2,746 (1.6) 2,931 (7.9) 3,060 (11.7)
EBIDTA 380 579 (34.3) 515 (26.1) 627 (39.3)
STOCK INFO
Adjusted PAT 344 467 (26.3) 449 (23.3) 531 (35.1)
INDEX Rep. PAT 357 468 (23.8) 451 (20.9) 531 (32.8)
BSE 506943 Source: Company, IndiaNivesh Research
NSE JBCHEPHARM
Bloomberg JBCP IN Sales maintained: JB Chemicals and Pharmaceuticals (JBCP IN) reported numbers
Reuters JBCH.NS which were lower than our estimates on all counts with sales being impacted by
Sector Pharma currency fluctuations & margins impacted by higher employee & other costs as
Face Value (Rs) 2
company has started expansion in its DF business. However, the company
maintained double digit growth in Domestic Formulation (DF) at 12.4% Y‐y slightly
52w H/L (Rs) 404 / 228 better than our expectation despite demonetization. EF (export formulation) sales
Avg Daily Vol (BSE+NSE) 100,113 remain impacted by currency related issues in various export markets. EF sales to

other regulated markets & countries other than Russia & CIS de‐grew by 3% y‐y
STOCK PERFORMANCE(%) 3m 6m 12m while sales to Russia/CIS increased by 12% y‐y.
JBCP IN Equity (6.7) 17.9 35.1
SENSEX 3.0 2.0 19.3 Gross margin maintained but EBITDA margin declined sharply: While gross margin
was maintained at62% (99 bps down y‐y , up 91 bps q‐q) but EBITDA margin took a
JBCP IN Equity v/s SENSEX sharp beating decreasing 699 bps y‐y (down 348 bps q‐q). The sharp decline in
EBITDA margin is on account of steep increase in employee costs & other expenses.
The company has started expansion of its DF business for which it has hired a large
number of field force. Since the productivity of newly appointed personnel will take
a few months the margins may take a hit in future quarters too. While we await
more clarity on this from the management we believe this is in continuation to
expansion of facility that the company had undertaken in past few quarters. In our
previous note we mentioned that JBCL has spent Rs 1.4bn on capacity expansion to
cater to growing DF & exports markets. In its press release the company has
Daljeet S. Kohli mentioned that most of the incremental costs are fixed in nature & are likely to
Head of Research remain high in Q4Y17E too.
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in Despite abnormally low tax outgo at the rate of 10% v/s 23‐27% in previous periods

the adj PAT declined by 26% y‐y & 23% q‐q.

Traction in US business: In our last quarter result review note, we had mentioned

that traction from US business shall be soon visible. The company has got approval

for Glipizide ER tablets & expects to launch this product in Q4FY17E. In Q2FY17 also

JBCL received approval for Oxybutynin ER tablets. JBCL has 3 more ANDA
applications pending for approval from USFDA.

Rating & target price under review (UR): Before Q3FY17 results, we had Buy rating
on JBCL with target price of Rs 413 (15xFY18E EPS). At CMP of Rs 333, the stock is
trading at 13x FY17E EPS of Rs25.3 & 12.x FY18E EPS of Rs 27.50 However in view of
much below expectation performance of Q3FY17 & guidance that Q4FY17E may also
be impacted, we will be reviewing our estimates for both FY17E & FY18E.To get
better understanding of future trajectory we will need to speak to management too.
Hence temporarily we are suspending our rating & target price on the stock. We
are changing rating & target price to UR (under review) from BUY.


Q3FY17 First Cut Analysis | J.B. Chemicals & Pharmaceuticals Ltd.
Quarterly financial summary
(Standalone financials as per Ind As))
Particulars (Rs Mn) Q3FY17 Q3FY16 Y‐o‐Y (%) Q2FY17 Q‐o‐Q (%)
Net sales 2,701 2,746 (1.6) 2,931 (7.9)
Consumption of raw material 1,027 1,018 1.0 1,141 (10.0)
Empoyee Cost 470 387 21.5 447 5.1
Other Expenditure 823 763 7.9 828 (0.6)
Total Expenditure 2,321 2,167 7.1 2,416 (4.0)
EBITDA 380 579 (34.3) 515 (26.1)
Depreciation & Ammortization 114 102 11.1 112 1.6
EBIT 267 476 (44.0) 403 (33.8)
Interest 24 29 (15.2) 20 19.5
Other Income 141 162 (13.0) 230 (38.9)
Pre‐tax Profit 383 610 (37.1) 613 (37.5)
Tax 39 142 (72.8) 164 (76.3)
Net Profit (adj) 344 467 (26.3) 449 (23.3)
Adjustments /OIC 12 1 1,508.5 2 427.5
Net Profit (Reported) 357 468 (23.8) 451 (20.9)
EPS (Dil, Rs) 4.05 5.50 (26.3) 5.28 (23.3)
O/ Share ( In Million) 85 85 85
Key Ratios
Particulars (%) Q3FY17 Q3FY16 Bps Q2FY17 Bps
Gross Margins 62.0 62.9 (99) 61.1 90
EBITDA margin 14.1 21.1 (699) 17.6 (348)
Net Margin 12.8 17.0 (426) 15.3 (256)
Material cost/Net Sales 38.0 37.1 99 38.9 (90)
Employee Cost/ Net Sales 17.4 14.1 331 15.3 215
Other Expenditure/ Net Sales 30.5 27.8 269 28.2 222
Tax Rate 10.1 23.3 (1,323) 26.7 (1,663)
Revenue mix
Particulars (Rs mn) Q3FY17 Q3FY16 Y‐o‐Y (%) Q2FY17 Q‐o‐Q (%)
Domestic formulation 1,195 1,063 12.4 1,258 (5.1)
Exports Formulation 1,238 1,231 0.6 1,314 (5.8)
API 151 286 (47.1) 207 (26.8)
Others 117 166 (29.3) 153 (23.2)
Total 2,701 2,746 (1.6) 2,931 (7.9)


Idea Cellular Ltd.
First PAT loss in 40 quarters since IPO. Maintain HOLD with a revised
target price to Rs. 102
Q3FY17 First Cut Analysis February 13, 2017

Current Previous Consolidated Financial Snapshot
CMP : Rs. 110 INSPL
Rating : HOLD Rating : HOLD
Rs. mn Q3FY17 Q2FY17 QoQ% Q3FY16 YoY%
Estimates
Variance Comments
Revenue 86,607 92,989 ‐6.9% 90,014 ‐3.8% 89,012 ‐2.7% Inline

Target : Rs. 102 Target : Rs. 88
EBITDA 21,655 28,290 ‐23.5% 31,285 ‐30.8% 25,813 ‐16.1% 18% jump

STOCK INFO in Network
EBITDA 25.0% 30.4% 34.8% 29.0%
BSE 532822
Margin% Expenses
NSE IDEA pulled the
Index S&P BSE 100 EBITDA
Bloomberg
Reuters
IDEA IN
IDEA.BO
margin
down
Sector Telecom ‐ Services Other 437 1,291 ‐66.2% 308 41.8%
Face Value (Rs) 10
Mkt Cap (Rs bn) 395
Income
Net Profit (3,839) 804 7,642 (1,710) 124.5% Lower
52w H/L (Rs) 128 / 66
PAT ‐4.4% 0.9% 8.5% ‐1.9% EBITDA

Margin% resulted in
SHAREHOLDING PATTERN % EPS (1.1) 0.2 2.1 (0.5) 124.5% lower PAT
(as on Dec. 2016)
Promoters 42.45 Source: Company, IndiaNivesh Research
Public 57.55
Source: BSE

 Idea Cellular Ltd (Idea) Q3FY17 result was disappointing, well below our
STOCK PER. (%) 3m 6m 12m estimates. Revenue although was inline was negatively impacted by lesser than
IDEA 57.9 18.4 11.2
SENSEX 5.7 1.0 21.1 expected net subscriber addition during the quarter. 18% rise in Network

Expenses led to a sharp decline in EBITDA margins (25% in Q3FY17 vs 34.7 in
IDEA v/s SENSEX Q3FY16, 34.7% in Q2FY17). Considering the sensitivity of telecom sectors
margins on topline growth, PAT fell even more sharply compounded by fall in
operating margins sharply. Drop in other income relative to Q2FY17 exposed
the sensitivity even further. Top‐line de‐grew by 3.8% Y/Y (+6.9% Q/Q) to Rs.
86.6 bn against INSL estimates of Rs. 89 bn. The revenue de‐growth was owing
to 5.3% Y/Y (+7.3% Q/Q) increase in total volume minutes while the ARPM fell
by 6.9% Y/Y (‐10.6% Q/Q).
Source: Capitaline, IndiaNivesh Research
 During the quarter, minutes of usage per user per month (MoU) declined ‐2%
Y/Y (+4.6% Q/Q) to 385 mins (v/s 393 mins in Q3FY16 and 368 mins in Q2FY17).
Average revenue per user (APRU) fell at Rs. 173 (v/s Rs. 175 in Q2FY16; down
Daljeet S. Kohli 1.2% Q/Q and Rs. 181 in Q1FY17; down 4.5%). ARPM went‐up to 40.7 paisa (v/s
Head of Research 44.8 paisa in Q3FY16 & 47 paisa in Q2FY17).
 EBITDA stood at Rs. 21.6 bn (INSL est: Rs 25.8 bn), down 30.8% Y/Y (down 23.5%
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in Q/Q). The consolidated EBITDA margin stood at 25% (v/s 34.8% in Q3FY16 and
30.4% in Q2FY17). Loss after tax (after minority interest and share of associates)
Rajiv Bharati for quarter stood at Rs. 3.8 bn (INSL est. loss of Rs. 1.7 bn).
Research Analyst
Tel: +91 22 66188818
rajiv.bharati@indianivesh.in Valuations
With recent sharp run‐up in the stock in response to merger talks with Vodafone,
the current price captures a lot of synergistic benefits of the potential merger. We
hope to get more clarity on the same in post results conference call. We have
tweaked our estimates for FY17E & FY18E. We also introduce FY19E financials &
roll over valuation to FY19. At CMP of Rs. 110, the stock is trading at 7.2x FY18E
and 5.7x FY19E EV/EBITDA estimates. We maintain HOLD rating on the stock with a
revised TP of Rs. 102 per share (assigning an EV/EBITDA multiple of 5.5x FY19E).

IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511

Q3FY17 First Cut Analysis (contd...)

Focus Charts:
Av. MoU per user improved by 4.6% QoQ, although a lower ARPU‐ARPM trajectory: APRM dip on expected lines
than expected subscriber addition restricted the impact to
7.3% QoQ on total MoUs
425 240 240 44 45 45 44 45 46 46 45 45 45 45 46 48 47 48
41 41 41 41 41
38 38 37 37 36
408 35 35 35 35 37 36
34 33 33 34 33
32 33
406
400 401 400 180 180 36
398 397 30
Paise per min
393
388 386 387
Minutes
384 384 385
Rupees
379
376
379 120 24
375 120
368 368
359
60 12
350 60
156
148
158
167
174
164
169
173
181
176
179
179
182
175
176
179
181
173
157
131
126
132
143
147
139
145
157
165
162
171
185
196
189
199
202
199
196
210
‐ 0
325 0
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
ARPU‐Blended (LHS) ARPM (RHS) Voice ARPM (RHS)
Voice traffic (bn min) Av. MOU (LHS)
Source: Company, IndiaNivesh Research Source: Company, IndiaNivesh Research

Fall in data subscribers was disappointing as ARMB continues …although 3G subscription still remains low and so was the
its downward trajectory, 15.9 paisa pe MB in Q3FY17 case with 4G data subscribers
40 140 32 20%
28
25 24
23
30 105 24 21 15%
20
paise per MB
mn GB
17
15
mn
20 70 16 13 10%

49 54 49 11
37 41 41 44 9
26 31
34 31 34 33 7
10 26 25 28 35 8 6 5%
18 19 22 3 4 4
2 2 3
0 ‐ 0 0%
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Data Subscribers (mn) ARMB‐Blended (LHS) Data traffic (RHS) 3G Subscribers (LHS) 3G subs as % of total subs (RHS)

…albeit bulk of the data volume traffic is now on 3G for Idea Cell site addition profile: Bulk of the addition is happening on
Cellular with 4G expected to catch up as full roll out happens 4G
by next fiscal
80 80% 24
70 72 21
62
60 54 56 60% 17 17
18
43
in thousand
36 13
40 40%
mn GB
31 11
25 12 10
20 9
8 7
20 13 16 20% 7
8 9 5 5 5 5
3 4 5 5 6 6 4 4 5 4
3 3 2 3
0 0% 2
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
0
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
3G data volume (LHS)
4G data volume (LHS)
3G data volume as % of total volume (RHS) Cell Site Addition ‐ Cumulative Cell Site Addition ‐ 4G

3G, 4G and Broadband update
 In last 12 months, Idea has expanded its network sites by 27%, adding 62,917 network
sites (2G+3G+4G). They have added 9,847 2G, 38,917 3G and 33,954 4G network sites.
Total network sites currently stands at 2,32,977. With 3G+4G site cumulatively at 1,00,615
sites, management’s indicative target of 2,00,000 sites at an average capex of Rs. 1.5 mn
per site would require another ~Rs. 150 bn capex going ahead to achieve 1 bn coverage.
CWIP was at Rs. 124 bn by the end of 9MFY17.

Idea Cellular Ltd. (contd...) February 13, 2017 | 2

Q3FY17 First Cut Analysis (contd...)

Capex Update
 Idea spent of Rs. 20 bn in 32FY17 (same as Q2FY17), totaling Rs. 50.8 bn in 9MFY17, in line
with FY17 capex guidance of Rs. 65‐70 bn (v/s Rs. 75 bn in FY16), covering 11 circles of 4G
and 13 circles of 3G. Capex in Q3 was partly funded by cash (Rs. 12.3 bn). The company’s
net debt stood at Rs. 491 bn (v/s Rs. 384 bn in FY16). Management earlier in Q2FY17
indicated that FY17 will be the peak capex year and will taper off by FY19.
Management’s remark on Jio
 ”Despite an unprecedented outgoing voice rate fall, the lure of free offerings resulted in
lower than normal volume elasticity with the quarterly sequential voice minutes growing
only by 7.3% to 210 billion minutes (vs. 195.5 billion minutes in Q2FY17), that too led by
double digit growth in incoming call volume. The higher blended voice realization rate fall
was also an outcome of the tsunami of minutes terminating on Idea’s network from the
new operator resulting in overall higher ratio of subsidized incoming minutes recovered at
below cost IUC settlement rates The impact of free promotions was even more pronounced
on mobile data business. Idea, for the first time, witnessed a decline of 5.5 million mobile
data customers on sequential quarter basis….”

Quarterly Performance
Q3FY17 Q3FY16 YoY% Q2FY17 QoQ%
Particulars (Rs mn)
(Consolidated) (Consolidated) Change (Consolidated) Change
Net Sales 86,607 90,014 ‐3.8% 92,989 ‐6.9%
Other Op. Income 20 83 14
Total Income 86,627 90,097 ‐3.9% 93,002 ‐6.9%
Total Expenditure 64,973 58,812 10.5% 64,712 0.4%
Operating Profit 21,655 31,285 ‐30.8% 28,290 ‐23.5%
Other Income 437 308 41.8% 1,291 ‐66.2%
EBITDA 22,091 31,593 ‐30.1% 29,581 ‐25.3%
Depreciation 19,653 16,231 21.1% 19,543 0.6%
EBIT 2,438 15,362 ‐84.1% 10,038 ‐75.7%
Interest 9,669 3,657 10,044
EBT (7,230) 11,705 ‐161.8% (6)
Tax (2,248) 4,063 ‐155.3% 247
PAT (4,982) 7,642 ‐165.2% (253)
Minority Interest and Share of associates (1,143) ‐ (1,057)
Net Income (3,839) 7,642 ‐150.2% 804
Margins(%)
EBITDA Margin 25.0% 34.7% 30.4%
NPM ‐4.4% 8.5% 0.9%
EPS (1.07) 0.22 0.22

Idea Cellular Ltd. (contd...) February 13, 2017 | 3

Analyst Meet Update
13 February 2017 Power Grid (PGCIL)
Solid performance continues for successive quarters, post attending
Q3FY17 Analyst Meet, revised our estimates with a new TP of Rs 236
Current Previous We attended the Q3FY17 Post Result Analyst Meet of Power Grid. The
CMP : Rs 200 company’s standalone Q3FY17 numbers were mostly in line with our
estimates. Revenue was up 23.5% YoY to Rs 66.3bn, 3.1% higher than our
Rating : BUY Rating : BUY
estimate of Rs 64.3bn helped by strong growth in its transmission,
(NR-Not Rated, UR-Under Review)
consultancy and telecom businesses. EBITDA grew 24.5% YoY to Rs 59.5bn
STOCK INFO which was 3.6% higher than our estimate of Rs 57.5bn. EBITDA margin
INDEX expanded 71bps YoY to 89.9% slightly higher than our estimate of 89.5%.
BSE 532898 PAT grew by 20.2% YoY to Rs 19.3bn against our estimate of Rs 19.6bn
NSE POWERGRID
helped by higher EBITDA and strong revenue growth.
Bloomberg PWGR IN
Reuters PRGD.NS
Sector Power Rs Mn (standalone) Q3FY17 Q2FY17 Q3FY16 Q-o-Q % Y-o-Y % Inspl Q3FY17E Variance %
Face Value (Rs) 10 Revenue 66,298 62,549 53,695 6.0 23.5 64300 3.1
Equity Capital (Rs mn) 52,316 EBIDTA 59,592 56,041 47,882 6.3 24.5 57548 3.6
Mkt Cap (Rs mn) 10,46,316 PAT 19,300 18,720 16,063 3.1 20.2 19611 -1.6
52w H/L (Rs) 209 / 129 EPS (RS.) 3.7 3.6 3.1 3.1 20.2 3.7 -1.6
Avg Daily Vol (BSE+NSE) 5,601,646 Margin % BPS Margin % BPS
EBITDA % 89.9 89.6 89.2 29 71 89.5 39
SHAREHOLDING PATTERN % PAT % 29.1 29.9 29.9 -82 -80 30.5 -139
(as on Dec. 2016) Source: Company Filings; IndiaNivesh Research
Promoters 57.9
Public & Others 42.1
 Transmission business revenue grew 21.6% YoY to Rs 62.1bn on the
STOCK PERFORMANCE(%) 3m 6m 12m
back of higher capitalisation in the preceding four quarters. Telecom
Power Grid 12.2 14.8 42.4
SENSEX 4.0 0.9 17.9 business revenue increased by 26.6% YoY to Rs 1.3bn while revenues
Source: Bloomberg, IndiaNivesh Research from consultancy business saw a growth of 43.8% YoY to Rs 1.6bn.
Power Grid v/s SENSEX
200  Power Grid has a targeted capex of Rs 1.1tn in the 12th Five Year Plan
150
(FY13-17), which is up 2x from the 11th Plan. The company is on track
100
50 for its targeted capex, with ~95% of the projects already under
0
implementation. Out of Rs 225.5bn annual capex plan for FY17, Power
Feb-16
Sep-16
Mar-16
May-16
Dec-16
Nov-16
Oct-16
Jul-16
Jan-17
Apr-16
Jun-16
Aug-16
Grid has already achieved Rs 179.08bn till date.

PWGR IN SENSEX
Source: Bloomberg, IndiaNivesh Research Valuation

At CMP of Rs 200, Power Grid is trading at 1.9xFY18E BV. We had a BUY
rating on the stock with a target price of Rs 202 (1.9x FY18E BV), which has
Daljeet S. Kohli
Head of Research already been achieved. After attending the post result Analyst Meet and
Tel: +91 22 66188826 listening to management commentary, we have revised our estimates for
FY17E and FY18E. We now value the stock at a higher target P/BV multiple of
2.3x FY18E, which gives us a price target of Rs 236. We continue to be bullish
Monami Manna
Research Analyst on the stock from a medium to longer term perspective and maintain our
Tel: +91 22 66188848 BUY rating with a revised target price of Rs 236.
monami.manna@indianivesh.in
Financial Performance
YE March EBITDA
Net Sales EBITDA Adj.PAT Adj.EPS (Rs) RoE(%) Adj.P/E(x) EV EBITDA (x)
(Rs Mn) Margin
FY14 1,52,303 1,29,563 44,974 8.6 85.1 13.1 23.3 14.0
FY15 1,76,585 1,51,262 50,484 9.6 85.7 13.1 20.7 12.6
FY16 2,13,523 1,86,056 60,146 11.5 87.1 14.0 17.4 10.8
FY17E 2,62,943 2,27,564 73,876 14.1 86.5 15.6 14.2 9.1
FY18E 3,21,237 2,76,345 90,076 17.2 86.0 16.8 11.6 7.8

Q3FY17 Analyst Meet Update | Power Grid (PGCIL)
Q3FY17 and 9MFY17 Financial Performance

Quick Fundamentals (Rs. Mn)
Power Grid (Standalone) Q3FY17 Q2FY17 Q3FY16 Q-o-Q % Y-o-Y % 9MFY17 9MFY16 Y-o-Y %
Consultancy Income 1,641 1,540 1,141 6.55 43.8 4,385 3,025 45.0
Transmission Income 62,068 59,457 51,057 4.4 21.6 1,79,908 1,42,700 26.1
Telecom Income 1,300 1,298 1,027 0.2 26.6 3,703 2,875 28.8
Other operating revenue 1,288 253 470 408.5 174.3 2,049 653 214.0
Total Revenue 66,298 62,549 53,695 6.0 23.5 1,90,045 1,49,253 27.3
Cost of Revenues 6,705 6,507 5,813 3.0 15.3 20,215 17,008 18.9
Transmission, admin and other expenses 3,576 3,954 3,398 -9.6 5.3 11,818 9,833 20.2
Staff cost 3,130 2,553 2,416 22.6 29.5 8,397 7,175 17.0
EBIDTA 59,592 56,041 47,882 6.3 24.5 1,69,830 1,32,245 28.4
Depreciation 19,653 18,769 15,850 4.7 24.0 55,995 44,108 27.0
EBIT 39,939 37,273 32,032 7.2 24.7 1,13,835 88,138 29.2
Interest Expense 16,426 15,876 12,884 3.5 27.5 47,480 36,154 31.3
Rate regulated income/(expenditure) -84 -42 -14 -130 46
Other income 1,578 2,253 1,069 -30.0 47.6 5,225 3,335 56.7
Exceptiional Items 0 0 0 0 0
PBT 25,006 23,608 20,202 5.9 23.8 71,451 55,365 29.1
Provision for taxation 5,706 4,888 4,140 16.7 37.8 15,413 11,566 33.3
PAT 19,300 18,720 16,063 3.1 20.2 56,038 43,799 27.9
Other comprehensive income/(expenses) -297 -13 104 -140 -119
Total Comprehensive Income 19,003 18,707 16,167 1.6 17.5 55,898 43,681 28.0
EPS (RS.) 3.69 3.58 3.07 3.1 20.2 10.71 8.37 27.9
Margin % Margin % Margin % Basis Points (BPS) Margin % Margin % BPS
EBITDA % 89.9 89.6 89.2 29 71 89.4 88.6 76
EBIT % 60.2 59.6 59.7 65 59 59.9 59.1 85
PBT % 37.7 37.7 37.6 -3 9 0.0 0.0 0
PAT % 29.1 29.9 29.9 -82 -80 29.5 29.3 14
Analyst Meet Highlights

 Power Grid has already test charged ±800kV HVDC Champa-Kurukshetra
Pole-I, and the same is expected to be commissioned by first week of
March 2017. This is one of the largest projects of PGCIL and will transfer
3000MW of power between Champa and Kurukshetra. The above
project is being implemented in two phases; Phase-I, Pole-I is 1500MW
worth ~Rs 60bn, while Phase-II, Pole-II is 1500MW worth ~Rs 32bn.
PGCIL has plans to upgrade the above project to 6000MW in Phase-II.
 Some of the major projects commissioned by PGCIL during Q3FY17,---

1) -400/+600MVAr SVC at Ludhiana
2) ER-SR interconnection of Angul-Srikakulam-Vemagiri
3) Strengthening in SR of Nagapattinam PS-Salem-Dharmapuri and
Tuticorin-Dharmapuri
4) Strengthening in Western UP of Dehradun-Baghpat-Saharanpur
and Dehradun-Roorkee
 Power Grid commissioned/capitalised Rs 207bn worth of projects in

FY17 till date (April 2016-January 2017) including TBCB projects. If we
include its Champa-Kurukshetra HVDC project (which is already
completed but yet to be commissioned, commissioning likely to be in
first week of March 2017), then the total would be Rs 267bn.
 Power Grid was awarded contracts worth Rs 219.4bn during 9MFY17 (Rs
134.6bn in 9MFY16), while it got investment approval of Rs 281.3bn
during 9MFY17 (Rs 94.9bn in 9MFY16).

12th Plan (FY13-FY17) Performance of Power Grid

 With the rising capex lined up for transmission, we are optimistic about
the future growth prospects of PGCIL. Power Grid’s targeted capex of Rs
1.1tn in 12th Five Year Plan (FY13-17) is up 2x from 11th Plan, and the
company is on track with ~95% of the projects already under
implementation. Out of Rs 225.5bn annual capex plan for FY17, Power
Grid has already achieved Rs 179.08bn till date.
Source: Company Presentation; IndiaNivesh Research
 Power Grid has achieved strong capitalisation for successive quarters.

The company capitalised cumulative Rs 159.7bn for the 9MFY17, with
rising capitalisation for each successive quarters. Even in the current
quarter of Q4FY17, for the month of January 2017 the company
achieved Rs 47.3bn capitalisation which is ~70% of its third quarter
(Q3FY17) capitalisation.
 Power Grid’s capex to capitalisation ratio have been steadily increasing

over the last several quarters. The company aims to maintain the ratio
at 1x or close to 1x. Going forward Power Grid is looking to increase the
ratio to more than 1x in 12th Plan, as it envisage higher capitalisation to
the tune of Rs 300bn p.a.

Future Outlook for Power Grid

 At present Power Grid has Rs 1390bn of projects in hand. Out of which
Rs 1100bn are ongoing projects, while Rs 130bn are new projects and
another Rs 160bn are TBCB (Tariff Based Competitive Bidding) projects
(as per empowered committee estimate).
 Power Grid has good investment potential in the transmission TBCB
space to the tune of Rs 140bn over FY18-19. Out of these, at present
there are seven inter-state transmission projects under TBCB worth
Rs 87bn under various stages of bidding. Another ten intra-state
transmission projects in four states worth Rs 52.65bn are also under
bidding stage.
 Recently Power Grid has taken interest in the Railways sector also. The
company is already implementing a pilot project for 761rkm for railways.
Railways have a target to achieve electrification of 90% tracks in next five
years from the current levels of less than 50%. Also 24,000rkm will be
electrified by 2021 (target of 2000 in FY17, 4000 in FY18, 6000 annually
during FY19-21). With renewed thrust of Government on upgradation
and modernisation of railways, Power Grid envisages good opportunity
for it in the railways sector going forward.
Valuation
With the rising capex lined up for transmission, we are optimistic about the
future growth prospects of Power Grid. The company has a stable regulated
business model. Power Grid’s cost‐plus model assures a certain return (15.5%
RoE on projects) with no fuel supply risks, thereby providing stability to
earnings. We expect the company to get the benefit of higher capitalisation
and show steady earnings growth in the medium term. At CMP of Rs 200,
Power Grid is trading at 1.9xFY18E BV. We had a BUY rating on the stock with
a target price of Rs 202 (1.9x FY18E BV), which has already been achieved.
After attending the post result Analyst Meet and listening to management
commentary, we have revised our estimates for FY17E and FY18E. We now
value the stock at a higher target P/BV multiple of 2.3x FY18E, which gives us
a price target of Rs 236. We continue to be bullish on the stock from a
medium to longer term perspective and maintain our BUY rating with a
revised target price of Rs 236.

Income Statement (consolidated)

Y E March (Rs mn) FY 14 FY 15 FY 16 FY 17E FY 18E
Net Sales 152303 176585 213523 262943 321237
Growth % 20.2 15.9 20.9 23.1 22.2
Expenditure 22740 25323 27468 35379 44892
Employee Remuneration & Benefits 9417 11244 10846 11714 12768
Transmission, Admin and other Expenses 13323 14079 16622 23665 32124
EBITDA 129563 151262 186056 227564 276345
Growth % 19.4 16.7 23.0 22.3 21.4
EBITDA Margin % 85.1 85.7 87.1 86.5 86.0
Depreceation 39957 51733 63022 76022 91022
EBIT 89606 99529 123034 151542 185323
EBIT Margin % 58.8 56.4 57.6 57.6 57.7
Interest & Finance Charges 31675 40812 50860 62098 75901
Deferred Revenue Expenditure Written Off 0 0 0 0 0
Other Income 4911 5745 4284 6499 8324
Prior Period Expenditure/Income/Forex 205 417 9 0 0
PBT 62637 64045 76450 95943 117746
Tax 17663 13561 16304 22067 27670
Effective Tax Rate % 28.2 21.2 21.3 23.0 23.5
Adjusted PAT 44974 50484 60146 73876 90076
Growth% 7.2 12.3 19.1 22.8 21.9
PAT Margin % 29.5 28.6 28.2 28.1 28.0
Balance Sheet (consolidated)

Share Capital 52316 52316 52316 52316 52316
Reserves & Surplus 292280 332072 377361 420328 485398
Less: Miscellaneous Expenditure 0 0 0 0 0
Net Worth 344596 384388 429677 472644 537714
Total debt 808275 916990 1037986 1102291 1200302
Net defered tax liability 24430 24905 25245 25245 25245
Total Liabilities 1177301 1326282 1492908 1600180 1763261
Gross Block 1045936 1326648 1571576 1579536 1757136
Less Depreciation 231951 283684 346706 422728 513750
Net Block 813985 1042964 1224870 1156809 1243387
Capital Work in Progress 236069 210556 227454 407561 497917
Construction Stores & Advances 176253 132052 103507 144231 174388
Investments 9987 2196 398 398 398
Deferred foreign currency fluctuation asset 0 28038 38318 38318 38318
Current Assets 136040 128307 149881 166898 188578
Inventories 7124 7188 8482 15358 17809
Sundry Debtors 15785 22069 28222 32893 34608
Cash & Bank Balance 44175 29886 35879 39065 54181
Other Current Assets 23426 23448 31632 31632 31632
Loans & Advances 45530 45716 45667 47950 50348
Current Liabilities & provisions 195034 217832 251519 314034 379724
Net Current Assets -58994 -89525 -101638 -147136 -191146
Mis Exp not written off 0 0 0 0 0
Total assets 1177301 1326282 1492908 1600180 1763261

Cash Flow Statement (consolidated)

PBT 62637 64045 76450 95943 117746
Adjustment for:
Depreciation 39957 51733 63022 76022 91022
Interest(Net) 31675 40812 50860 62098 75901
Tax -17663 -13561 -16304 -22067 -27670
Changes in working capital 59271 9583 26630 39615 50057

Cash flow from operations 175877 152612 200658 251611 307055
increase in gross block -239936 -280712 -244928 -7961 -177600
Pur/ Sale of Investment 1488 7791 1798 0 0

Capital Work in Progress -46856 25513 -16898 -180107 -90356
Construction Store & Advances -19167 44201 28546 -40724 -30157
Cash flow from investments -304471 -203207 -231482 -228792 -298113
Equity Raised 0 0 0 0 0
Interest -31675 -40812 -50860 -62098 -75901
Loans availed or (repaid) 157513 108715 120997 64305 98010
Dividend Paid -17770 -8835 -10526 -12928 -15763
Share premium 48080 0 0 0 0
Cash flow from Financing 156148 59068 59612 -10721 6347
Net change in cash 27555 8473 28788 12098 15289
Cash at the beginning of the year 16620 44175 29886 35879 39065
Others 0 -22763 -22794 -8912 -173
Cash at the end of the year 44175 29885 35879 39065 54181
Key Ratios (consolidated)

Y E March FY 14 FY 15 FY 16 FY 17E FY 18E
EPS (Rs) 8.6 9.6 11.5 14.1 17.2
Cash EPS (Rs) 16.2 19.5 23.5 28.7 34.6
DPS (Rs) 3.4 1.7 2.0 2.5 3.0
BVPS 65.9 73.5 82.1 90.3 102.8
ROCE 5.9 5.4 5.5 6.5 7.3
ROE 13.1 13.1 14.0 15.6 16.8
EBITDA Margin % 85.1 85.7 87.1 86.5 86.0
Net Margin % 29.5 28.6 28.2 28.1 28.0
EV/sales(x) 11.9 10.8 9.4 7.9 6.7
PER (x) 23.3 20.7 17.4 14.2 11.6
P/BV (x) 3.0 2.7 2.4 2.2 1.9
P/CEPS (x) 12.3 10.2 8.5 7.0 5.8
EV/EBITDA (x) 14.0 12.6 10.8 9.1 7.8
Dividend yield % 1.7 0.8 1.0 1.2 1.5
M cap/sales (x) 6.9 5.9 4.9 4.0 3.3
Debt/equity (x) 2.3 2.4 2.4 2.3 2.2
Net debt/ebitda (x) 5.2 5.2 4.8 4.1 3.7
Debtor Turnover Ratio 37.3 45.0 47.6 45.0 38.8
Inventory Turnover Ratio 16.8 14.7 14.3 21.0 20.0

Auto Monthly
Royal Enfield, Baleno, S‐Cross, Vitara Breeza, Ciaz and Tiago shine.
Revival seen in volumes of SML and Ashok Leyland
January 2017

Daljeet S. Kohli
Highlights of the month: January 2017 was a mixed bag for Auto sector with 2Ws, 3Ws
Head of Research
and LCVs clearly seeing continued stress. Smaller player like SML Isuzu did well in LCV
Tel: +91 22 66188826 space. M&HCV overall volumes were up but still far from what could signal recovery.
daljeet.kohli@indianivesh.in Mopeds continue to spring a surprise helping TVS Motors’ tide over the tricky
demonetization phase. Brands with long waiting period like Royal Enfield, Vitara
Sriram R
Research Associate
Brezza, Baleno, S‐Cross continue to do well.
Tel: +91 22 61151621

r.sriram@indianivesh.in Passenger Vehicles
 PV cars segment did well clocking 12.5% YoY growth during the month led by ~19% YoY
Rajiv Bharati growth seen by the market leader Maruti. Renault grew by 23.3% YoY during the
Research Analyst month, witnessing a market share gain from 1.6% to 5.3% in YTD FY17. Tata Motors’ too
Tel: +91 22 66188818 did well, 11.4% YoY growth, riding on the success of Tiago.
rajiv.bharati@indianivesh.in  UV segment grew by 20% YoY in Jan’17 led by 2x growth seen by Maruti, riding on its

strong performance of Vitara Brezza and S‐Cross. Maruti has seen a marked jump in its
market share in this segment from 15.4% to 25.8% in YTD FY17 to come at par with the
market leader M&M with 29% market share in YTD FY17 as against 37% in same period
last year. M&M volume in UV segment fell by 7.5%. Tata Motor’s also seem to be
recovering with 75% YoY growth during the month with Safari, Sumo and Sumo Grande
doing well.
 Vans segment recorded ~22% YoY in Jan‐17 led by Maruti (Eeco, Omni), market leader
(84% in YTD FY17) by far. Performance of all other players slipped.
 Overall PV segment clocked 14.6% YoY volume growth during Jan’17.

Commercial Vehicles (M&HCV)
 Passenger carrier recorded 9.7% YoY drop in Jan‐17 sales volume, as sub‐segment
leader Ashok Leyland’s volume slipped by 30% YoY (44% fall in 12‐16.2 MT segment).
The second largest player in this segment, Tata Motors recorded flat volumes. Volvo‐
Eicher continues its good run clocking 49% YoY growth, everything being domestic.
 Goods carrier performed slightly better with 6.8% YoY growth in Jan‐17 sales volume.
The sub‐segment leader Tata Motos’ volume remained flat while the second largest
player Ashok Leyland reported 18% YoY growth. Volvo‐Eicher and M&M had a decent
run with 8.5% and 5.5% YoY growth respectively.
 Overall M&HV segment clocked 4.3% YoY volume growth during Jan’17.

Commercial Vehicles (LCV)
 Passenger carrier remained flat (up 1.2% YoY) in Jan‐17. Ashok Leyland (up 32%), SML
Isuzu (up 24%) and M&M (up 12%) have fared better than the peers in this sub‐
segment. Segment leader Force Motors (T1, Citiline) reported 4.7% growth while Tata
Motors fell 6.8% YoY.
 Goods carrier performed was particularly under stress with the segment leaders M&M
and Tata Motors witnessing 11% and 14% YoY drop respectively. Ashok Leyland with
less that 9% market share in this sub‐segment reported 4.7% YoY growth. Reasonable
smaller player in this sub‐segment SML Isuzu gre by a smart 41% YoY.
 Overall LCV segment clocked 7.8% YoY volume de‐growth during Jan’17 while the CV
segment (M&HCV and LCV combined) witnessed a drop of 2.4% YoY.
IndiaNivesh Securities Limited|Research Analyst SEBI Registration No. INH000000511
Three Wheelers
 Passenger carrier was the most impacted segment in the Auto space recording a sharp
32% fall in volumes sold during Jan’17. All the players fell almost to the same quantum
in this sub‐segment.
 Goods carrier also followed suite of its passerger carrier sub‐segment but for the
launch of Bajaj Maxima C which lifted the overall volumes. Overall Goods Carrier
volumes were up 7.3% YoY (down 16% YoY if Bajaj’s performance is excluded).
 Overall 3W segment clocked 27% YoY volume de‐growth during Jan’17.

Two Wheelers
 Scooters slipped 14% YoY in Jan‐17, as sub‐segment leader Honda’s (58% market
share) volume slipped by 3% YoY while Hero’s (14% market share) volume fell 59%.
TVS Motors (14.5% market share) sprung a surprise clocking 13.2% YoY growth.
 Motorcycles fell by 7% YoY in Jan‐17, as sub‐segment leader Hero’s (50% market
share), Bajaj’s (18% market share) and and TVS (7% market share) volume slipped by
4.5%, 16% and 29% YoY respectively. Honda (14% market share) sprung a surprise
clocking 13.8% YoY growth. Royal Enfield continues to defy the trend recording 25%
YoY growth during the month.
 Mopeds volume surged 30% YoY in Jan‐17 supporting the sole player TVS Motor’s
overall 2W volumes.
 Overall 2W segment clocked 7.7% YoY volume de‐growth during Jan’17.
 During the month, tractor sales witnessed decent performance as M&M reported 6%
growth while Escorts reported 16% YoY growth.

Monthly Auto Numbers | January 2017

Eicher Motors Ltd: M&HCV sales up 20% YoY, Royal Enfield sales up 25%
YoY, NOT RATED
Change Dec‐ Change Change
M&HCVs Jan‐17 Jan‐16 YTD FY17 YTD FY16
YoY 16 MoM YoY
Total Sales 4,449 3,707 20% 3,946 13% 44,974 39,214 15%
Domestic 3,796 3,415 11% 3,246 17% 38,168 34,063 12%
Exports 653 292 124% 700 ‐7% 6,806 5,151 32%
Change Change Change

Royal Enfield(2W) Jan‐17 Jan‐16 Dec‐16 YTD FY17 YTD FY16
YoY MoM YoY
Total Sales 59,676 47,710 25% 57,398 4% 547,938 407,678 34%
Domestic 58,133 47,140 23% 56,316 3% 535,821 401,165 34%
Exports 1,543 570 171% 1,082 43% 12,117 6,513 86%
M&HCV Royal Enfield
80% 7,000 70% 70,000
60% 6,000 60% 60,000
5,000 50% 50,000
40%
4,000 40% 40,000
20%
3,000 30% 30,000
0% 20% 20,000
2,000
‐20% 1,000 10% 10,000
‐40% 0 0% 0
Total Sales Growth YoY Total Sales Growth YoY
Source: Company filings, IndiaNivesh Research Source: Company filings, IndiaNivesh Research

Eicher Motors witnessed revival in MHCV sales volume during Jan 2017. However, sales of
Tata Motors are to be seen for overall recovery in the Industry. Royal Enfield recorded the
highest sales in this month for YTD FY 17.

Ashok Leyland Ltd.: Total sales up 7% YoY, NOT RATED
Segment Jan‐17 Jan‐16 Dec‐16 YTD FY17 YTD FY16
YoY MoM YoY
Total Sales 14,872 13,886 7% 10,731 39% 112,317 110,349 2%
M&HCV 12,056 11,208 8% 8,782 37% 86,709 85,721 1%
LCV 2,816 2,678 5% 1,949 44% 25,608 24,628 4%
M&HCV LCV
50% 14,000 30% 4,000
40% 12,000 20% 3,500
30% 10,000 3,000
20% 10% 2,500
8,000
10% 0% 2,000
6,000
0%
‐10% 1,500
4,000
‐10% 1,000
‐20% 2,000 ‐20% 500
‐30% 0 ‐30% 0

Spurt in volumes seen during the last month. Revival seen in MHCV volumes for Ashok
Leyland as was the case with Eicher Motors

Atul Auto Ltd: Total sales down 37% YoY. Maintain HOLD with a TP of Rs. 400
YoY MoM YoY
Total Sales 2,349 3,708 ‐37% 2,556 ‐8% 32,759 37,080 ‐12%
Three Wheeler Sales
6,000 20%
10%
5,000
0%
4,000
‐10%
3,000 ‐20%
‐30%
2,000
‐40%
1,000
‐50%
0 ‐60%
Total Sales Growth YoY

Source: Company filings, IndiaNivesh Research
The company continues to de‐grow. Atul Auto recorded the worst performance during
January 2017 in the past 9 months.

Escorts Ltd: Total sales up 16% YoY, NOT RATED
YoY MoM YoY
Total Sales 3,652 3,140 16% 3,187 15% 52,460 42,772 23%
Domestic 3,507 3,089 14% 3,043 15% 51,581 42,181 22%
Exports 145 51 184% 144 1% 879 591 49%

Total Sales
10,000 60%
9,000 50%
8,000
40%
7,000
6,000 30%
5,000 20%
4,000 10%
3,000
0%
2,000
1,000 ‐10%
0 ‐20%

Tractor segment continues to perform well. Overall volume on YTD basis up by 23% YoY

SML ISUZU Ltd: Total sales up 20% YoY, NOT RATED
YoY MoM YoY
Total Sales 1,002 838 20% 1,021 ‐2% 11,945 10,034 19%
Total Sales
2,500 70%
60%
2,000 50%
40%
1,500 30%
20%
1,000 10%
0%
500 ‐10%
‐20%
0 ‐30%

The company continues to do well in LCV segment after the recovery last month.

M&M Ltd.: Total sales down 6% YoY, maintain BUY with a target price of Rs.
1701
YoY MoM YoY
PVs 20,096 22,088 ‐9% 16,698 20% 190,247 185,704 2%
LCVs 13,272 13,774 ‐4% 13,678 ‐3% 137,055 131,134 5%
M&HCV 618 611 1% 476 30% 4,528 4,347 4%
3 wheeler 3,056 4,220 ‐28% 3,458 ‐12% 43,818 46,565 ‐6%
Export 2,261 3,096 ‐27% 2,053 10% 32,232 29,628 9%
Sales Excl. Tractors 39,303 43,789 ‐10% 36,363 8% 407,880 397,378 3%
Tractors 15,909 15,065 6% 14,047 13% 228,648 185,335 23%
Total Sales 55,212 58,854 ‐6% 50,410 10% 636,530 582,723 9%

Passenger Vehicles (Domestic) Commercial Vehicles (Domestic)
30,000 40% 20,000 20%
30% 18,000 15%
25,000
20% 16,000
10%
20,000 14,000
10% 5%
12,000
15,000 0% 10,000 0%
‐10% 8,000
10,000 ‐5%
‐20% 6,000
‐10%
5,000 4,000
‐30%
2,000 ‐15%
0 ‐40%
0 ‐20%
Dec‐15 Feb‐16 Apr‐16 Jun‐16 Aug‐16 Oct‐16 Dec‐16
Dec‐15 Feb‐16 Apr‐16 Jun‐16 Aug‐16 Oct‐16 Dec‐16

Average performance was seen on tractor volumes as compared to Eicher. UV segment de‐
grew by 9% YoY. Company is facing serious competition from other players like Maruti,
Renault and Hyundai in the UV segment.

Tata Motors Ltd.: Total sales down 1% YoY, maintain HOLD with a target
price of Rs. 560
YoY MoM YoY
CV's 28,521 30,670 ‐7% 24,998 14% 258,928 258,705 0%
PVs 12,907 10,728 20% 10,827 19% 125,446 106,732 18%
Total Sales 46,349 47,034 ‐1% 40,944 13% 437,842 411,973 6%
Domestic Sales 41,428 41,398 0% 35,825 16% 384,374 365,437 5%
Export 4,921 5,636 ‐13% 5,119 ‐4% 53,468 46,536 15%
Passenger Vehicles Commercial Vehicles
250% 30,000 40% 50,000
200% 20%
25,000 40,000
150% 0%
20,000 ‐20%
100% 30,000
15,000 ‐40%
50% ‐60% 20,000
0% 10,000
‐80%
5,000 10,000
‐50% ‐100%
‐100% 0 ‐120% 0

The company reported strong volume growth on PV segment on account of sales generated
by Tiago. However, weak performance was reported on MHCV front. TATA Motors has the
lion’s share in MHCV segment and this could mean that the revival in MHCV will take some
more time.

Maruti Suzuki India Ltd.: Total sales up 27% YoY, maintain BUY with target
price of Rs. 7001
YoY MoM YoY
PVs 103,276 87,757 18% 81,092 27% 909,594 888,210 2%
Mini Segment 37,928 34,206 11% 31,527 20% 349,929 360,804 ‐3%
Compact Segment 58,818 48,120 22% 45,854 28% 506,021 435,695 16%
Mid‐Size 6,530 5,431 20% 3,711 76% 53,644 38,160 41%
Uvs + Vans 30,492 18,626 64% 25,296 21% 285,753 190,131 50%
LCV 166 0 26 460
Total Sales 144,396 113,606 27% 117,908 22% 1,298,560 1,182,452 10%
Domestic Sales 133,934 106,383 26% 106,414 26% 1,195,807 1,078,341 11%
Export 10,462 7,223 45% 11,494 ‐9% 102,753 104,111 ‐1%
 Company’s compact segment (Swift, Ritz, Desire, Baleno, Celerio) grew by 22% YoY to
58,818 units. Sales in compact segment were largely driven by newly launched Baleno.
The waiting period for Baleno is 24 weeks.
 UV sales jumped by 101% YoY to 16,313 units mainly on account of new launched Vitara
Brezza and S‐Cross. Maruti Suzuki’s new offering in the compact, SUV segment Vitara
Brezza has received great response since its launch on March 8, 2016. Currently, the
waiting period for Brezza is 18 weeks. Seeing the massive demand, the company plans to
increase its production to 0.12 mn/annum. The Maruti Vitara Brezza also outsold its
closest competitor – Ford EcoSport and Hyundai Creta.
 Mini segment (Alto, WagonR), was up 11% YoY to 37,928 units dueled by sales of newly
launched “Ignis”.
 Maruti is aiming for double digit growth in the current fiscal year. The Gujarat plant
which will be functional in the fourth quarter and has tentative plans to produce 0.25 mn
Vehicles. Maruti’s new offering, Ignis, has already hit the market and has a waiting period
of 10 weeks.
 Production on the first line at the new plant at Gujarat will start during the Q4FY17. The
total capacity is 1.5 mn, of which the company plans to commission 0.25 mn in CY18.
 Maruti announced a price hike of Rs 1,500‐Rs 8,014 across its portfolio owing to increase
in commodity, transportation and administrative costs. The previous price hike was done
in August 2016 in the range of Rs. 1,500‐Rs. 5,000 with Baleno price hike by Rs. 10,000
and Brezza by Rs. 20,000.
 Maruti has also discontinued sales of the premium crossover S‐Cross in its lower variants
citing segmental customer behaviour who typically choose highest variant that has all the
features.
Total Sales
175,000 45.00%
140,000 30.00%
105,000 15.00%
70,000 0.00%
35,000 ‐15.00%
0 ‐30.00%
Jan‐16 Mar‐16 May‐16 Jul‐16 Sep‐16 Nov‐16 Jan‐17


Hero Motocorp: Total Sales down 14% YOY. Maintain BUY with TP of Rs. 3875
YoY MoM YoY
2 Wheelers 487,088 563,348 ‐14% 330,202 48% 5,529,186 5,474,150 1%

Total Sales
800,000 40%
700,000 30%
600,000 20%
500,000 10%
400,000 0%
300,000 ‐10%
200,000 ‐20%
100,000 ‐30%
0 ‐40%

This was the third consecutive month in which the sales dipped on YoY basis. Motorcycle
volumes on a YTD basis were up by 1% YoY. During the month of January, Hero Motocorp
launched the new Glamour in Argentina. This was the first global product launch for Hero
MotoCorp.

Bajaj Auto Ltd.: Total volumes were down 18% YoY; maintain HOLD with a
target price of Rs. 3020
YoY MoM YoY
Motorcycle 211,824 252,988 ‐16% 203,312 4% 2,730,739 2,858,721 ‐4%
3 Wheeler 30,093 40,951 ‐27% 22,217 35% 389,501 456,341 ‐15%
Total Sales 241,917 293,939 ‐18% 225,529 7% 3,120,240 3,315,062 ‐6%
Domestic Sales 135,118 161,870 ‐17% 119,725 13% 1,926,159 1,775,911 8%
Export 106,729 132,069 ‐19% 105,804 1% 1,194,011 1,539,151 ‐22%
 Domestic two wheeler sales were down by 15% YoY at 119,803 vehicles while motorcycle
exports were down by 18% YoY at 92,021 vehicles, dragging the overall motorcycle sales
by 16% YoY
 3W sales have come down to 30,093 units in January, down 27% YoY. It had clocked a
high of 48,276 units in October. 3W domestic and exports fell by 27% and 26% YoY
respectively during Jan 2017. 3W sales have fallen in 9 out of trailing 12 months on a YoY
basis.
Two wheelers Three Wheelers
30% 350,000 50% 60,000
25% 40%
20% 300,000 30% 50,000
15% 250,000 20%
10% 10% 40,000
5% 200,000 0%
30,000
0% 150,000 ‐10%
‐5% ‐20% 20,000
‐10% 100,000 ‐30%
‐15% 50,000 ‐40% 10,000
‐20% ‐50%
‐25% 0 ‐60% 0


TVS Motors Ltd.: Total sales down 1% YoY, helped by 30% YoY jump in
mopeds volume. Maintain SELL with a target price of Rs. 270
YoY MoM YoY
2 Wheeler 202,209 201,233 0% 179,508 13% 2,400,478 2,130,765 13%
Scooter 70,049 62,552 12% 55,536 26% 716,906 677,952 6%
Motorcycle 60,275 83,374 ‐28% 58,189 4% 922,421 852,938 8%
Mopeds 71,885 55,307 30% 65,783 9% 761,151 599,875 27%
3 Wheeler 4,850 7,252 ‐33% 5,393 ‐10% 58,669 96,628 ‐39%
Total Sales 207,059 208,485 ‐1% 184,901 12% 2,459,147 2,227,393 10%
Domestic Sales 172,949 173,662 0% 154,207 12% 2,110,916 1,838,768 15%
Export 34,110 34,823 ‐2% 30,694 11% 348,231 388,625 ‐10%
 Motorcycle volumes were down 28% YoY at 60275 units falling for third straight month,
replicating the trend seen in Hero and Bajaj.
 Scooter sales were up 12% YoY, recording positive YoY growth after a gap of two months.
Moped sales were up 30% YoY lifting the overall two wheeler volumes for the month.
 The company has been riding on strong moped voumes for the past few months. The
current run rate hence might not be susutainable according to commentary made by the
management.

Motorcycles Scooters
54% 150,000 36% 100,000
36% 120,000 24% 80,000
18% 90,000 12% 60,000
0% 60,000 0% 40,000
‐18% 30,000 ‐12% 20,000
‐36% 0 ‐24% 0


Mopeds Three Wheelers
60% 100,000 15% 10,000
45% 80,000 0% 8,000
30% 60,000 ‐15% 6,000
15% 40,000 ‐30% 4,000
0% 20,000 ‐45% 2,000
‐15% 0 ‐60% 0


Force Motors Ltd: Total volumes down 14% YoY, maintain BUY with target
price of Rs. 4322
YoY MoM YoY
SCV & LCV 1,293 1,483 ‐13% 1,309 ‐1% 14,953 14,837 1%
SCV & LCV Domestic 1,116 1,295 ‐14% 1,131 ‐1% 12,868 13,099 ‐2%
SCV & LCV Export 177 188 ‐6% 178 ‐1% 2,085 1,738 20%
UV, SUV & Tractor 1,060 1,245 ‐15% 1,001 6% 10,817 11,247 ‐4%
UV, SUV & Tractor Domestic 1,046 1,234 ‐15% 990 6% 10,685 11,157 ‐4%
UV, SUV & Tractor Export 14 11 NA 11 27% 132 90 47%
Total 2,353 2,728 ‐14% 2,310 2% 25,770 26,084 ‐1%
Domestic 2,162 2,529 ‐15% 2,121 2% 23,553 24,256 ‐3%
Exports 191 199 ‐4% 189 1% 2,217 1,828 21%
 The company sold 2353 vehicles during Jan 2017. Domestic sales across the board were
down over 14% YoY. Force Motors produced 2280 vehicles during the month vs 1688
units in Dec 2016 and 2947 units in Jan 2016.
UV, SUV & Tractors SCV & LCV
2,500 UV, SUV & Tractors 3,500 SCV and LCV
1,981
2,782
2,000 2,800
1,528
1,489
1,918
1,832
1,796
1,230
1,217
1,147
1,120
1,607
1,500
1,544
2,100
1,535
1,060
1,035
1,001
1,446
1,402
1,358
1,309
1,293
806
785
763
1,000 1,400
859
500 700
0 0
Jan‐16 Mar‐16 May‐16 Jul‐16 Sep‐16 Nov‐16 Jan‐17 Jan‐16 Mar‐16 May‐16 Jul‐16 Sep‐16 Nov‐16 Jan‐17


Valuations:
Company Sales EBITDA PAT Mcap P/E(x) M cap/ EBITDA% NPM% CMP Target Current Previous
Name FY18e FY18e FY18e (Rs. Mn) FY18e Sales(x) FY18e FY18e Rs. Price Rs. Recom. Recom.
(Rs. Mn) (Rs. Mn) (Rs. Mn) FY18e
Atul Auto 5,541 803 532 9,386 17.6 1.7 14.5 9.6 428 400 HOLD HOLD
Bajaj Auto 261,816 58,647 45,988 805,685 17.5 3.1 22.4 17.6 2784 3020 HOLD HOLD
Ashok
238,280 27,495 15,826 271,212 17.1 1.1 11.5 6.6 95 NA NA NA
leyland*
Force Motors 42,413 3,885 2,589 55,162 21.3 1.3 9.2 6.1 4233 4322 BUY BUY
Eicher
151,483 26,640 21,747 649,982 29.9 4.3 17.6 14.4 23893 NA NA NA
Motors*
Hero
317,984 54,784 39,271 652,013 16.6 2.1 17.2 12.3 3265 3875 BUY BUY
MotoCorp
M&M 533,453 64,014 45,545 802,265 17.6 1.5 12.0 8.5 1292 1701 BUY BUY
Maruti Suzuki
791,928 127,982 88,093 1,859,937 21.1 2.3 16.2 11.1 6157 7001 BUY HOLD
India
Tata Motors 3,350,072 521,774 201,658 1,643,364 8.1 0.5 15.6 6.0 513 560 HOLD HOLD
TVS Motor
151,211 12,173 6,914 193,836 28.0 1.3 8.1 4.6 408 270 SELL SELL
Company
SML Isuzu* 16,044 1,445 902 18,079 20.0 1.1 9.0 5.6 1249 NA NA NA
Escorts Ltd* 47,653 4,380 2,855 48,191 16.9 1.0 9.2 6.0 393 NA NA NA
*Consensus Estimates; Source: IndiaNivesh Research

Result Today in our INSL Universe
 Allahabad Bank
 Axiscades Engineering Technologies Ltd
 SKF India Ltd.
 Sunteck Realty Ltd.


Disclaimer:
This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries,
group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to
be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material
included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document
has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered,
transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This
document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past
performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients
particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board
of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading
volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal,
accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever
nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions
expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have
holdings in the stocks mentioned in the document.
This report is based / focused on fundamentals of the Company and forward‐looking statements as such, may not match with a report on a company’s technical analysis report
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this
report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed in this report: Daljeet S Kohli, Kamal Sahoo, Santosh Yellapu, Rajiv Bharati, Sriram R, Monami Manna and Saptarshi Mukherjee.
Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:

Disclosure of Interest Statement
1 Details of business activity of IndiaNivesh Securities Limited (INSL) INSL is a Stock Broker registered with BSE, NSE and MCX ‐ SX in all the major segments viz. Cash, F & O and CDS
segments. INSL is also a Depository Participant and registered with both Depository viz. CDSL and NSDL.
Further, INSL is a Registered Portfolio Manager and is registered with SEBI.
2 Details of Disciplinary History of INSL No disciplinary action is / was running / initiated against INSL
3 Details of Associates of INSL Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment
Research Section ‐http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10 link). Also, please refer
to the latest update on respective stocks for the disclosure status in respect of those stocks. INSL and its
affiliates may have investment positions in the stocks recommended in this report.
4 Research analyst or INSL or its relatives'/associates' financial interest No (except to the extent of shares held by Research analyst or INSL or its relatives'/associates')
in the subject company and nature of such financial interest
5 Research analyst or INSL or its relatives'/associates' actual/beneficial Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment
ownership of 1% or more in securities of the subject company, at the Research Section ‐ http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10 link). Also, please refer
end of the month immediately preceding the date of publication of to the latest update on respective stocks for the disclosure status in respect of those stocks. INSL and its
the document. affiliates may have investment positions in the stocks recommended in this report.
6 Research analyst or INSL or its relatives'/associates' any other material No
conflict of interest at the time of publication of the document
7 Has research analyst or INSL or its associates received any No
compensation from the subject company in the past 12 months
8 Has research analyst or INSL or its associates managed or co‐managed No
public offering of securities for the subject company in the past 12
months
compensation for investment banking or merchant banking or
brokerage services from the subject company in the past 12 months
compensation for products or services other than investment banking
or merchant banking or brokerage services from the subject company
in the past 12 months
compensation or other benefits from the subject company or third
party in connection with the document.
12 Has research analyst served as an officer, director or employee of the No
subject company
13 Has research analyst or INSL engaged in market making activity for the No
subject company
14 Other disclosures No

INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations
expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change,
as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.
Definitions of ratings
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
HOLD. We expect this stock to deliver ‐15% to +15% returns over the next 12 months.
SELL. We expect this stock to deliver <‐15% returns over the next 12 months.
Our target prices are on a 12‐month horizon basis.
Other definitions
NR = Not Rated. The investment rating and target price, if any, have been arrived at due to certain circumstances not in control of INSL
CS = Coverage Suspended. INSL has suspended coverage of this company.
UR=Under Review. Such e invest review happens when any developments have already occurred or likely to occur in target company & INSL analyst is waiting for some more information to draw
conclusion on rating/target.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.
Research Analyst has not served as an officer, director or employee of Subject Company
One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock‐quotes.
(Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart)

IndiaNivesh Securities Limited
Research Analyst SEBI Registration No. INH000000511
IndiaNivesh Research 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007.
February 13, 2017
Tel: (022) 66188800 / Fax: (022) 66188899
e‐mail: research@indianivesh.in | Website: www.indianivesh.in

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Rs. Mn Q3FY17 Q2FY17 Q3FY16 Q‐o‐Q% Y‐o‐Y% INSPL est Variance% Comments

IndiaNivesh Research 13 Feb 2017 2 of 5

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ROCE 14.6% 17.1% 6.6% 3.4% 6.5% 8.1%

Inventories Days 98 96 109 109 109 109

PER (x) 17.7 12.7 27.7 42.6 20.7 15.2

IndiaNivesh Securities Ltd 13 Feb 2017 5 of 5

Daljeet S. Kohli Rep. PAT 5,811 5,350 8.6 6,026 (3.6) 5,736 1.3

IndiaNivesh Securities Ltd 13 Feb 2017 2 of 7

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ROCE 34.3% 36.2% 34.8% 30.2% 27.0%

Inventories Days 109 109 109 109 109

PER (x) 25.2 20.0 15.2 14.0 12.9

IndiaNivesh Securities Ltd 13 Feb 2017 7 of 7

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IndiaNivesh Securities Ltd 13 Feb 2017 2 of 5

Quick Fundamentals (Rs. Mn) Q3FY17 Q2FY17 Q3FY16 QoQ % YoY %

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IndiaNivesh Securities Ltd 13 Feb 2017 2 of 2

Revenue 86,607 92,989 ‐6.9% 90,014 ‐3.8% 89,012 ‐2.7% Inline

384 384 385

20 70 16 13 10%

Grid has already achieved Rs 179.08bn till date.

Source: Bloomberg, IndiaNivesh Research Valuation

IndiaNivesh Securities Limited|Research Analyst SEBI Registration No:INH0000000511

Q3FY17 and 9MFY17 Financial Performance

Analyst Meet Highlights

 Some of the major projects commissioned by PGCIL during Q3FY17,---

 Power Grid commissioned/capitalised Rs 207bn worth of projects in

IndiaNivesh Securities Ltd 13 Feb 2017 2 of 6

12th Plan (FY13-FY17) Performance of Power Grid

Source: Company Presentation; IndiaNivesh Research

Source: Company Presentation; IndiaNivesh Research

 Power Grid has achieved strong capitalisation for successive quarters.

 Power Grid’s capex to capitalisation ratio have been steadily increasing

Source: Company Presentation; IndiaNivesh Research

IndiaNivesh Securities Ltd 13 Feb 2017 3 of 6

Future Outlook for Power Grid

IndiaNivesh Securities Ltd 13 Feb 2017 4 of 6

Income Statement (consolidated)

Balance Sheet (consolidated)

IndiaNivesh Securities Ltd 13 Feb 2017 5 of 6

Cash Flow Statement (consolidated)

Changes in working capital 59271 9583 26630 39615 50057

Pur/ Sale of Investment 1488 7791 1798 0 0

Key Ratios (consolidated)

IndiaNivesh Securities Ltd 13 Feb 2017 6 of 6

Change Change Change

Total Sales Growth YoY Total Sales Growth YoY

Total Sales Growth YoY Total Sales Growth YoY

Total Sales Growth YoY Total Sales Growth YoY