Submitted By:Akshat Singhal Research Analyst

INDIAN CABLE INDUSTR INDUSTRY

Indian cable Industry was $6 billion in value and 0.8 million tonnes in 2010. We are ahead of Russia, France and even Germany Germany. In Future we will be over overtaking Japans production which was $8 $ billion in 2010. China is the market leader with over $38 billion in production. The CAGR for wire and cable industry in I India at 15% from 2005. The industry saw fall in value generation in 2009 due to global recession The prices of copper fall 3 times and aluminum to 2 times its peak value caused lots of damage to the cable and wire industry in India.

Production Output in Billion $

Copper and Aluminum Prices Pric

Key Features of Indian Cable Industry Highly fragmented with very large number of cable producers. No clear market leader with limited consolidation. Major Cable companies in India are listed companies. Large informal or unorganized sector with over 50% m market arket share. Poor track record for foreign investors in the Indian cable industry. Profit margins between 5% to 10% of sales. Highly depended on fall and rise of Copper and Aluminum prize. prize

PRODUCT WISE ANALYSIS OF CABLE SECTOR Total Market Value: US$122bn across the globe in 2009. Types of Products LV Energy Rated below 1kV. Power Cable Rated 1kV and Above. Telecom -External copper telecom cable. Data All types of cable for data transmission. Winding Wire All enameled wire and covered conductors. Fiber Optic All fiber optic cables. Market share by Product Fiber Optic is the Best Performer Followed by Power in Cable Sector.

KEY PLAYERS IN $3 BILLON ORGANIZED CABLE SECTOR IN INDIA Company Name

Finolex Cables Havells India KEI Industries Polycab Wires Diamond Power Uniflex Cables

Market Share
15% 9% 8% 20% 9% 2%

LV Power Cables
Yes Yes Yes Yes Yes Yes

HV Power Cables
Yes No Yes Yes Yes Yes

Fiber Optics
Yes No No No No Yes

Others Products
Yes Yes Yes Yes No Yes

Major target sectors for the wire and cable products are electric utilities, real estate, automobile and infrastructure sectors.

SWOT Analysis for Wire and Cable Industry

Strengths
Easy availabity of raw materials. Large product Mix. Cheap labour.

Weaknesses
o Technological obsolescence o Low quality products by unorganized sector. o Unattractive for foreign investments.

Opportunities
Demand from growth of Power sector and electric utilities. Demand from telecom sector with launch of 3G. Demand from Govt. infrastructure projects. Demand from real estate.

Threats
o Fluctuations in copper and aluminium prises. o Highly competitive market. o Entry of China in India with low cost products. o Decreased demand with current debt crises.

FUTURE OUTLOOK The industry will continue to be dependent on high volume production with low profit margins. The most profitable product is fiber-optic cables which is also the fastest growing product. The HV power is better placed with continuous projects coming in electric utilities and infrastructure sector. If demand in real estate and automobile increases than LV energy cable will be able to catch up with the HV power cables market share. In communication and data cable the future looks good with profit margins better than power cables with launch of 3G and growth of computer and telecom networks. Trend Analyses for Listed Indian Cable Companies on BSE.

. Interactive Chart Movement from Bloomberg for past 12 months Havells India. Finolex Cables KEI Industries Diamond Power -9.09% -34.53% -57.9% -58% The best company in the trend analysis is Havells India because of its brand name and diversified product mix.

BUSINESS ANALYSES AND VALUATION FOR HAVELLS INDIA LTD.

Founded ->1971 Based->Noida Industry ->Electrical Equipments Key strength->Large Product Mix Brands-> Havells, Crabtree & Standard Peer companies->Crompton Greaves, Bajaj Electrical, Finolex cables etc.

Key financial Highlights Rs Mn March-11 March-10 Sales 28,817 24,735 EBITDA 3,583 3,253 PBT 3,099 2,903 PAT 2,421 2,282 Current Market and equity valuations in secondary market (Price Rs 363.10)

Key transaction in Havells India Ltd. Date Buyer Stake% 22/10/07 Warburg 10.65 10/07/08 SAIF 2.58 Deal Value 4150 538 Equity value 38,972 20,843 EV 39,200 20,552

KEY FINDING FROM VALUATION METHODS Fundamental Analyses

a) NAV/Book Value Approach. The current value using this method is Rs. 107.46 which is 3 times less than its current market price. This method is normally used for funds and real estate investment trusts. This method doesnt tell the growth potential of a company. b) Price to Earning (P/E) Approach. This method is the simplest method to value a firm based on its current earnings. Current P/E is 18.4 which show that investors are expecting higher returns in the future from the company. Also comparing with current industry P/E of 21.91 we can say that stock is still under-valued. c) DCF (Discounted Cash Flow) Method. This method is widely used to value a project, company or assets. Here future cash flows are discounted to give present value. The most critical part of this method is identifying a discount rate. The value we are getting using this method is between Rs 300 and Rs 460 with average at Rs 362 which is also the current price of share. Further analyses and calculations are shown in the attached excel sheet. Q.1 Recommend if you would buy or sell this stock at the current market valuation based on current market valuations based on financial and non-financial criteria? Ans1. Based on Non-financial Criteria an investor should invest because of-> Strong Brand Name and global presence Wide range of products and new launches of products to its portfolio. Huge future demand in this sector. Continuous innovation and expansion.

Based on Financial Criteria also an investor should invest because of-> Debt to Equity at 10% one of the lowest among its peers. 33 quarters of consecutive growth. High return on capital at 22.3% and high return on equity at 18% in 2011. High investment in past will start producing high returns in future.