IEA Report

3th May 2017

IRB InvIT Fund "SUBSCRIBE" 3th May 2017
IRB InvIT FUND is India's first registered infrastructure investment trust. IRB has bundled six of its operational toll road assets and transferred them
to the Trust.
The Trust generates income in the form of toll collection from these road assets and interest on cash in their books. According to SEBI guidelines,
the Trust needs to distribute at least 90 percent of this distributable cash to the unit holders in the form of dividend, which will be tax free. The
Trust also is exempted from dividend distribution tax.
Based on projected cash flow on the basis of estimated growth in traffic and inflation-linked increase in toll charges, at an upper price band of IPO
(Rs 102), the dividend yield will be close to 10%. Excessive investor interest may also lead to some price appreciation post-listing.
Risk attached to the issue is that the regulatory framework governing infrastructure investment trusts in India is untested and the interpretation
and enforcement thereof involve uncertainties. ..................................................................... ( Page : 2-5)

DABUR "NEUTRAL" 3th May 2017

The company is facing headwinds in the international market which contributes approx. 25% of the total revenue. We expect it to continue for at
least next four quarters. Secondly companys management has indicated that going forward they will increase their media spending sharply which
may impact its margin going forward as in this competitive environment it will be slightly tough to increase prices. Considering subdued
International business growth and expectation of contraction in margin going forward on the back of higher Ad expenses we are Neutral on this
stock. .................................................................. ( Page : 6-9)

BIOCON "Neutral" 2th May 2017

Biocon has discontinued drug Ambraxane from Indian and European markets which impacted 4QFY17s sales. On-going pricing pressure in US
market and rupee appreciation are key concerns for the company going forward. In last Dec. 2016, fire broke out at one of its facilities has
adversely impacted the EBITDA margin of the company by 130bps. Commercial sales of Insulin to US from Malaysian facility has started but we do
not have any clarity on the revenue front in this quarter. We do not expect any sharp improvement in revenue in near term. Currently, the stock is
trading at 4.74x FY17 P/BV. Considering the growth un-certainities in near term, we maintain Neutral rating in this stock.
............................................ ( Page : 10-13)

MARUTI "Neutral" 28th Apr 2017

Successful new launches in the recent past have kept Maruti on the driving seat with the market share of 47%. With the commissioning of Gujarat
facility in the 4QFY17 waiting period for Baleno will reduce going forward. However, we expect that it will ramp up only by the second half of FY18
and till then the company has to incur high depreciation and fixed cost on the plant which may result in negative operating leverage for Maruti. We
expect 120 bps deterioration in RoE from 20.2% in FY17 to 19% in FY19E. Going ahead lower PAT growth compared to previous years gives us a
very little cushion on the valuation front and at the present price level valuation is little stretched. Hence, we change our rating from BUY to
Neutral with the target price of Rs. 6450 . ......................................... ( Page : 14-18)

GODREJCP "HOLD" 27th Apr 2017

Recent commentary by management is very encouraging which indicates better recovery after demonetization in Q4FY17E. GODREJCP is present in
less penetrated segment as compared to other FMCG players such as Hair color and Home Insecticide. It will give it enough room to grow further.
As far as international business in concern, we expect better revenue growth from Indonesian market going forward as company is expanding its
distribution reach and launching new products. GODREJCP has achieved our price target of Rs 1760 on 26 April 2017. As GODREJCP is one of
fastest growing company with stable ROE of ~ 20% and now it is recovering after demonetization, Hence before revising our estimates we need to
go through Q4FY17 result which is due on 9May, 2017. At present we recommend `HOLD on this stock. .................................................. ( Page :
19-23)

S CHAND AND COMPANY LIMITED "AVOID" 26th Apr 2017

S Chand and Company is raising funds to retire its debts in its subsidiaries . The company is being offered at post IPO valuations of 2.3 times P/b
and Return on Equity of 5.5% while its comparable peer Navneet Education Limited is being traded at 5times P/b and has return on Equity of 20%.
We recommend AVOID. .................................................. ( Page : 24-26)

Narnolia Securities Ltd IEA Edition No.- 1004

 IRB InvIT Fund "SUBCRIBE"
2nd May 2017
IPO Note
Issue Detail Company Overview
Type 100% Book Building IRB InvIT Fund is a registered infrastructure investment trust under the InvIT Regulations. They
Issue Size Rs. 4700 Crore primarily intend to own, operate and maintain a portfolio of six toll - road assets in the Indian
Offer Price *Rs (100-102)/Equity Share states of Maharashtra, Gujarat, Rajasthan, Karnataka and Tamil Nadu. These toll roads are
operated and maintained pursuant to concessions granted by the NHAI.
Min App Size 10000 Shares IRB Infrastructure Developers Limited (the Sponsor) is, one of the largest infrastructure
Issue Open 3-May-17 development and construction companies in India in terms of net worth in the roads and
highways sector according to the NHAI's annual prequalification for public private partnerships in
Issue Close 5-May-17
national highway projects report for 2016. Excluding the toll-road assets that will be transferred by
Shares Offer 45.6 Cr. IRB to them, as of December 31, 2016, IRB has 16 road projects, of which eight are operational,
Face Value Rs 10 five are under construction and three are under development. They wish to acquire an initial
Credit Suisse Securities (India) portfolio comprising of the Project SPVs, all of which are currently either wholly or majority owned
Private Ltd , ICICI Securities by IRB and its subsidiaries.
Lead Mgrs
Ltd, IDFC Bank Ltd , IIFL The Trust has been settled by the Sponsor pursuant to the Indenture of Trust in Mumbai, India, as
Holdings Ltd. an irrevocable trust in accordance with the Trusts Act. The Trust was settled with an initial
Listing BSE, NSE settlement amount of Rs. 10,000 by the Sponsor.
Registrar Karvy Computershare Pvt Ltd These toll roads projects are BharuchSurat NH 8, JaipurDeoli NH 12, SuratDahisar NH 8,
TumkurChitradurga NH 4, OmalurSalemNamakkal NH 7 and TalegaonAmravati NH 6. While
Surat-Dahisar and Bharuch-Surat project has concession period tenure till January 2022 and
Omalur-Salem-Namakkal till August 2026, other projects have concession tenures ending in June
2037. Sponsor has 22 BOT road projects on hand as on 31st December 2016 out of which 14 are
No of shares operational, 5 are under construction and 3 are under development. Futures of all these projects
are based on the daily traffic volumes, inflation and regulatory changes. Trust will follow factoring
Offer for Sale 34,761,770
of WPI in the pricing of the projects.
Fresh Issue made 421568627 Company Strength
option to retain oversubscription upto 25% of > Company has diversified road project portfolio and revenue base. The geographic diversity of the
issue size. Initial Road Assets will play a significant role in developing experience and expertise, including
ability to evaluate, acquire, operate and maintain new projects. The geographically and temporally
diverse project portfolio provides with an advantage in capitalizing on new opportunities available
in the roads and highways sector .
> Company has Experienced Sponsor, Investment Manager and Project Manager with consistent
track records in operating and maintaining projects in the roads and highways sector in India . The
Sponsor is one of the largest infrastructure development and construction companies in India in
terms of net worth in the roads and highways sector with a large project portfolio of 8,183 Lane
Kilometres of roads and highways in operation, under construction or under development,
excluding the Initial Road Assets, as of December 31, 2016.

> The Net Proceeds will be used to repay and replace a significant portion of the Project SPVs'
existing indebtedness. The resulting low leverage will provide them with debt capacity to grow
their business, including by financing future acquisitions. They intend on financing future
development and acquisitions through the issuance of additional Units .
Recommendation
IRB InvIT FUND is India's first registered infrastructure investment trust. IRB has bundled six of its operational toll road assets and transferred
them to the Trust.
The Trust generates income in the form of toll collection from these road assets and interest on cash in their books. According to SEBI guidelines,
the Trust needs to distribute at least 90 percent of this distributable cash to the unit holders in the form of dividend, which will be tax free. The
Trust also is exempted from dividend distribution tax.
Based on projected cash flow on the basis of estimated growth in traffic and inflation-linked increase in toll charges, at an upper price band of
IPO (Rs 102), the dividend yield will be close to 10%. Excessive investor interest may also lead to some price appreciation post-listing.
Risk attached to the issue is that the regulatory framework governing infrastructure investment trusts in India is untested and the interpretation
and enforcement thereof involve uncertainties.

Please refer to the Disclaimers at the end of this Report.

 IRB InvIT Fund

Objects of Issue:

The object and purpose of the Trust, as described in the Indenture of Trust, is to carry on the activity of an infrastructure investment trust
under the InvIT Regulations, to raise resources in accordance with the InvIT Regulations, and to make investments in accordance with the
investment strategy of the Trust. The Trustee and the Investment Manager shall ensure that the subscription amounts are kept in a separate
bank account in the name of the Trust and are only utilised for adjustment against Allotment of Units or refund of money to the applicants until
such Units are listed.

Utilization of Net Proceeds

Particulars Estimated Amount

Investment in the Project SPVs by way of an issue of debt
1 4200 Cr.
2 General purposes *+
Particulars Amount Amount
Outstanding as on Proposed to be
December 31,2016 ( Repaid/Prepaid ( Cr.
Cr. ) )
Repayment/prepayment, in part, of certain loans/facilities availed
by the Project SPVs from their respective senior lenders
1
Loans/facilities availed from senior lenders that are not associates
a 2121.4 1060
of GCBRLMs and BRLM
Loans/facilities availed from senior lenders that are associates of
1,391.28 1,368.16
b GCBRLMs and BRLM
Prepayment, in full, of the subordinate debt provided to certain
Project SPVs by the Sponsor and the Project Manager 698.50 698.50
2
Prepayment, in full, of certain unsecured loans and advances
availed by certain Project SPVs from the Sponsor, the Project 741.74 741.74
3 Manager and certain members of the Sponsor group
Repayment/prepayment, in part, of the balance portion of certain
loans/facilities availed by the Project SPVs from their respective 10,14.9
4 senior lenders
Total 4952.921 3868.4028

Trust will have key investment conditions as under:

1 Invest at least 80% of the value of the assets in completed and revenue generating infrastructure assets
2 Balance 20% can be invested in under-construction infrastructure projects and securities of infrastructure
companies in India (cannot invest in units of other InvITs)
3 InvIT should hold (directly or through SPVs) the infrastructure assets for at least 3 years from the date of
purchase of the asset by the InvIT (except investment in securities of infrastructure companies)
4 Investment into SPVs is subject to the InvIT holding a controlling interest (at least 51% of equity share capital)
in the SPVs
On dividend policy, investors are likely to get rewards based on
> At least 90% of distributable cash flow of the SPV shall be distributed to the InvIT in proportion to its
>holding in90%
At least the SPV
of distributable cash flow of the InvIT shall be distributed to the unit holders
> Dividend declared to be paid within 15 days; distributions to the unit holders to be made on a half yearly basis
(however, management has intention to distribute dividends on quarterly basis as informed during road show. Such
dividends will be totally tax free in the hands of the Unit holders.)

Please refer to the Disclaimers at the end of this Report.

 IRB InvIT Fund

InvIT project Details

Residual
Trust's Concessio
equity n
End of interest period as
Commencem concession upon Gross of 31st
ent Commence period with the toll Dec
of ment no listing revenue 2016 with
Project Lane concession of toll reduction of the in no
SPV Project Kms period collection or extention units FY2016 extension
ISDTPL Surat-Dahisar NH8 1434 Feb 20,2019 Feb 20,2009 19-Feb-21 100% 613.476 4.14 yrs
ITCTPL Tumkur-Chitradurga NH4 684 June 4,2011 June 4,2011 3-Jun-27 100% 201.91 20.43 yrs
IDAAIPL Bharuch-surat NH8 390 Jan 2,2007 25-Sep-09 1-Jan-22 100% 193.552 5.01 yrs
IJDTPL Jaipur-Deoli NH12 565 June 14,2010 27-Sep-13 13-Jun-35 100% 120.617 18.45 yrs
MITPL Omalur- Salen-Namakkal NH7 275 14-Aug-06 6-Aug-09 13-Aug-26 74% 74.939 9.62 yrs
ITATPL Talegaon-Amravati NH6 267 3-Sep-10 24-Apr-13 2-Sep-32 100% 47.217 15.67 yrs

Ratings
The Trust has been assigned a rating of CARE AAA(Is) stable by CARE ratings indicating an opinion on the general creditworthiness of the trust
and has not rated the Units of the Trust. India Ratings has assigned IND AAA Outlook Stable to Trusts external senior debt reflecting combined
credit quality of the underlying assets and has not rated the Units.

Competitive Risks
> The debt financing proposed to be provided by the Trust to each of the Project SPVs comprises certain unsecured, interest-free and interest-
bearing loan as well as loans that will be secured by a charge on (i) the cash flows deposited in the escrow account and (ii) the escrow account
of such Project SPV which shall be subordinated to the charge created to secure the debt owed to the senior lenders of the respective Project
SPVs (the Secured Trust Financing). The Project SPVs propose to undertake additional obligations in relation to such deposits, including,
among other things, the creation of a cash reserve of not less than 15% of the amount of the deposits maturing during a financial year and the
immediately succeeding financial year, the appointment of a security trustee for secured deposits and obtaining deposit related insurance

> The escrow arrangements mandated under the concession agreements require all monies that are received by each Project SPV, including
funds constituting the financing package, the fees collected from the operation of the Initial Road Assets and any termination payments
received from the NHAI, to be deposited in an escrow account and utilised only in accordance with the order prescribed under the escrow
agreement. The consent of the NHAI is required to amend the order of outflow of payments from such escrow account.

> The regulatory framework governing infrastructure investment trusts in India is untested and the interpretation and enforcement thereof
involve uncertainties, which may have a material, adverse effect on the ability of certain categories of investors to invest in the Units, our
business, financial condition and results of operations and our ability to make distributions to Unitholders.
> The Sponsor currently holds 74% of the equity share capital of MITPL, and its ability to acquire the residual 26% of the equity share capital
from the other shareholders of MITPL is subject to obtaining NHAI's consent. In case of any delay or failure to obtain such consent, the Sponsor
may be unable to acquire such equity shares in a timely manner or at all and the Trust may be unable to acquire 100% of the shareholding in
MITPL from the Sponsor prior to listing of the Units or at all.

Please refer to the Disclaimers at the end of this Report.

 IRB InvIT Fund

Financials Snap Shot

Profit & Loss Account ( Cr.) 31 Mar 14 31 Mar 15 31 Mar 16 Ratio 31 Mar 14 31 Mar 15 31 Mar 16

Revenue (Net) 745.2 900.3 986.7 Profitability Ratios

Other Income 17.3 16.1 17.1 RoE 12% 12% 17%
Total Revenue 762.5 916.4 1,003.8 RoCE 12% 12% 17%
Road work and site expenses 48.0 142.6 128.4 Liquidity Ratios
Employee benefits expense 16.0 17.4 20.9 Net Debt/Equity 1.981 2.031 1.999
Other expenses 11.7 12.2 11.2 Interest Coverage Ratio 101.5 -95.1 18.7
Total Expenses 75.7 172.3 160.5
EBITDA 686.8 744.1 843.3 Issue Information
Depreciation and amortisation expenses 68.7 74.4 84.3 Type 100% Book Building
EBIT 618.2 669.7 759.0 Issue Size Rs. 4700 Crore
Finance Costs 375.6 444.8 434.8 Offer Price *Rs (100-102)/Equity Share
Profit / (loss) before tax 242.6 224.8 324.2 Min App Size 10000 Shares
Tax expenses 2.4 -2.4 17.3 Issue Open 42858.0
PROFIT AFTER TAX 240.2 227.2 306.9 Issue Close 42860.0
Other comprehensive income 0.1 0.0 -0.1 Shares Offer 45.6 Cr
Profit before Tax 240.3 227.2 306.8 Face Value Rs 10

Balance Sheet ( Cr.) 31 Mar 14 31 Mar 15 31 Mar 16 Cash Flow ( Cr. ) 31 Mar 14 31 Mar 15 31 Mar 16

Share Capital 1111.6 1114.6 1114.6 Profit/(Loss) before tax (45.2) (126.1) (59.1)
Subordinated debt (in nature of equity) 695.6 698.5 698.5 Adjustments
Other equity 215.6 91.6 15.2 Interest expense 347.4 413.9 398.7
Net Worth 2022.7 1904.7 1828.2 Depreciation and amortisation expenses 356.4 425.4 467.6
Borrowings 4006.9 3868.2 3655.2 Dividend income on current investments (0.0) (0.0) (0.4)
Other financial liabilities 6959.2 6867.3 6662.6 Interest income (12.2) (10.1) (9.6)
Provisions 121.5 73.5 109.4 Operating profit before working capital changes646.4 703.0 797.3
Non - current liabilities 11087.6 10809.0 10427.2 Movement in working capital
Borrowings 677.8 677.8 643.6 Increase/(decrease) in trade payables (44.3) 35.4 (29.5)
Trade payables 7.6 43.0 13.4 Increase/(decrease) in other liabilities 9.8 0.6 (10.9)
Other financial liabilities 383.8 421.0 545.4 Increase/(decrease) in other financial liabilities(139.3) (163.9) (152.1)
Other current liabilities 12.9 13.9 3.0 Increase/(decrease) in provisions 0.2 43.8 35.8
Provisions 0.2 0.1 0.1 Decrease/(increase) in trade receivables (0.7) 0.8 0.7
Current tax liabilities 3.8 3.3 1.4 Decrease/(increase) in financials assets-loans (4.0) (129.9) (70.2)
Current liabilities 1086.1 1159.0 1206.9 Decrease/(increase) in others financial assets 18.0 3.0 1.9
Total Liability 14196.5 13872.7 13462.3 Decrease/(increase) in others assets 139.5 8.3 (4.2)
Fixed Asset 13047.0 13466.3 13940.6 Cash generated from / (used in) operations 625.6 501.1 568.7
Deferred tax assets 44.8 49.2 36.7 Direct taxes paid (net of refunds) 0.8 1.3 7.6
Other non-current assets 3.0 1.1 0.5 Net cash flows from operating activities 624.9 499.8 561.1
Total Non-current assets 13094.8 13516.6 13977.9 Net cash flows from investing activities (454.0) (26.6) (37.2)
Trade receivables 20.4 17.8 14.8 Net cash flows from financing activities (271.8) (463.3) (548.3)
Cash and cash equivalents 173.8 180.8 160.6 Net increase/(decrease) in cash (100.9) 9.9 (24.5)
Loans 0.1 125.3 190.4 Cash at the beginning of the year 173.5 72.5 82.4
Current tax assets 3.5 2.2 3.2 Cash at the end of the year 725.4 824.0 579.4
Other current assets 10.7 4.3 9.0
Total asset 13303.2 13846.9 14355.9

Please refer to the Disclaimers at the end of this Report.

 INDUSTRY - Con. Staples
BSE Code - 500096
NSE Code - DABUR
2-May-17 NIFTY - 9314

Company Data Key Highlights of the Report:

CMP 285 DABUR reported result below than our expectation. Sales declined by 5%
Target Price NEUTRAL
YoY to Rs 1915 cr whereas our expectation was Rs 2070 cr.
Previous Target Price DABURs gross margin declined by 163 bps to 49% but maintained
Upside operating margin led by lower employee, A&P and Other Expenses.
52wk Range H/L 320/259 International business declined by 4.5% in constant currency terms led by
Mkt Capital (Rs Cr) 50,045 currency devaluation in Egypt, Turkey and Nigeria and Macro economic
Av. Volume (,000) 1,461 slowdown in MENA region.

RoE
The company reported 2.4% overall volume growth for this quarter.
Considering subdued International business growth which contributes
ROE
approx. 25% of companys total revenue and expectation of contraction in
45%
margin going forward on the back of higher A&P expenses we are Neutral
38%
40% 36%
34% on this stock.
35% 32%
30%
30% 26%

25%
20%
15%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
10%
ation
Net Sales 7,827 7,869 7,701 8,615 9,808
5%
0% EBITDA 1,316 1,518 1,509 1,612 1,845
FY12 FY13 FY14 FY15 FY16 FY17
EBIT 1,201 1,385 1,366 1,833 2,117
Shareholding patterns % PAT 1,066 1,251 1,277 1,411 1,639
4QFY17 3QFY17 2QFY17 EPS (Rs) 6 7 7 8 9
Promoters 68 68 68 EPS growth (%) 16% 17% 2% 11% 16%
Public 32 32 32 ROE (%) 32% 30% 26% 26% 26%
Total 100 100 100 ROCE (%) 34% 31% 26% 23% 24%
BV 19 24 28 32 38
Stock Performance % P/B (X) 10.2 11.6 10.3 8.8 7.5
1Mn 3Mn 1Yr P/E (x) 32.0 38.8 39.3 35.5 30.6
Absolute 2.5 2.9 5.5
Rel.to Nifty 1.0 (4.0) (13.2) RESULT REVIEW:

125 DABUR NIFTY DABURs result for Q4FY17 is below than our expectations. Sales declined
120 by 5% YoY to Rs 1915 cr from Rs 2010 cr.
115
Gross margin declined by 163 bps YoY to 49% due to increase in material
110
105 costs and adverse currency impact.
100 EBITDA margin improved by 115 bps YoY to 21.8% from 20.7% led by

95 lower employee, A&P and Other expenses.
90
85 PAT margin improved by 91 bps YoY 17.4% from 16.5%.
80
DABURs PAT for this quarter remained flat. Reported PAT of Rs 333 cr

(Vs Rs 331 cr in Q4FY16).

RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Net Sales 2,010 1,928 1,981 1,853 1,915 -5% 3% 7,869 7,701 -2%
Other Income 54 61 89 83 65 21% -22% 217 298 37%
COGS 992 938 967 938 976 -2% 4% 3,850 3,843 0%
Ad & P Expenses 157 197 149 177 123 -21% -31%
Employee Cost 202 212 216 189 173 -14% -9% 794 790 -1%
Other Expenses 245 234 240 214 225 -8% 5% 1,707 1,560 -9%
EBITDA 415 349 408 334 418 1% 25% 1,518 1,509 -1%
Depreciation 36 34 36 33 40 11% 19% 133 143 7%
Interest 13 12 17 14 12 -12% -16% 48 54 11%
PBT 420 364 445 370 431 3% 17% 1,554 1,610 4%
Tax 87 70 87 75 98 13% 30% 300 330 10%
PAT 331 293 357 294 333 0% 13% 1,251 1,277 2%

International
business Expect subdued growth due to pressure on International Business going forward.
declined by
4.5% in cc
International business declined by 4.5% in constant currency terms led by currency devaluation in
term. Egypt, Turkey and Nigeria and Macro economic slowdown in MENA region.
Severe currency devaluation of ~55% in Egyptian Pound, ~20% in LIRA and ~36% in Naira led to
translation loss in the international business
Local currency growth for Egypt remained 19% while Nepal and Turkey recorded local currency
growth of 16% in Q4FY17.
Bangladesh recorded local currency growth of 2% in Q4FY17.
The company is facing headwinds in Saudi & UAE market. We expect it to remain for at least one
year. Although company has indicated that market shares in most categories & countries remained
stable to increasing but we remain bearish on overall International business considering slower MENA
region growth going forward.

Contribution from International business in total revenue declined from 34% to 25%.

Sales Contribution(Q1FY17) Sales Contribution(Q4FY17)

Others, 3% Others, 4%

International,
International, 25%
34%
Domestic
FMCG, 63% Domestic
FMCG, 71%

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Gross Margin 50.6% 51.4% 51.2% 49.4% 49.0% -1.6% -0.3% 51.1% 50.1% -1.0%
EBITDA Margin 20.7% 18.1% 20.6% 18.0% 21.8% 1.2% 3.8% 19.3% 19.6% 0.3%
PAT Margin 16.5% 15.2% 18.0% 15.9% 17.4% 0.9% 1.5% 15.9% 16.6% 0.7%

Gross margin declined by 168 bps YoY and 34 bps QoQ led by increase in material costs and adverse
currency impact.
EBITDA margin improved by 115 bps YoY and 379 bps QoQ on the back of lower employee expense
(down by 100bps) ,AD&P expense (down by 136 bps) and Other expense(down by 42 bps).
PAT margin improved by 91 bps YoY and 154 bps QoQ in Q4FY17.

Sales and PAT (in cr.) Domestic FMCG Revenue Break Up

2100 400 Domestic FMCG Revenue Break up(Q4FY17)
Net Sales(in cr) PAT(in cr)
2050 357 350
340 331 333
318
2000 293 294 300
287 283 285
262
1950 250 Health
Foods, 19% Supplements, 1
1900 211 200 Skin & 7% Digestives, 6%
Salon, 5%
1850 150
OTC&
1800 100 Home Care, 6% Ethicals, 9%
Oral Care, 16%
1869

1930

1950

1959

1972

1928

1981

1853

1915
2079

1907

2010

1750 50 Hair Care, 22%

1700 0

Concall Highlights(Q4FY17):
Translation loss Rural market is showing signs of revival.
remained Rs 79 New Launches: Red Gel Toothpaste Launched, Dabur Woman Restorative Tonic.
cr in Q4FY17. Media Spend: Expects sharp increase especially 2nd half of FY18.
International business: Translation loss remained Rs 79 Cr in Q4FY17.
If tax differential will be less in GST than chances of de-stocking will be less.
Secondary sales is much higher than primary sales in this quarter.
The company will curtail its promotions sharply going forward in FY18.
Tax rate: Under MAT for some more time.
Tezpur plant: Tezpur plant commissioned in March17.Excise duty benefit and 80i benefits will
remain for next 10 years.
Market share in toothpaste segment increased by 100 bps yoy.
Dabur gained volume market share by 70bps in Air fresheners and 100 bps in Mosquito
Repellant Creams YOY.
International business: Pressure in MENA region will remain for whole year.
Pricing action: The Company will take price hike only to maintain margin.
OTC remained subdued.
The company has inventory of 6-8 months of low priced raw honey. Company will not
increase prices in Q1FY18.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Innovation and new product launches:The company has long history of products innovation and new
products launches. It had launched Amla Naturals in last quarter which has very encouraging response.
Recently DABUR has launched: Red Gel Toothpaste and Woman Restorative Tonic.
Strong Ayurvedic portfolio: The Company has strong Ayurvedic product portfolio and we expect
DABUR will be ultimate beneficiary in the long run of Patanjali initiatives of expending awareness about
ayurvedic products and its uses.
Strong financials: DABUR is one of the best companies in our FMCG basket. The companys sales
grew at the CAGR of 15% and PAT of 17% for last five years. It maintained average ROE of 34% for last
five years.
Expect media spending to increase sharply Expect contraction in margin going forward

Employee Expense Other expense Ad Expense

Gross Margin EBITDA margin
18%
60% 53% 52% 54% 52% 51% 51% 51%
16% 51% 50% 51% 49% 49%
14% 50%
12% 40%
10%
30% 22%
8% 18% 17% 18% 17%
21% 19% 21%
18%
21%
18%
6% 20% 14%

4% 10%
2%
0%
0%

Domestic FMCG Volume growth Local Currency Growth Rate

Domestic FMCG Volume Gr %

10.00% 8.70% Local Currency Growth Rate(Q4FY17)

8.10% 8.10%
7.40% 20% 19%
8.00% 7.00%
5.50% 18% 16% 16%
6.00% 4.50% 16%
4.10%
14%
4.00% 2.40% 12%
2.00% 10%
8%
0.00% 6%
-2.50% 4% 2%
-2.00%
2%
-4.00% -5.20% 0%
Egypt Nepal Turkey Bangladesh
-6.00%

View & Valuation

The company is facing headwinds in the international market which contributes approx. 25% of the total
revenue. We expect it to continue for at least next four quarters. Secondly companys management has
indicated that going forward they will increase their media spending sharply which may impact its margin
going forward as in this competitive environment it will be slightly tough to increase prices. Considering
subdued International business growth and expectation of contraction in margin going forward
on the back of higher Ad expenses we are Neutral on this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - BIOTECHNOLOGY
BSE Code - 532523
NSE Code - BIOCON
2-May-17 NIFTY - 9304

Comapany Data Key Highlights of the Report:

CMP 1112
Marketing Authorization application for Bio-similar Trastuzumab,
Target Price 970 pegfilgrastim and insulin Glargine were accepted by European Medical
Previous Target Price 15% agency for review.
Upside Discontinuance of Ambraxane drug, and fire broke down at one of its facility
52wk Range H/L 1188/564 in Dec. 2016 has impacted the revenue of the company in the last quarter.
Mkt Capital (Rs Cr) 22,107 Biocon plans to file Marketing Authorization application for Bio-similar
Av. Volume (,000) 128 Trastuzumab with USFDA in FY18.

RoE declines to 12.7% in FY17

Biocon has made 5 regulatory filings with USFDA in FY17.
Malasiyan faciltity has been Commercialised and revenue will start coming
20.0% from 1QFY18.
18.9%
18.0%

16.0%
15.2%
14.0%
13.7% 13.6%
12.7%
12.0%
11.3%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
10.0% 9.7% ation
Net Sales 3,090 3,347 3,891 5,026 5,964
8.0% EBITDA 564 636 851 1,148 1,363
FY13 FY14 FY15 FY16 FY17 FY18E FY19E
EBIT 343 387 574 604 793
Share Holding patterns % PAT 497 550 612 512 653
4QFY17 3QFY17 2QFY17 EPS (Rs) 25 28 31 26 33
Promoters 60.7 60.7 60.7 EPS growth (%) 20% 11% 11% -16% 27%
Public 37.2 37.2 37.2 ROE (%) 15% 14% 13% 10% 11%
Others 1.8 1.8 1.8 ROCE (%) 8% 6% 8% 8% 9%
Total 100.0 100.0 100.0 BV 3,271 4,034 4,838 5,253 5,782
Stock Performance % P/B (X) 2.9 2.4 4.6 4.2 3.8
1Mn 3Mn 1Yr P/E (x) 20.0 20.0 20.0 20.0 20.0
Absolute (3.7) 8.5 93.5
Rel.to Nifty (5.4) 0.7 76.9 RECENT DEVELOPMENT:
Mylan got a nod for breast cancer tablets -Exemestane tablets. U.S. sales
200
BIOCON NIFTY of approximately $100 million for the 12 months ending Jan. 31, 2017,
180 according to IMS Health

160 US FDA accepts Biocon-Mylan biosimilar application for proposed anti-

cancer bio-similar. The market size of Trastuzumab injection is valued at
140
about $6.5 billion, according to IMS data
120
Biocon has partnered with Japanese drug firm Eisai Pharma to market the
100
latter's anti-ulcer drug rabeprazole in India.Market size for rabeprazole and
rabeprazole-D is roughly Rs 950 crore in India
80
Mylan has inked a settlement pack with Genentech and Roche in relation to
Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16

Nov-16
Apr-16

Apr-17
Mar-17

patents for cancer drug Herceptin (Trastuzumab).The settlement gives

Mylan global licence to commercialise its Trastuzumab product in various
ADITYA GUPTA markets around the world.
adityagupta@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Biopharma(CORE 531 464 501 582 699 32% 20% 1,879 2,246 20%
BIOPHARMA)
India(BRANDED 101 138 137 123 105.5 4% -14% 436 503.5 15%
FORMULATIONS)
CRAMS 316 263 286 317 363 15% 15% 1,061 1,229 16%
Licensing income 23 17 24 79 23 0% -71% 76 143 88%
Net Sales 957 982 946 1,038 931 -3% -10% 3,347 3,891 16%
Other Income 16 41 38 47 43 170% -9% 79 157 98%
COGS 334 357 301 330 336 0% 2% 1,290 1,447 12%
Employee Cost 167 179 180 194 194 16% 0% 610 747 22%
Other Expenses 251 184 224 237 214 -15% -10% 811 846 4%
EBITDA 205 263 240 276 188 -8% -32% 636 851 34%
Depreciation 65 66 68 70 73 12% 3% 249 277 11%
Interest 21 6 7 9 5 -76% -43% 29 26 -11%
PBT 135 232 204 244 153 13% -37% 569 833 46%
Tax 55 55 42 54 10 -81% -81% 142 162 14%
PAT 333 167 147 171 128 -62% -26% 550 612 11%

Margins under pressure

Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY15 FY16 YoY(+/-)
Gross Margin 65% 64% 68% 68% 64% -0.01 -0.04 30% 33% 0.03
EBITDA Margin 21% 27% 25% 27% 20% -0.01 -0.06 13% 16% 0.02
PAT Margin 35% 17% 16% 17% 14% -0.21 -0.03 7% 8% 0.01

Gross Margin contracted by 100bps YoY and 400bps QoQ due to higher purchase of stock in trade
and cost of material consumed.
EBITDA degrew by 8%YoY to Rs.188 crore. EBITDA Margin also declined by 130bps YoY to 20.1%
on account of higher employee cost.
PAT degrew by 61%YoY to Rs.128 crore. In 4QFY16, there was an exceptional item of Rs. 268 Cr.
which has inflated profit in 4QFY16.

EBITDA( Rs.Crore) EBITDA Margin PAT( Rs.Crore) PAT Margin

400 40%
300 27% 27% 30% 35%
25% 25%
350 35%
250 22% 23% 25%
21% 21% 21%
20% 300 30%
24%
200 20%250 25%

15%200
17% 16% 17% 20%
150 15%
276
263

14%
333

13%
240

150 12% 15%

212

205

188
185

185

100 10%
169
160

202

100 10%
171
167

147

128
126

50 5%
104

50 5%
91

-1%
0 0% 0 0%
-11

-50 -5%

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Concall Highlights:
Biocon Malaysian Insulin plant has started commercial sales, but management refrains from giving any
revenue guidance
Marketing Authorization application for Bio-similar Trastuzumab, pegfilgrastim and insulin Glargine were
accepted by European Medical agency for review.
Biocon has received approval for Rosuvastatin Calcium from USFDA. This is the first ANDA approval for
Biocon. This will further strengthen the companys API business.
Discontinuance of Ambraxane drug, and fire broke down at one of its facility in Dec. 2016 has impacted
the revenue of the company in the last quarter.
Capex guidance for FY18 is Rs. 700 Cr. This does not include capex planned by Syngene.
Biocon Insulin Disposable pens were highly appreciated in the International markets.
R&D exp. for 4QFY17 is Rs. 98 Cr. Out of which Rs. 64 Cr is reflected in P&L A/C. Guidance for FY18 is
12-15% of its revenue.
Biocon has completed ROW phase-3 clinical trial of its Bio-similar Bevacizumab for metastatic colorectal
cancer.
Plans to file Marketing Authorization Application with USFDA for insulin Glargine very soon.
Biocon has made 5 regulatory filings with USFDA in FY17.
Syngene has continued to expand its manufacturing facility by setting up new API facility in Mangalore
and new Biologics facility in Bangalore.

Investment Arguments:
Delay in Copaxone approval: Biocon has received queries from the USFDA relating to its ANDA for
generic Copaxone 20 mg and 40mg. The company is yet to respond to these queries
Discontinuance of Ambraxane: Biocon has discontinued Ambraxane drug from its portfolio which is a major
set back for the company.
Waiting for EMA Nod:Marketing Authorization application for Bio-similar Trastuzumab, pegfilgrastim
and insulin Glargine were accepted by European Medical agency for review. Company is still waiting for
approval which usually takes 12-18 months.
Commercialization of Malaysian facility : The facility manufactures the Drug Substance for Biocons
range of rh-insulin and insulin analogs as well as Drug Products in vials, cartridges and devices. This
facility supplies drug to the US market.This facility has been set up at an investment of over USD 250
million

View & Valuation

Biocon has discontinued drug Ambraxane from Indian and European markets which impacted 4QFY17s
sales. On-going pricing pressure in US market and rupee appreciation are key concerns for the company
going forward. In last Dec. 2016, fire broke out at one of its facilities has adversely impacted the EBITDA
margin of the company by 130bps. Commercial sales of Insulin to US from Malaysian facility has started
but we do not have any clarity on the revenue front in this quarter. We do not expect any sharp
improvement in revenue in near term. Currently, the stock is trading at 4.74x FY17 P/BV. Considering
the growth un-certainities in near term, we maintain Neutral rating in this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Curr Assets 3,971 4,048 4,880 5,832
Y/E March FY16 FY17E FY18E FY19E Creditors 610 740 916 1,086
Revenue from Operation 3,347 3,891 5,026 5,964 Provisons 67 83 92 103
Change (%) 8% 16% 29% 19% Other Curr Liab 316 366 475 564
EBITDA 636 851 1,148 1,363 Curr Liabilities 1,271 1,581 1,876 2,146
Change (%) 13% 34% 35% 19% Net Curr Assets 2,700 2,467 3,004 3,687
Margin (%) 19% 22% 23% 23% Total Assets 8,458 9,394 10,478 11,578
Depr & Amor. 249 277 544 570
EBIT 387 574 604 793 Cash Flow Statement in Rs Crores
Int. & other fin. Cost 29 26 30 33 Y/E March FY16 FY17E FY18E FY19E
Other Income 79 157 104 105 PBT 1,227 833 678 864
EBT 569 833 678 864 (inc)/Dec in Working Capital (45) (186) (13) (100)
Exp Item 161 - - - Non Cash Op Exp 242 277 544 570
Tax 142 162 166 211 Int Paid (+) 10 26 30 33
Minority Int & P/L share of Ass. (59) (76) - - Tax Paid (247) (162) (166) (211)
Reported PAT 550 612 512 653 others (652) 26 30 33
Adjusted PAT 430 612 512 653 CF from Op. Activities 526 881 1,074 1,156
Change (%) 11% 11% -16% 27% (inc)/Dec in FA & CWIP (811) (754) (796) (718)
Margin(%) 16% 16% 10% 11% Free Cashflow (284) 127 277 438
(Pur)/Sale of Inv (197) - - -
Balance Sheet Rs in Crores others 495 - - -
Y/E March FY16 FY17E FY18E FY19E CF from Inv. Activities (954) (754) (796) (718)
Share Capital 100 100 100 100 inc/(dec) in NW - - - -
Reserves 3,934 4,738 5,153 5,682 inc/(dec) in Debt 1,346 (262) 322 250
Networth 4,034 4,838 5,253 5,782 Int. Paid 10 26 30 33
Debt 2467.3 2,205.4 2,527.0 2,777.0 Div Paid (inc tax) 20 - - -
Other Non Cur Liab 371 352 352 352 others (262) (142) (127) (157)
Total Capital Employed 6,501 7,043 7,780 8,559 CF from Fin. Activities 1,087 (404) 194 93
Net Fixed Assets (incl CWIP) 3,961 4,438 4,690 4,837 Inc(Dec) in Cash 659 (276) 472 531
Non Cur Investments - 146 146 146 Add: Opening Balance 463 761 710 810
Other Non Cur Asst 229 278 278 278 Closing Balance 1,127 485 1,182 1,341
Goodwill 26 26 26 26
Investment in associates & joint ventures26 42 42 42 Key Ratios
Derivative assets 61 109 109 109 FY16 FY17 FY18E FY19E
Other financial assets 26 20 20 20 ROE 14% 13% 10% 11%
Income tax assets 85 90 90 90 ROCE 6% 8% 8% 9%
Non Curr Assets 4,487 5,347 5,598 5,746 Asset Turnover 0.4 0.4 0.5 0.5
Current investments 875 1,065 1,065 1,065 Debtor Days 78 78 78 78
Inventories 542 635 814 966 Inv Days 59 59 59 59
Trade receivables 715 883 1,073 1,273 Payable Days 66 66 66 66
Cash and bank balances 761 710 810 815 Int Coverage 13.21 22.08 19.91 23.79
Other bank balance 777 334 759 1,336 P/E 18 36 43 34
Derivative assets 51 106 106 106 Price / Book Value 2.4 4.6 4.2 3.8
Other financial assets 184 155 155 155 EV/EBITDA 17 28 21 18
Other current assets 65 159 98 116 FCF per Share (14) 6 14 22
Div Yield 1.0% 0.5% 0.4% 0.5%

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - AUTOMOBILE
BSE Code - 532500
NSE Code - MARUTI
28-Apr-17 NIFTY - 9342

Comapany Data Key Highlights of the Report:

CMP 6371
Higher fixed cost and depreciation on Gujarat plant will lead to further
Target Price 6450 deteriorationin the margins because of gradual ramp up in the volumes.
Previous Target Price EBITDA margin contracted by 300bps in last 3 quarters.
Upside 1% Continued support from higher other income has helped company to post
52wk Range H/L 6444/3730 over 9% PAT margin.
Mkt Capital (Rs Cr) 192,460 We expect 120 bps deterioration in RoE in FY19E from 20.2% in FY17.
Av. Volume (,000) 39 Going ahead lower PAT growth compared to previous period gives us very
little cushion on the valuation front and at the present price level valuation
RoE to decline by 120bps
is little stretched. Hence, we change our rating from BUY to Neutral with
25% the target price of Rs. 6450 .
20%
19% 19%
20% 18%
16%
15% 13% 13%

10%

5%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
ation
Net Sales 50,801 57,589 68,085 71,496 79,796
0%
EBITDA 6,844 8,768 10,358 10,848 12,231
EBIT 4,329 5,947 7,754 7,878 9,621
Share Holding patterns % PAT 3,807 5,377 7,511 7,449 9,188
4QFY17 3QFY17 2QFY17 EPS (Rs) 126 178 249 247 304
Promoters 56.2 56.2 56.2 EPS growth (%) 33% 41% 40% -1% 23%
Public 43.8 43.8 43.8 ROE (%) 16% 19% 20% 18% 19%
Total 100.0 100.0 100.0 ROCE (%) 18% 21% 21% 19% 20%
BV 805 919 1,227 1,384 1,598
Stock Performance % P/B (X) 4.6 4.0 5.2 4.6 4.0
1Mn 3Mn 1Yr P/E (x) 29.3 20.9 25.6 25.8 20.9
Absolute 6.6 7.6 64.7
Rel.to Nifty 4.0 (0.5) 47.3 RECENT DEVELOPMENT: Commencement of Gujarat Plant
170
MARUTI NIFTY Gujarat plant has started production of first phase from February 2017 with
160 total capacity of 250000 units per annum and initially, it will produce 20,000
150 units per month.
140 Suzuki Motor Corporation had plans to spent around Rs.8500 crore on the

130 Gujarat plant. The plant will become operational in three phases.
120 Suzuki Motor Corporation will sell the production on cost to Maruti once its

110 gets completed.
100
Baleno will be first model to be produced and later on depending on the
90
demand scenario other models can also be produced from same plateform.
80
The plant will take care of new models and exports. It will also reduce the

Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16

Nov-16
Apr-16

Apr-17
Mar-17

logistics cost of Maruti.

NAVEEN KUMAR DUBEY

Naveen.dubey@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Higher other Total Volumes ('000) 360 348 418 387 414 15% 7% 1,429 1,568 10%
income Realization(Rs./ car) 424372.8 428400.1 426381.8 435500.5 442420 4% 2% 402932.2 434062.5 8%
supporting Net Sales 15,294 14,927 17,843 16,865 18,333 20% 9% 57,589 68,085 18%
PAT Other Income 537 483 813 592 445 -17% -25% 1,481 2,290 55%
COGS 10,095 10,125 12,074 11,674 12,767 26% 9% 38,706 46,742 21%
Employee Cost 603 579 519 617 616 2% 0% 2,000 2,360 18%
Other Expenses 2,258 2,007 2,212 2,085 2,402 6% 15% 8,054 8,728 8%
EBITDA 2,339 2,216 3,037 2,489 2,549 9% 2% 8,768 10,358 18%
Depreciation 761 639 630 635 701 -8% 10% 2,822 2,604 -8%
Interest 20 18 20 29 23 13% -21% 8 9 9%
PBT 2,095 2,042 3,200 2,417 2,270 8% -6% 7,419 10,035 35%
Tax 557 556 802 673 573 3% -15% 2,087 2,616 25%
PAT 1,538 1,486 2,398 1,745 1,709 11% -2% 5,451 7,591 39%

Results in-line, posted strong double digit revenue growth

Maruti reported results in line with our estimates. Net sales stood at Rs.18333 crore in 4QFY17 a
Utility Vehicles growth of 20% over same quarter previous year. This was driven by 15% volume growth and 4.5%
volume grew realization growth YoY.
by 72% Domestic volumes grew by 15%YoY to 382618 units during 4QFY17. Compact segment saw a
growth of 21% and utility vehicle segment grew by 72% YoY during the quarter. Fast growing UV and
Compact segment demand is driven by Vitara Brezza and Baleno. These two models enjoys a waiting
period of 5 and 7 months waiting period respectively.

Exports volumes have seen growth of 18%YoY backed by exposure in the new geographies and
increase in the Baleno volumes exported to Japan.
Realization improved by 4.6%YoY to Rs.442000 per car on account of better product mix and price
increases taken during the quarter.
Royalty rate for the quarter stood at Rs.948 crore.

Volume (in No.) Growth YoY Realization (Rs./car) Realization Growth (QoQ)

450,000 18% 20% 450,000 7%

17% 16%
400,000 14% 18% 440,000 6%
15% 430,000
350,000 10% 16%
13% 12% 420,000 2% 5%
300,000 14% 6%
410,000 0% 0% 2% 0% 4%
12% 1%
250,000 400,000
7% 2% 10% 2% 1% 3%
200,000 390,000 2% 1% 2%
4% 3% 8% 380,000 2%
150,000 6% 370,000
401,227

424,373

428,400

426,382

435,500
379,138

382,216

388,243

392,973

393,313

392,013

1%
299,894

323,911

346,712

341,329

353,335

360,402

348,443

418,470

387,251
321,898

374,182

414,389

442420

100,000 4% 360,000
50,000 2% 350,000 0%
- 0% 340,000 -1%

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Higher Other income supported PAT
Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Gross Margin 34% 32% 32% 31% 30% -0.04 0.00 33% 31% -0.01
EBITDA Margin 15% 15% 17% 15% 14% -0.01 -0.01 15% 15% 0.00
PAT Margin 10% 10% 13% 10% 9% -0.01 -0.01 9% 11% 0.02

Gross Margin contracted by 360bps YoY and 40bps QoQ due to increasing commodity prices and
higher discounts on the mini segment cars during the quarter.
EBITDA Margin also declined by 130bps YoY to 13.9% on account of higher marketing and
promotional expenses. New launches and Ciaz movement to Nexa also led to increase in the other
expenses.
PAT grew by 15.8%YoY to Rs.1709 crore on account of higher other income. PAT margin declined by
40bps YoY and 100bps QoQ in 4QFY17.

EBITDA (Rs. Crore) EBITDA Margin PAT (Rs. Crore) PAT Margin
17%
3,500 16% 16% 16% 18% 3,000 16%
15% 15% 15% 13%
3,000
14% 14% 16% 14%
12% 13%
2,500
12% 14% 11% 10% 12%
2,500 10% 10%
2,000 9% 9%
12% 9%
10%
8%
2,000 10% 7% 7%
1,500 6% 8%
1,500 8%
6%
6% 1,000
1,000

1,284
1,193
1,497
1,183
1,538
1,486
2,398
1,745
1,709
4%
4%
762
863
802
500
1,328

1,521

2,164

2,189

2,245

2,339

2,216

2,489

2,549
1,593

2,145

3,037

500 2%
2%
- 0% - 0%

Concall Highlights:
Confident of double digit growth in next fiscal.
Confident of The management do not see any kind of slow down in demand for next financial year.
double digit Exports Revenue in FY17 stood at Rs. 6000 crore.
volume growth in The company will maintain its market share going forward.
domestic market. Capex plan-Rs.4500 crore; large chunk of it would be for new models and rest is for R&D expenses
and maintenance of old plants.
Gujarat plant started production in 4QFY17 and initially, it will produce 20,000 units per month.
Management expects that the industry is going to benefit hugely from GST.
Maruti have been working with its suppliers and dealers to make sure that they are absolutely ready
for GST.
The company has asked its vendors to work with their tier II and tier III suppliers to make sure that
they also become GST compliant by July 1.
There is no improvement in the sales from government employees.
Export outlook Tax rate will be same as FY17
subdued in Exports outlook remain subdued because of dollar avaiability issue in African countries and change in
FY18. the duty structure in Sri-Lanka which was bigger market for Maruti.
Fleet segment is 6% of overall sales for Maruti.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Higher fixed cost and depreciation on Gujarat Plant- Gujarat plant has already started production
and it will take atleast 6-9 months to fully ramp up. Till the time plant gets ramp up the company has to
incur high fixed cost and depreciation on the plant. Thus the company can get the benefit of operating
leverage from FY19 only.

Increasing Annual Budget on Old Plants- Plants and machineries at Gurugram and Manesar plants
more than 25 years older so the maintenance cost of these plants are high and the manegement has
stated that the capex would be 800 crore for FY18 but it may go up going ahead.
International market to remain subdued- Maruti is facing challenges in establishing its footprint in
the exports. Africa market is facing dollar availability issue from last one and half years and Another big
market for Maruti was Sri-Lanka where the government has changed the duty structure. Japan and
Europe are the two markets where Maruti is exporting significant volumes.

New Launches by rivals in the premium segment- Maruti has taken the benefit of selling preimium
segment cars as a market leader in the Indian market but going forward competitors like Tata Motors,
Honda and Ford will share the pie with Maruti. These companies have been started spending huge
amount on R&D to take advantage of future demand.

Reducing dependency on Yen to improve profitability- Maruti is also aggressively working towards
bringing down the import content in its cars from an average 16% at the end of FY16 to 10% as part of
its vision 2.0 plan. Currently about 14 percent of imports are yen denominated. Management expects
to bring it down to 5 percent and typically, 1% movement in yen leads to around 1% change in the
operating profit of Maruti. The company also have rupee denominated Royalty contracts with the
parent Suzuki Motors for new models.

Mix changes towards Utility Vehicles Capacity and Utilization Trend

Mini Compact Super Compact Mid size Total Capacity(in units) Utilization Trend
Utility Vehicles Vans Export 2000000 120%
1800000 93%
97% 95%
120% 90% 90% 100%
1600000 86%
76%
100% 8% 7% 7% 8%
1400000 80%
10% 9% 8%
10% 10% 10% 10% 10% 10% 9% 10% 1200000
80% 5% 6% 7% 8% 11% 13% 13% 13%
4% 3% 4% 4% 0% 1000000 60%
4% 4% 4% 4%
60% 800000
38% 38% 38% 37% 40%
38% 35% 37% 39% 600000
40%
1260000

1260000

1510000

1510000

1510000

1650000

1760000
400000 20%
20% 31% 31% 30% 30% 27% 27% 27% 25% 200000
0% 0 0%

View & Valuation

Successful new launches in the recent past have kept Maruti on the driving seat with the market
share of 47%. With the commissioning of Gujarat facility in the 4QFY17 waiting period for Baleno will
reduce going forward. However, we expect that it will ramp up only by the second half of FY18 and
till then the company has to incur high depreciation and fixed cost on the plant which may result in
negative operating leverage for Maruti. We expect 120 bps deterioration in RoE from 20.2% in FY17
to 19% in FY19E. Going ahead lower PAT growth compared to previous years gives us a very little
cushion on the valuation front and at the present price level valuation is little stretched. Hence, we
change our rating from BUY to Neutral with the target price of Rs. 6450 .

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17 FY18E FY19E Y/E March FY16 FY17 FY18E FY19E
Revenue from Operation 57,589 68,085 71,496 79,796 ROE 19% 20% 18% 19%
Change (%) 13% 18% 24% 17% ROCE 21% 21% 19% 20%
Other Operating Income Asset Turnover 1.4 1.3 1.3 1.3
EBITDA 8,768 10,358 10,848 12,231 Debtor Days 8.79 6.45 6.45 6.45
Change (%) 28% 18% 24% 18% Inventory Days 20.3 17.5 17.5 17.5
Margin (%) 15% 15% 15% 15% Payable Days 45 45 45 45
Dep & Amortization 2,822 2,604 2,970 2,610 Interest Coverage 0.0 0.0 0.0 0.0
EBIT 5,947 7,754 7,878 9,621 P/E 21 26 26 21
Interest & other finance cost 82 89 156 166 Price / Book Value 4.0 5.2 4.6 4.0
Other Income 1,481 2,290 2,293 2,863 EV/EBITDA 13 19 18 16
EBT 7,345 9,954 10,016 12,318 FCF per Share 1,265 2,517 2,937 2,896
Exceptional Item - - - - Dividend Yield 0.9% 1.2% 1.2% 1.2%
Tax 2,087 2,616 2,739 3,303
Minority Int & P/L share of Ass. 119 173 173 173 Assumptions
Reported PAT 5,377 7,511 7,449 9,188 Y/E March FY16 FY17 FY18E FY19E
Adjusted PAT 5,377 7,511 7,449 9,188 Volume ('000) 1,429 1,569 1,724 1,886
Change (%) 41% 40% 39% 22% Volume Growth 11% 10% 10% 9%
Margin(%) 9% 11% 10% 12% Realization(Rs./vehicle) 402,932 434,062 414,710 423,094
Realization Growth 3% 8% -4% 2%
Capex(Rs crore) 3,249 3,500 2,000 2,000

Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores

Y/E March FY16 FY17 FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Share Capital 151 151 151 151 PBT 6,630 9,954 10,016 12,318
Reserves 27,598 36,924 41,647 48,108 (inc)/Dec in Working Capital 9,089 14,348 11,264 15,267
Networth 27,749 37,075 41,798 48,259 Non Cash Op Exp 2,867 2,604 2,970 2,610
Debt 237.8 483.6 484.0 484.0 Interest Paid (+) 94 89 156 166
Other Non Current Liab 900 1,633 1,085 1,085 Tax Paid (1,948) (2,616) (2,739) (3,303)
Total Capital Employed 27,987 37,559 42,282 48,743 others 941 358 (108) 926
Net Fixed Assets (incl CWIP) 13,989 14,563 13,370 12,442 CF from Op. Activities 8,584 11,917 8,243 12,717
Non Current Investments 17,512 26,972 28,950 35,398 (inc)/Dec in FA & CWIP (2,424) (3,178) (1,777) (1,682)
Other Non Current Assets 9 1,603 1,862 1,862 Free Cashflow 6,160 8,739 6,467 11,035
Non Current Assets 32,866 43,162 44,220 49,740 (Pur)/Sale of Investment (4,785) (1,304) (1,551) (1,691)
Inventory 3,200 3,264 3,427 3,825 others (110) (8,095) (1,978) (6,448)
Debtors 1,387 1,203 1,263 1,410 CF from Inv. Activities (7,319) (9,399) (5,306) (9,821)
Cash & Bank 77 24 79 83 inc/(dec) in NW
Other Current Assets 270 1,541 1,583 1,583 inc/(dec) in Debt (226) 246 0 -
Current Assets 7,404 8,798 10,343 12,582 Interest Paid (104) (89) (156) (166)
Creditors 7,127 8,369 8,788 9,809 Dividend Paid (inc tax) (909) (2,727) (2,727) (2,727)
Provisions 2,137 472 491 546 others
Other Current Liabilities 2,408 1,828 1,919 2,142 CF from Fin. Activities (1,239) (2,570) (2,882) (2,892)
Curr Liabilities 11,369 12,753 11,180 12,478 Inc(Dec) in Cash 26 (53) 55 4
Net Current Assets (3,965) (3,955) (838) 104 Add: Opening Balance 43 77 24 79
Total Assets 40,270 51,961 54,563 62,322 Closing Balance 69 24 79 83

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - Con. Staples
BSE Code - 532424
NSE Code - GODREJCP
27-Apr-17 NIFTY - 9352

Company Data Key Highlights of the Report:

CMP 1725 GODREJCP is one of the fasted growing company in our FMCG universe
Target Price HOLD
with 28% CAGR revenue growth and 22% PAT growth in last 6 years.
Previous Target Price GODREJCP is present in less penetrated segment as compared to other
Upside FMCG players such as hair color.It will give it enough room to grow further.
52wk Range H/L 1771/1286 Recent commentary by management is very encouraging which indicates
Mkt Capital (Rs Cr) 58,766 better recovery after demonetization in Q4FY17E.
Av. Volume (,000) 165 GODREJCP has achieved our price target of Rs 1760 on 26 April 2017. As
it is one of fastest growing company with stable ROE of ~ 20% and now it is
RoE & ROCE recovering after demonetization, Hence before revising our estimates we
need to go through Q4FY17 result of it which is due on 9May, 2017. At
ROE ROCE
present we recommend `HOLD on this stock.
25% 22%
21% 21%
20% 19%
20%
20% 20% 21%
19%
15% 18%

10%
Financials/Valu FY15 FY16 FY17E FY18E FY19E
5%
ation
Net Sales 8,276 8,968 9,523 10,592 11,853
FY15 FY16 FY17E FY18E FY19E EBITDA 1,365 1,639 1,857 2,050 2,235
EBIT 1,275 1,536 1,714 1,886 2,075
Share Holding patterns % PAT 907 1,119 1,251 1,413 1,590
3QFY17 2QFY17 1QFY17 EPS (Rs) 27 33 37 41 47
Promoters 63.3 63.3 63.3 EPS growth (%) 19% 23% 12% 13% 13%
Public 36.7 36.7 36.7 ROE (%) 21% 22% 21% 20% 19%
Total 100.0 100.0 100.0 ROCE (%) 20% 20% 18% 19% 21%
BV 127 150 177 210 246
Stock Performance % P/B (X) 6.4 9.7 9.2 7.8 6.7
1Mn 3Mn 1Yr P/E (x) 30.2 44.3 44.6 39.5 35.1
Absolute 3.6 11.9 26.2
Rel.to Nifty 0.9 3.2 7.8 RESULT PREVIEW:

Overall revenue is expected to grow by 9%YoY to Rs 2473 cr whereas PAT

140 GODREJCP NIFTY will remain to Rs 352.
130
We expect 1% overall volume growth and 3.5% realization growth for
120
GODREJCP in Q4FY17.
110 We expect deterioration in gross margin by 14 bps YoY and 46 bps QoQ in

100 Q4FY17E. Gross margin is expected to remain 57% in Q4FY17E.
EBITDA margin will remain 19.9% in Q4FY17E, an improvement of 6 bps
90
YoY led by better cost management.
80
PAT margin is expected to improve by 55 bps YoY to 14.2%on the back of

lower Tax out go in Q4FY17E.

RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 3QFY16 4QFY16 1QFY1 2QFY17 3QFY17 YoY % QoQ% FY15 FY16 YoY %
Net Sales 2,286 2,269 7
2,123 2,439 2,486 9% 2% 8,276 8,968 8%
Other Income 17 14 14 17 19 10% 13% 92 67 -27%
COGS 992 973 982 1,059 1,057 7% 0% 3,842 3,846 0%
Ad & P Expenses 172 215 168 203 192 12% -6%
Employee Cost 236 246 249 241 256 8% 6% 777 960 24%
Other Expenses 345 386 343 391 381 10% -3% 2,293 2,523 10%
EBITDA 455 449 381 466 517 14% 11% 1,365 1,639 20%
Depreciation 26 29 33 36 36 41% 1% 91 103 14%
Interest 30 24 33 35 40 34% 13% 100 100 0%
PBT 427 410 330 412 447 5% 9% 1,266 1,503 19%
Tax 94 98 75 91 99 4% 9% 272 317 16%
PAT 368 310 244 318 352 -4% 11% 907 1,119 23%

International Better revenue growth led by robust international business performance

business grew
by 19% YoY.
Revenue for Q3FY17 grew by 9% YoY to Rs 2486 cr led by 19% YoY growth in the international
business.
Africa business including Strength of Nature grew by strong 54% in constant currency term.
Indonesian business which contributes approx. 17% of total revenue remained flat while Latin
America and Europe grew by 24% and 16% in Constant currency terms in this quarter.

Domestic sales remained flat YoY due to demonetization and domestic volume declined by 3% YoY.

Gross margin improved by 88 bps YoY to 57.5% supported by lower input prices.

EBITDA for this quarter grew by 14% YoY to Rs 517 cr. EBITDA margin improved by 91
bps YoY 20.8%.
PAT declined by 4% YoY to Rs 352 cr and PAT margin contracted by 194 bps in Q3FY17.

3000 400
Sales(in cr) 368 PAT(in cr) International Business Revenue(in cr.)
352350
2500 1400
310 318
300
1200
2000 264 266
244 250
235 1000
222
1500 200 800

143 150 600

1000
117 400
100
1018

1078

1120
1029

1013

1028

1086

1220

500 200
920

910
889

50
1889

2060

2236

2092

1988

2197

2286

2269

2123

2439

2486

0
0 0

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Margin % 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-) FY15 FY16 YoY(+/-)
Gross Margin 56.6% 57.1% 53.8% 56.6% 57.5% 0.9% 0.9% 53.6% 57.1% 3.5%
EBITDA Margin 19.9% 19.8% 17.9% 19.1% 20.8% 0.9% 1.7% 16.5% 18.3% 1.8%
PAT Margin 16.1% 13.7% 11.5% 13.0% 14.2% -1.9% 1.1% 11.0% 12.5% 1.5%

Gross margin improved by 88 bps YoY to 57.5% supported by lower input prices.

EBITDA grew by 14% YoY to Rs 517 cr in Q3FY17.EBITDA margin improved by 91 bps YoY to 20.8%
on the back of lower COG and employee cost.
PAT de-grew by 4% YoY to Rs 352 cr. PAT margin for this quarter remained 14.2% ,declined by 194 bps
YoY.

Domestic Soap Revenue growth YoY Segments Penetration

Domestic Soap Revenue growth YoY Penetration

20% 120%
15% 100%
15% 13% 13%
100%
11%

10% 80%

5% 2%
3%
2%
60% 48%
1% 38%
40%
0%
-6% -6% 20%
-5%
-10%
0%
-10%
Hair colour Household Soap
-15% Insecticides(HI)

Concall Highlights(Q3FY17):
Indonesian business: Non HI (Home Insecticide) portfolio performed better. Improved market share in HI
business. Management is hopeful for better growth from Indonesia next year.
The management is Confident to outpace industry growth going forward(domestic market).
Management is confident of EBITDA growth ahead of the sales growth.
After demonetization, recovery is much faster than what was expected. It will be back to normal in couple
Took price of month.
hike of 2% in Ad&P Expenses will be in the range of 11%.
domestic Going forward, the company will maintain innovation, launch new products, intensify introduction on Lower
soap Unit Pack(LUP), expand direct reach and work for brand building.
business. Price hike of 2% taken in the domestic soaps business in 3QFY17.Gained market share in Cinthol.
Scope of Margin improvement in International Market: for Indonesia still chance of some margin expansion,
LA(Latin America) scope of more margin expansion and for African business potential of significant margin
improvement in next 3-5 years.

SON supply issue will be short term issue. The company will localize its factory there in CY2017.Capex in
Africa will be very low.
MT(Modern Trade) grew by 33% in this quarter.
Margin expansion: Gross margin will not as good as this quarter going forwards.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Innovation and new product launches: The Company gets 25% to 40% of sales growth from
launch of new products historically. Going forward, the company will maintain innovation, launch new
products, intensify introduction on Lower Unit Pack (LUP) which will deliver better growth going
forward.

Lower penetration gives opportunity: GODREJCP is present in less penetrated segment as

compared to other FMCG players like Hair Colour(38%) and HI(48%). It will give it enough room to
grow further.
Relatively less impacted by Patanjali: If we see our FMCG basket, GODREJCP has minimum
overlap of products with Patanjali than any other players. Hence we expect very less impact on the
volume of GODREJCP due to expansion of Patanjali.
Expectation of better revenue from Indonesian market: Indonesian market contributes approx.
17% of companys revenue. We expect it to improve going forward as company has plans to launch
several hair care and personal care products in Indonesian market in next 6-12 months which will
improve companys volume going forward. Secondly company is planning to ramp up its distribution
reach to double in next 3-5 year which will translate into better volume growth from Indonesia going
forward.

African business (Potential growth driver): African business grew by 19% YoY in constant
currency (CC) terms and 54%YoY including Strength of Nature in Q3FY17. We expect similar growth
in Q4FY17.Although African business is facing some currency headwinds but by localizing production
facility and increasing prices company is expected to counter it.Going forward management sees
continuous margin improvement from African business in next 3-5 years.

Indonesian Market Constant Currency(CC) growth Africa Constant Currency(CC) growth

Indonesian Market (CC) growth YoY Africa (CC) growth YoY
75%
25% 80%
70%
21%
20% 54%
19% 60% 52%

15% 15%
50%
36%
13% 40% 32% 33%
26%
10% 30% 23%
8% 15% 16%
7% 20% 12%
6%
5%
3% 3% 10%
0% 0% 0%
-2%
-5%

View & Valuation

Recent commentary by management is very encouraging which indicates better recovery after
demonetization in Q4FY17E. GODREJCP is present in less penetrated segment as compared to
other FMCG players such as Hair color and Home Insecticide. It will give it enough room to grow
further. As far as international business in concern, we expect better revenue growth from Indonesian
market going forward as company is expanding its distribution reach and launching new products.
GODREJCP has achieved our price target of Rs 1760 on 26 April 2017. As GODREJCP is one of
fastest growing company with stable ROE of ~ 20% and now it is recovering after demonetization,
Hence before revising our estimates we need to go through Q4FY17 result which is due on 9May,
2017. At present we recommend `HOLD on this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Revenue from Operation 8,968 9,523 10,592 11,853 ROE 22% 21% 20% 19%
Change (%) 8% 6% 11% 12% ROCE 20% 18% 19% 21%
Other Operating Income Asset Turnover 0.9 0.8 0.8 0.9
EBITDA 1,639 1,857 2,050 2,235 Debtor Days 45.50 45.50 45.50 45.50
Change (%) 20% 13% 10% 9% Inventory Days 53.2 53.2 53.2 53.2
Margin (%) 18% 20% 19% 19% Payable Days 42 42 42 42
Dep & Amortization 103 143 165 160 Interest Coverage 15.34 13.19 17.85 25.52
EBIT 1,536 1,714 1,886 2,075 P/E 44 45 40 35
Interest & other finance cost 100 130 106 81 Price / Book Value 9.7 9.2 7.8 6.7
Other Income 67 52 61 71 EV/EBITDA 31 32 28 25
EBT 1,503 1,636 1,841 2,065 FCF per Share 19 34 45 48
Exceptional Item (27) - - - Dividend Yield 0.4% 0.4% 0.4% 0.5%
Tax 317 345 388 436
Minority Int & P/L share of Ass. 39 39 39 39 Assumptions
Reported PAT 1,119 1,251 1,413 1,590 Y/E March FY16 FY17E FY18E FY19E
Adjusted PAT 1,140 1,251 1,413 1,590 Volume Growth(domestic) 10% 2% 6% 7%
Change (%) 24% 10% 13% 13% Realization Growth(domestic) -1% 0% 4% 5%
Margin(%) 13% 13% 13% 13% Capex(Rs crore) 391 262 100 100

Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores

Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Share Capital 34 34 34 34 PBT 1,503 1,557 1,762 1,986
Reserves 5,064 6,007 7,137 8,357 (inc)/Dec in Working Capital (482) (21) (40) (47)
Networth 5,098 6,041 7,171 8,391 Non Cash Op Exp 116 143 165 160
Debt 2631 3517 2617 1717 Interest Paid (+) 100 130 106 81
Other Non Current Liab 37 37 37 37 Tax Paid (336) (345) (388) (436)
Total Capital Employed 7,729 9,558 9,788 10,108 others (41) - - -
Net Fixed Assets (incl CWIP) 1,780 3,495 3,401 3,312 CF from Op. Activities 839 1,459 1,657 1,748
Non Current Investments 34 34 34 34 (inc)/Dec in FA & CWIP (208) (286) (126) (127)
Other Non Current Assets 4,792 4,845 4,845 4,845 Free Cashflow 631 1,173 1,531 1,622
Non Current Assets 6,606 8,375 8,281 8,192 (Pur)/Sale of Investment (330) (147) (150) (200)
Inventory 1,307 1,388 1,544 1,727 others 43 (61) (1) (2)
Debtors 1,118 1,187 1,320 1,478 CF from Inv. Activities (495) (2,059) (222) (273)
Cash & Bank 746 569 688 812 inc/(dec) in NW - - - -
Other Current Assets 376 537 714 945 inc/(dec) in Debt 157 886 (900) (900)
Current Assets 3,547 3,681 4,266 4,962 Interest Paid (119) (130) (106) (81)
Creditors 1,037 1,101 1,225 1,371 Dividend Paid (inc tax) (225) (263) (297) (334)
Provisions 65 69 77 86 others - (70) - -
Other Current Liabilities 1,202 1,276 1,419 1,588 CF from Fin. Activities (187) 424 (1,302) (1,315)
Curr Liabilities 2,303 2,446 2,721 3,044 Inc(Dec) in Cash 157 (177) 133 124
Net Current Assets 1,244 1,235 1,546 1,917 Add: Opening Balance 404 746 569 688
Total Assets 10,153 12,056 12,547 13,154 Closing Balance 561 569 702 812

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 "AVIOD "
S CHAND AND COMPANY LIMITED
25th Apr 2017

IPO Note
Issue Detail Company Overview
Type 100% Book Building S Chand And Company Limited was incorporated in 1970 which operates as an education content
Issue Size Rs. 700 Crore company in India. The company develops and delivers content, solutions, and services in the
Offer Price *Rs (660-670)/Equity Share education K-12, higher education, and early learning segments
Company is involved in publishing, printing, sale, purchase, export, and import of various books and
Min App Size 22 Shares
other literary work; agency ship and distribution of publishers for books and other literary work;
Issue Open 26-Apr-17 selling of educational toys; and publishing books for children, schools, colleges, and universities, as
Issue Close 28-Apr-17 well as digital content and interactive learning systems to schools and running pre-schools.
Shares Offer 1.05 Cr.
Face Value Rs 5 The company also provides digital data management services and digital content books to schools
JM Financial Institutional and colleges; solutions for higher education in colleges, universities, and technical institutes; and
Securities Ltd , Axis Capital Ltd , DTP printing, DTP jobs, page making, editing and proof reading, and cover designing services of
Lead Mgrs
Credit Suisse Securities (India) books, journals, tabloids, magazines, bulletins, brochures, and periodicals in the form of hard copy,
Pvt Ltd compact disks, and e-forms. S Chand And Company Ltd offers 53 consumer brands across
Listing BSE, NSE knowledge products and services including S.chand, Vikas, Madhubun, Saraswati, Destination
Success and Ignitor. The company also exports its printed and digital content to Asia, the Middle
Registrar Link Intime India Pvt Ltd
East, Africa, and internationally.
Market Cap
2304.1 Company Strategies
(Post Issue)
> Company has strong presence in the CBSE/ICSE affiliated schools and increasing presence in the
No of shares ( Post & Pre Issue) state board affiliated schools across India. It works closely with the educators and authors, and
No of Shares (Pre Issue) 29,844,496 regularly integrates feedback received from authors, educators and students Company
Comprehensive consumer focused education content player with touch points across education
Offer for Sale 6,023,236 lifecycle
Fresh Issue made 4545455 > Company has Strong integrated in-house printing and logistic capabilities . The printing
capacity was enhanced from 15 tons to 55 ton paper per day from in FY 14 to FY16. By integrating
No of Shares (Post Issue) 34389951
and expanding the printing capabilities, they reduced dependence on third-party vendors, thereby
achieving cost savings and operational efficiencies.
Bid allocation pattern > Company has Pan-India sales and distribution network which driving deep market reach. They
QIB 50% sold their content in 29 states and 7 union territories through their distribution channels. Its
Non-Institutional 15% acquisition of NSHPL enhanced its distribution network in southern India, and acquisition of VPHPL
added to its distribution network in north India
Retail 35% > Company Focused digital and technology platform . The digital offerings are focused on
supplementing our existing strengths in the K-12 and higher education businesses.

Objects of the Issue:

Particulars
Repayment of loans availed by the Company and one of their Subsidiaries, EPHL, which were
utilized towards funding the acquisition of Chhaya
Rubi Burman Repayment/prepayment in full or in part, of certain loans availed of by the Company and their
rubi.burman@narnolia.com Subsidiaries, VPHPL and NSHPL
General corporate purpose

Recommendation
S Chand and Company is raising funds to retire its debts in its subsidiaries . The company is being offered at post IPO valuations of 2.3 times
P/b and Return on Equity of 5.5% while its comparable peer Navneet Education Limited is being traded at 5times P/b and has return on
Equity of 20%. We recommend AVOID.

Narnolia Securities Ltd

Please refer to the Disclaimers at the end of this Report.

 S CHAND AND COMPANY LIMITED

S Chand Organization Structure

Competitive Risks
> The high degree of seasonality of our K-12 business materially affects operating revenue, margins and cash
flow from quarter to quarter. Company business and the newly acquired business of Chhaya is linked to the
academic cycle. Chhayas sales season has traditionally been across first and fourth quarters of the financial
year with the main sales season starting in December. The the working capital cycle for print content in the
CBSE/ICSE K-12 education industry tends to be unduly high at the fiscal year end on account of high sales in the
last quarter
> Company operate in a highly-competitive and fragmented industry, and our business, results of operations
and financial condition may be adversely affected if we are not able to compete effectively.

> For the past two years, CBSE has issued an advisory circular advising CBSE schools to use only NCERT print
content for all classes and may issue similar advisory circulars in the future. These circulars may reduce demand
for its educational content amongst the CBSE affiliated schools and, accordingly, may adversely affect its
business, results of operations, cash flows and financial condition.

> A significant portion of the companys revenues are derived from titles of its top authors. The loss of all or any
of its top authors could adversely affect its business, results of operation, cash flows and financial condition.

Narnolia Securities Ltd

Please refer to the Disclaimers at the end of this Report.

 S CHAND AND COMPANY LIMITED
Financials Snap Shot
INCOME STATEMENT RATIOS
31 March 31 March 31 31 Dec 31 March 31 March 31
2014 2015 March 2016 2014 2015 March
Revenue (Net) 370.0 476.7 537.8 149.5 EPS 12.2 9.8 14.1
Other Income 0.9 1.8 2.9 1.3 Book Value Per share 6.0 6.7 9.7
Total Revenue 371.0 478.5 540.6 150.8 Valuation(x)
Raw materials Cost 149.2 178.2 175.7 98.7 P/E ( Upper Band ) 54.7 68.2 47.4
Purchase and implementation cost 0.3 1.7 4.9 3.7 P/E ( Lower Band ) 53.9 67.1 46.7
Publicationdecrease
Increase)/ expensesin 42.3 48.2 50.3 22.3 Price / Book Value 112.6 100.4 69.3
inventories of finished goods, -13.8 -24.3 -27.9 -68.1 EV 2337 2463 2438
Selling and distribution expenses 34.4 45.6 52.7 40.6 EV/Sales 6.3 5.2 4.5
Employee benefit expenses 52.7 80.3 94.2 83.6 EV/EBITDA 8.0 6.6 5.9
Other expenses 26.2 44.7 62.6 53.5 Profitability Ratios
Total Expenses 291.2 374.5 412.4 234.4 RoE 11% 8% 8%
EBITDA 79.8 104.0 128.2 -83.6 RoCE 18% 20% 17%
Depreciation 12.3 22.5 25.9 20.3 Liquidity Ratios
EBIT 67.5 81.5 102.3 -103.8 Net Debt/Equity 0.043 0.285 0.113
Finance Costs 9.5 28.3 30.6 22.7 Interest Coverage Ratio 6.5 4.6 4.9
Profit before Tax 58.0 53.2 71.7 -126.6 Current Ratio 1.86 1.75 1.87
Total Tax 16.0 19.5 23.3 -39.5
PROFIT AFTER TAX 42.0 33.7 48.4 -87.0
31 March 31 March 31 31 Dec 31 March 31 March 31 31 Dec
2014 2015 March 2016 2014 2015 March 2016
Share Capital 0.2 0.2 0.2 14.9 Net Profit/(loss) before tax 58.6 53.7 72.7 (126.3)
Reserves 367.5 394.1 599.0 494.2 Adjustments for:
Minority Interest 3.0 21.5 3.1 8.8 Depreciation and Amortisation 12.3 22.5 25.9 20.3
Net Worth 370.8 415.9 602.3 518.0 Interest expense 9.1 27.4 29.3 20.5
Long-term borrowings 16.0 118.5 67.9 59.5 Amortisation of ancillary borrowing cost 0.0 0.5 0.6 1.8
Trade payables 0.0 0.2 0.9 1.3 Interest income (0.6) (0.4) (0.9) (0.2)
Other non-current liabilities 0.3 0.3 0.1 0.0 Loss/(profit) on sale of fixed assets (0.1) 0.0 0.2 0.5
Long-term provisions 2.1 4.6 5.0 7.0 Loss/(profit) on sale of investments (0.1) (0.0) (1.7) (1.4)
Non - current liabilities 389.1 539.5 676.2 585.7 Provision for sales return 0.0 1.6 4.6 0.0
Short-term borrowings 69.5 96.5 125.8 183.1 Employee stock options expense 0.0 0.0 0.5 0.9
Trade payables 99.2 135.8 151.1 140.1 Provision for bad debts and advances 1.9 1.0 4.6 6.8
Other current liabilities 14.9 40.9 23.2 200.0 Operating profit before working capital 81.2 106.2 135.7 (77.2)
Short-term provisions 4.3 13.3 17.2 31.0 Movements in working capital
Current liabilities 187.9 286.5 317.3 554.1 (Increase)/ decrease in loans and advances 30.3 1.7 (5.7) (10.8)
Total Liabilities 576.9 826.0 993.5 1139.9 (Increase)/ decrease in trade receivables (59.2) (113.5) (59.7) 195.3
Fixed assets 197.5 278.9 337.4 492.9 (Increase)/ decrease in inventories (23.9) (36.0) (20.1) (110.8)
Non Current Investments 7.4 13.0 25.4 25.4 Decrease in other assets 0.0 (0.0) 0.0 (0.0)
Deferred tax assets 5.4 10.4 12.4 56.3 Increase/ (decrease) in provisions 0.5 11.7 (10.2) (2.2)
Loans and advances 15.9 18.7 17.8 25.8 Increase/ (decrease) in trade payables 32.3 36.9 16.0 (10.6)
Other non-current assets 1.7 2.3 3.3 1.2 Increase/ (decrease) in other liabilities 1.1 4.4 (0.5) 10.2
Non-current assets 227.8 323.4 396.2 601.7 Cash flows from operations 62.2 11.4 55.5 (6.0)
Current investments 0.6 4.7 16.4 4.3 Direct taxes paid (net of refunds) 19.8 29.3 18.0 28.5
Inventories 83.9 119.7 139.8 250.6 Net cash flows from operating activities (39.5) (101.6) (136.1) (159.4)
Trade receivables 230.9 341.7 395.1 195.6 Cash flows from investing activities 0.5 122.7 100.9 190.7
Cash and bank balances 17.6 21.3 24.4 24.4 Net cash generated financing activities 5.1 1227.1 1009.3 1906.7
Short-term loans 16.0 13.2 18.5 62.4 Net in cash and cash equivalents (33.9) 1248.2 974.1 1937.9
Current assets 349.0 500.7 594.2 537.4 Cash & cash equivalents at the beginning 13.6 17.4 20.9 23.8
TOTAL Assets 576.8 824.1 990.4 1139.1 Cash & cash equivalents at the end of Year (20.2) 1265.6 995.1 1961.8
 Narnolia Securities Ltd
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email: narnolia@narnolia.com, website
: www.narnolia.com

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