Hinduja Ventures Ltd.

Stock Note
HDFC Sec Stock code Industry

CMP: Rs. 385.2

April 19, 2012
CMP Recommended Action Averaging Price Sequential Target Prices Time Horizon

HINFINEQNR

Media & Entertainment

385.2

Buy at CMP and add on dips

Rs.352

Rs 448 & Rs 512

1-2 Quarters

Company Background:
HVL (Hinduja Ventures Ltd) was incorporated in the year 1985 as Mitesh Mercantile & Financing Ltd. In the year 1994, the company commenced operations and in 1995, Hinduja Finance Ltd was amalgamated with the company and subsequently the name was changed to Hinduja Finance Corporation Ltd with effect from February 9, 1995. The Company had been renamed 'Hinduja Ventures Limited' effective from October 23, 2007. The new name reflects both the commitment of promoter group and the value and wealth creation proposition that the company offers by identifying and investing in growth opportunities. HVL is a part of Hinduja Group based in Mumbai. The company operates in the business of media & entertainment, real estate and treasury operations. The real estate activities encompass property development. Currently the company has properties located in Bangalore and Hyderabad, which could be developed in the near future. The treasury segment consists of activities relating to deployment of surplus funds in trade/ investments in shares and securities, other than subsidiaries. In March 2007, In Network Entertainment and In2Cable India, both wholly owned subsidiaries of the company were merged into IndusInd Media and Communications (IMCL), a 60% subsidiary of HVL. HVL is the holding company of one of Indias largest integrated media companies IMCL, which is one of the largest multi system operators (MSO) in the country. HVL with 8.5 million subscribers across 28 major cities offers over 301 channels in the digital mode (it also offers about 90 channels in the analog mode, which are a part of the digital package). It has a backbone of over 10,000 kms of hybrid fibre optic network through which it also offers broadband services with national ISP license. Over and above Digital cable distribution, HVL is also into content creation, acquisition & aggregation for TV services. IMCL has successfully deployed over 400,000 set top boxes for converting analogue home to digital homes. The Company is fully geared up to meet the subsequent addressable digital cable roll out as per Government policy & regulations. Company structure:

Source: Company reports, HDFC Sec

Media & Entertainment Business:

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As of FY11 the media & entertainment sector continues to grow at around 13% per annum. HVLs principal subsidiary, IndusInd Media & Communications Limited, (IMCL) continued its buoyant performance for FY11. IMCL continued with its consolidation strategy by acquiring several small networks and entering into Joint Ventures with medium sized networks. Its present footprint extends to 28 cities across the country. IMCL remains among the top 3 MSOs in the country with the distinction of having the highest profitability in the Indian cable TV industry. For IMCL, this year marks an unbroken profit record extending over last 5 years. In order to sustain the strong performance, IMCL has inducted few senior members on its board of directors. HVL also has presence on the content side through IEIL (IN Entertainment India Ltd), which acquired the content business of IMCL in recent past. The company has done significant investments towards creation of TV and movie contents and the same is likely to fructify in the near future and could position IEIL as a leading content producer in the Indian Entertainment industry. Real Estate: The real estate segment includes two land holdings measuring 4.75 acres and 47 acres located in Hyderabad and Bangalore respectively. IDL speciality Chemicals, a subsidiary of HVL had bought out ~ 4.75 acre land in Kukatpally in Hyderabad for a consideration of Rs 251.7 mn. HVL plans to develop both the properties so as to reap the benefits of the price appreciation in the real estate sector. Treasury Operations: The treasury operations primarily encompass deployment of funds so as to maximise returns through investments in quoted as well as unquoted investments. Currently the media & entertainment segment and the treasury operations yield revenues for the company while the real estate companies are yet to post revenues. The table below depicts the segmental performance of the company:
Segment Revenues: (Rs mn) Media & Communications % Of total sales Real Estates % Of total sales Treasury % Of total sales Unallocated Total Revenues Segment Results: Media & Communications EBIT % Real Estates EBIT % Treasury EBIT % Unallocated Total PBT EBIT % Capital Employed: Media & Communications ROCE % Real Estates ROCE % Treasury ROCE % Unallocated Total Segment Capital Employed ROCE % Q1FY11 828.7 84.8% 0.0% 149.1 15.2% 977.8 Q2FY11 960.7 82.2% 0.0% 207.6 17.8% 0.3 1,168.5 Q3FY11 1,080.7 89.6% 0.0% 125.0 10.4% 0.5 1,206.2 Q4FY11 1,234.2 88.1% 0.0% 165.7 11.8% 0.5 1,400.4 Q1 FY12 1,123.8 89.6% 0.0% 129.8 10.3% 0.9 1,254.5 Q2 FY12 1,230.1 83.8% 0.0% 234.3 16.0% 3.5 1,468.0 Q3 FY12 1,269.6 86.4% 0.0% 197.3 13.4% 1.8 1,468.7

147.4 17.8% (1.3) 139.3 93.4% (2.3) 283.2 29.0%

226.8 23.6% (1.6) 196.6 94.7% (5.7) 416.1 35.6%

279.6 25.9% (1.3) 116.0 92.8% (3.0) 391.3 32.4%

228.2 18.5% (1.4) 68.6 41.4% (16.6) 278.7 19.9%

294.6 26.2% (0.1) 1,172.9 903.4% (1.6) 1,465.8 116.8%

283.9 23.1% (1.2) 220.5 94.1% 0.2 503.4 34.3%

294.9 23.2% (2.5) 171.2 86.8% (2.8) 460.8 31.4%

2,290.6 6.4% 102.0 -1.3% 5,321.1 2.6% (118.9) 7,594.8 3.7%

2,872.9 7.9% 102.0 -1.6% 4,824.2 4.1% 132.5 7,931.7 5.2%

2,792.7 10.0% 105.7 -1.3% 5,149.9 2.3% 259.3 8,307.6 4.7%

2,942.1 7.8% 105.6 -1.3% 5,353.0 1.3% 5,353.9 13,754.7 2.0%

3,400.4 8.7% 106.0 -0.1% 5,177.5 22.7% (170.2) 8,513.7 17.2%

3,320.7 8.6% 106.0 -1.2% 5,325.3 4.1% 133.5 8,885.5 5.7%

3,594.5 8.2% 119.9 -2.1% 5,449.4 3.1% 131.0 9,294.8 5.0%

Share holding Pattern:

As of December 2011 the promoters stake stands at 65.8% including the foreign promoters stake. Amas Mauritius is the only foreign promoter with 13.43% stake. Amongst the Indian promoters Aasia Management and Consultancy Ltd holds 43.22% stake while the balance stake in held by various individuals related to the promoters.
Share holder category Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

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Foreign Promoters Indian Promoters Institutional Stake Non Institutional Stake Total

13.5 52.3 18.8 15.4 100

13.5 52.3 16.7 17.5 100

13.5 52.3 16.4 17.8 100

13.5 52.3 16.9 17.3 100

13.5 52.3 17.3 16.9 100

The stock is not a very widely held amongst the institutional category of investors. Reliance Capital Trustee Company holds 9.42% stake through two of its funds. Amam Ltd a Mauritius based investment fund holds 3.91% stake in the company.

Investment Rationale:
Television penetration still at ~63%, provides ample opportunity for expansion: Television (TV) by far is the largest medium for media delivery in India in terms of revenues. It constitutes ~45% of the total media industry. The TV industry continues to have headroom for further growth as television penetration in India is still at ~ 63.5% of total households. The following chart depicts the mix in the C&S industry based on households:

(HH Households)

Source: FICCI KPMG 2012 report

As per the chart above there are around 84 mn households without a TV connection in the country and constitute ~ 36.5%of the households in the country. With the increasing penetration of the C&S industry these households could also be connected and this provides an incremental opportunity. Since HVL is a leading player in the C&S industry, it could be one of the beneficiaries of the emerging situation. The company is making acquisition in the new geographies so as to increase the penetration. The recent acquisition of existing cable operators in Kolkatta is a testimony of the same. This incremental opportunity could add up to the top line of HVL in the near future. Migration to digitization could just be the inflexion point for the industry: The digitisation bill (transmission of channels through digital means v/s conventional analogue signal) requires that the transmission of television channels across the country be digitalized. This could be done in a phased manner and the regulator has charted out a plan for the same. The sunset clause reflects how the country's cable industry will be digitalized in 4 phases with the final date being 31st December 2014. The bill imposes the following deadlines beyond which the analog cables would be put off:
Particulars Phase -I Phase -II Phase -III Phase -IV Due Date 30-Jun-12 31-Mar-13 30-Sep-14 31-Dec-14 Areas 4 metro's All cities with population of 1 mn above Urban areas under Municipal Corporation Rest of the Country

India continues to be the third largest TV market after USA and China with ~146 million television households. C&S penetration of television households is ~81.5%. Today one of the major issues faced by the cable industry is the under declaration of subscribers by LCOs. Analog subscribers form 65% of C&S homes in the country. The analog market to a large extent is unorganised with 1000 MSOs and around 60,000 LCOs, with most of them not even registered with respective authorities. It is estimated that~ 20% of subscriber base is declared by LCOs while the balance 80% is not declared thus leaving a huge amount of under declared revenues, which serve as an opportunity to be captured by MSOs, broadcasters and the Government. The digital conversion would necessitate the

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installation of set top boxes and this in turn could require the LCOs to declare the actual number of subscribers to the MSOs and broadcasters. Increased subscriber declaration augurs well for the industry as it could add up to the revenues of MSOs. HVL being one of the leading MSOs in the country could benefit from the likely change in the form of enhanced revenues. With the impending digitization of all analog cable subscribers, penetration level of digital households is expected to increase significantly going forward as the digital cable connections score over analog cables on the following aspects: Enhanced customization: Analog cable signals have limited picture carrying capacity and hence restrict the number of channels that could be viewed. Increased competition amongst the broadcasters has resulted in an increase in the number of channels broadcasted. Currently there are more than 600 channels that are broadcast in the country. The analog cable system can carry a maximum of 90 channels. Also, the customer does not have the liberty to subscribe to the channel of his choice and has to pay for the entire bouquet, ending up paying for several channels he doesn't even watch and some of his wanted channels maybe excluded. Digital cable offer a wide range of choice to their customers with more than 250 channels to choose from and an option to pay only for the channels of their choice. This translates into a favourable proposition for the customers as well. Better view quality with advanced features: On the technical front too the digital cable scores over the analog cable. The digital cable connection offers advanced viewing experience like better viewing quality, electronic programmable guide, digital video recording facility, multiple bouquet options and a-l-a carte channels, video on demand, pay per view and channels in High Definition mode. All of the above could drive the conversion from the analog mode to digital mode and this in turn could benefit the MSOs like HVL in a big way. HVL (IMCL) being a MSO scores over DTH players: HVL is one of the leading MSOs in the country with a subscriber base of 8.5 mn spread across 28 cities in the country covering 3 out of 4 metros. The company has ~9% market share in the domestic market. With advent of the digitalization in the C&S industry, all the analog cable connections are set to be converted to digital connections through the set top boxes. This could directly connect the broadcasters to the end users thus elimination the LCO. In the light of this situation the MSOs could stand to benefit more as compared to the DTH providers. This is so because the DTH players would have to bear the high cost of customer acquisition, marketing cost, after sales services (call centres), which the MSOs like HVL would not be incurring to a similar extent. This in turn would result in faster breakeven and better profitability for the MSOs as against the DTH operators. Value un-locking possible in real estate operations and investments operations: HVL has investments in real estate and also has treasury operations, which provide value-unlocking opportunities in the near future. HVL has a 47-acre land near Bangalore airport and 4.75 acre in Hyderabad (bought by IDL Speciality Chemicals). The land at Bangalore is situated in the BIAPPA Zone, near the International Airport. The area near the international airport is considered for developing high end residential villas and the development potential in the area is estimated at 1.35 million square feet. The price of these residential villas is pegged at around Rs 5000 per square feet thus translating in to a potential of Rs.6750 mn (as of Mar 2011). The Company has extended the option to develop the property with a developer for a further period of two years and the project is likely to take 3-5 years of time frame and will be done in two phases. With buoyant demand for high end villas, the development potential is set to increase with increase in prices. Similarly, IDL Speciality Chemicals Limited (IDL) a wholly owned subsidiary of the Company has acquired 4.75 acres of land at kukatpally in Hyderabad. Plans are being drawn up to monetise this piece of land as well. The land was acquired at Rs.251.7 mn and the value has considerably appreciated post the acquisition. The company is evaluating value un-locking options for both these land holding by way of development, leasing or selling it off. Another strong aspect of the company is its investment and cash position. HVL has an investment book of Rs 2726.6 mn as of FY11, which has grown to Rs 2800 mn as of H1FY12. A major chunk of this investment is towards quoted investments and balance is unquoted investments (partially in subsidiaries and group companies). The investment book has remained strong in the past four years and the table below depicts the cash and investments position (per share) since FY08.
Cash n Investments per share Cash per share Investments per share Total value of cash n investments / share FY08 145.5 77.9 223.4 FY09 94.0 50.4 144.4 FY10 18.8 122.8 141.6 FY11 21.6 132.7 154.2 H1 FY12 20.9 136.2 157.1

As against the cost of investments as of Mar 2011 of Rs.2073 mn, the market value as on April 17, 2012 stands at Rs 4,552 mn suggesting a buffer of unrealised gains lying on the Balance sheet (though the investments being in group companies may not be realisable easily).

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As of H1FY12 HVLs total cash and investments per share is at Rs 157 per share, while the CMP stands at Rs 388.4. This suggests that cash and investments account for ~40% of the CMP. Though the investments of HVL are subjected to market movements (as the quoted investments account for ~76% of the total investment book), any positive development in the markets could improve the return from these investments thus further strengthening the returns from the treasury operations and in turn improving the overall profitability of the company. While a small part of the Investments is in-group companies (Rs.130 mn), the balance is realisable at will. Further during FY11 HVL invested in the newly formed Hinduja Leyland Finance Limited (HLFL), a start-up company engaged in leasing & hire purchase for Automotive and Capital goods sectors. HVL has bought 8.9% stake in the company at par. HLFL has grown very fast during its first year of operation, posting a turnover of 1013.2 mn and profit after tax of 272.7 mn. HLFL is expected to grow rapidly and HVL should reap rich dividends in the years ahead. HVL is also planning to list IMCL in the next few quarters. This could unlock value for shareholders of HVL. Possibility of a hike in FDI limits in the cable space could improve sentiments for HVL stock price: The government has proposed a uniform Foreign Direct Investment cap of 74% across the digital cable TV sector. The cap for non-digital cable TV would continue at 49%. This proposed relaxation is due to fact that digitalisation would require huge investment. With raised FDI limits we are looking at greater capital flows into the sector. This will enable IMCL to attract private equity investors and strategic investors to come into the sector as capital and technology are the need of the hour for the cable industry. Consistent high dividend payout resulting in high dividend yield: HVL is a consistent dividend paying company and has paid dividends in excess of 100% as well. The table below depicts the trends in dividend payout and yields for the past four years:
Particulars Dividend per share Rs. Yield (%) based on year end price Pay - out (%) FY08 10.0 3.0 37.3 FY09 10.0 10.3 43.9 FY10 10.0 3.2 33.9 FY11 12.5 4.8 29.7

The dividend yield as per the table above is at 4.8% for FY11, which is attractive. The company has been able to successfully maintain the dividend yields in excess of 3% at-least in the past four years. HVL has witnessed improvements at the top line as well as bottom line on a quarterly basis for FY12 and is likely to continue its buoyant performance for FY12 as well. Hence the possibility of a rise in the dividend for FY12 cant be ruled out. MSOs could have a tough competition from DTH players. Though the MSOs will not look to compete with each other in terms of subscriber acquisitions as all top MSOs are currently looking at just digitising their current subscriber base, intense competition can be expected from DTH operators. Though none of the DTH players are making profits right now, they are well funded. Should they start a price war, MSOs could face a tough time. Slower execution or delays in the execution in the transition to the digitization (deadlines for shift to digitisation has been extended a couple of times in the past) could hamper the revenue growth likely for the MSO. This could also adversely impact the overall revenue/profitability growth of the MSOs like HVL. One of the concerns for the MSOs is the after sales services to be provided to the clients. The companies could be required to set up call centres to assist the customers in various areas post digitalization. This could inflate the cost of the MSOs and dent their profitability. The MSO space is the one, which consistently requires capital infusion so as to sustain its business. This is primarily to upgrade the existing network / systems so as to keep pace with the changing technology. During FY12 and FY13, IMCL will need to raise more capital to invest in digitization, network up-gradation, acquisition of subscribers & last mile operators and to launch a new initiative for improving its broadband delivery. The Board of HVL has approved an investment of upto 10% in the equity of Hinduja Energy India Limited (HEIL) the holding company of the Hinduja Groups energy business. HEIL plans to create a portfolio of 10,000 MW of generation capacity in the next 5 - 7 years. It also has plans for developing renewable energy assets such as Wind, Solar and Biomass. One thermal project of HEIL of 1040 MW is being developed through its subsidiary Hinduja National Power Corporation Limited (HNPCL) at Vishakhapatnam, in Andhra Pradesh. Construction is in full swing and is ahead of schedule. The project comprises of two units of 520 MW each and is expected to commissioned in the year 2013 with the first unit of 520 MW expected to be commissioned in June 2013. One is not sure whether the proposed investment is in the best interests of the minority shareholders of HVL and whether this is the best use of surplus funds of HVL. IMCL is proposing to issue 51.13 lakh shares at Rs. 145 per share to Aman Mauritius on conversion of non-convertible preference shares of Rs.741.5 mn issued to them in the past. This could lead to a dilution of shareholding of HVL in IMCL from the current 59.65% to ~55%. One is not sure as to whether this conversion is in the best interest of HVLs minority shareholders.

Risks & Concerns:

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 HVL has lent Rs.1730 mn to IDL Speciality Chemicals. This has been used by the borrower to purchase shares of Auto and Bank companies to the extent of Rs.1630 mn as stock in trade. There are possibilities of the trading activity resulting in a loss if market sentiments turn adverse or calls are not efficient enough.

Industry Scenario:
The Indian Media & Entertainment industry grew from Rs 652 bn in 2010 to Rs 728 bn in 2011, registering an overall growth of 12 % on the back of strong consumption in Tier 2 and 3 cities, continued growth of regional media and fast increasing new media businesses. The industry is estimated to achieve a growth of 13% in 2012 to touch Rs 823 billion. Going forward, the sector is projected to grow at a healthy CAGR of 14.9% to reach Rs 1,457 billion by 2016. As of the end 2010, the total number of C&S households in India is estimated to be 101 million, which have registered a CAGR of 8% over the past 5 years. During this time, even though digital TV connections, especially direct-to-home (DTH) services, have gained traction, a large proportion of the households remain connected via analog cable. Analogue cable TV services poses several problems like poor broadcast quality, capacity constraints in terms of the number of channels that can be transmitted and non-addressability of the audience. Digital technology (either through DTH or digital cable), on the other hand, offers transparency, increased capacity as well as better broadcast quality. Besides, digital addressable systems can also help enhance the scope of other services, including broadband. Hence, there is a need for the speedy implementation of digitisation, which would be favourable to most of the MSOs.

Source: FICCI KPMG 2012 report

The over-all television industry was estimated to be Rs 329 bn as of 2011, and is further expected to grow at a CAGR of 17% over 2011-16. TV accounts for around 45% of the total media & entertainment industry in terms of size (Rs bn). The share of subscription revenues to the total industry revenue is expected to increase from 65% in 2011 to 69% in 2016. The chart below depicts the share of revenues from subscription and advertisement since 2006:

Source: FICCI KPMG 2012 report

Television as a medium of entertainment could continue to maintain significance against other mediums. There has been a significant increase in demand for satellite bandwidth, with the introduction of HD channels, DTH expansion, and new channel launches. This increases the options to the consumer, who may be amenable to paying more for content in the medium to long term. While there has been a significant increase in advertisement inventory, advertisement rates have generally remained flat

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or declined in 2011, with advertisers cutting ad budgets due to the global and domestic economic slowdown. However, with a large number of untapped advertisers who are currently using only the print platform, there is potential for further growth for TV. On the Cable Television side, the industry continues remains highly fragmented with around 60,000 to 70,000 local cable operators and around 6,000 to 8,000 Independent Cable Operators, 6 national foot print Multi System Operators (MSOs) and several regional MSOs. This provides an adequate opportunity of growing the sector through consolidation. The industry is now witnessing visible signs of consolidation with smaller LCOs and ICOs joining the mainstream MSOs. Thus this sector offers ample opportunity for long-term growth. The industry is also now attracting institutional funding.

Peer Information:
Financial Comparison Consolidated Results HVL WWIL Hathway Cables* Den Networks Net Sales (Rs mn) FY11 9m FY12 3,694.5 3,598.5 3,059.6 2,563.0 8,826.0 3,741.2 10,221.0 8,177.0 EBITDA (Rs mn) FY11 9m FY12 1,274.5 1,133.0 33.4 (239.6) 1,327.1 665.6 905.4 658.0 PAT (Rs mn) OPM (%) FY11 9m FY12 FY11 9m FY12 865.7 796.7 34.5% 31.5% (624.3) (670.0) 1.1% -9.3% (307.0) (434.0) 15.0% 17.8% 375.3 98.1 8.9% 8.0% NPM (%) FY11 9m FY12 23.4% 22.1% -20.4% -26.1% -3.5% -11.6% 3.7% 1.2%

(* 9M FY12 results are standalone)

Consolidated Numbers-FY11 HVL WWIL Hathway Cables Den Networks

(HH=Households)

BV / Share 266.7 0.2 59.5 59.2

EV / EBITDA x 5.0 46.2 10.6 7.7

CMP 385.20 10.22 170.15 99.75

Cable HH (mn) 8.5 8.0 8.7 11.0

Market Share (%) 9% 11% 9% 12%

Conclusion:
HVL is a part of the Mumbai based Hinduja group. The company operates in the business of media & entertainment, real estate and treasury operations. The real estate activities encompass property development while the treasury segment consists of activities relating to deployment of surplus funds in stock in trade/ investments in shares and securities, other than subsidiaries. HVL is the holding company of one of Indias largest integrated media companies IMCL, which is one of the largest multi system operators (MSO) in the country. HVL with 8.5 million subscribers across 28 major cities, the company offers over 301 channels in the digital mode (including 90 channels in analog mode). Television (TV) by far is the largest medium for media delivery in India in terms of revenues. It constitutes ~45% of the total media industry. Around 63% of the households in the country are connected by a TV while the balance 37% are yet to be connected by a TV. This signifies the scope for penetration of TV. The digitisation bill (transmission of channels through digital means v/s conventional analogue signal) requires that the transmission of television across the country be digitalized. This could be done in phased manner and the sunset date for the conversion across the country is set as December 2014 post, which there would be no analog transmission, allowed in the country. As India is the third biggest TV markets across the globe with 146 mn households, the scope for transmission to digital networks would definitely be challenging in terms of implementation and capex to be incurred. But the benefits from the move to digitalization would be more than the challenges. The digital network scores over the analog network in terms of improved declaration, enhanced customizations for the customers and better view quality with added features. The advantages augur well for the MSOs as well as the digital cable subscribers. The digitization would require the LCOs to declare each and every subscriber as against the current malpractice of declaring only about 20% of the subscribers. This could benefit the MSOs in the form of added revenues and could improve the profitability. The MSOs are set to benefit the substantially as compared to the DTH operators as they would not have to bear the additional marketing and subscriber acquisition cost to the same extent which the DTH operators have to bear. This makes the MSO space more attractive as lower cost could translate into better margins. As mentioned above HVL operates into real estate and treasury operations as well. The company has land banks located in Bangalore and Hyderabad, which it plans to develop in the near future. Therefore value unlocking in the real estate segment could be considered in the form of either development of these land banks or leasing out of these properties. This could add up to the cash flows of the company. However we have not considered any upsides from value unlocking in our estimates. Also the company has strong cash per share position of Rs 20.9 and investment per share of Rs 136 as of H1FY12. This suggests that cash and investments account for ~40% of the CMP. Since 40% of the CMP is towards cash and investments, the core business is valued at a substantial discount. Therefore with the onset of the digitalization in the cable industry the MSOs could benefit. In the light of this the core valuation of HVL could expand. Based on all the above triggers we feel that HVL could undergo gradual re-rating in terms of its P/E.

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We think that the stock could be bought at a CMP and added on dips to Rs. 352 (5.5x FY13E EPS) for sequential price targets of Rs 448 (7x FY13E EPS) and Rs 512 (8x FY13E EPS).

Consolidated Quarterly Financials:

Particulars (Rs Mn) Net Sales Other Operating Income Other Income Total Income TOTAL EXPENDITURE PBIDT (Including OI) PBIDT (Excluding OI) Interest PBDT Depreciation PBT Tax Reported Profit After Tax Minority Interest PAT after Minority Interest Q3 FY12 1,187.0 225.6 56.1 1,468.7 874.5 594.2 538.1 42.9 551.3 90.5 460.9 114.3 346.6 71.3 275.3 Q3FY11 895.4 302.0 8.8 1,206.2 726.4 479.8 471.0 16.2 463.6 72.3 391.3 102.0 289.3 70.7 218.6 % Y-o-Y 32.6 -25.3 537.1 21.8 20.4 23.9 14.3 165.3 18.9 25.1 17.8 12.0 19.8 0.9 25.9 Q2 FY12 1,163.5 283.3 21.2 1,468.0 852.5 615.5 594.3 28.8 586.7 83.3 503.4 131.6 371.8 65.9 305.9 % Q-o-Q 2.0 (20.4) 164.9 0.0 2.6 (3.5) (9.5) 48.9 (6.0) 8.6 (8.4) (13.1) (6.8) 8.2 (10.0) 9M FY11 3,422.7 673.0 95.6 4,191.3 2,465.4 1,726.0 1,630.4 97.9 1,628.1 254.3 1,373.8 363.3 1,010.5 213.7 796.8 9M FY10 2,637.39 695.29 19.72 3,352.40 2,041.21 1,311.19 1,291.47 18.95 1,292.24 201.63 1,090.61 225.31 865.30 164.73 700.57 % Y-o-Y 29.8 (3.2) 384.8 25.0 20.8 31.6 26.2 416.7 26.0 26.1 26.0 61.3 16.8 29.7 13.7

Consolidated Annual Financials:

Income Statement - consolidated (Rs mn) Operating Income Other Operating Income Other income Total Income EBITDA Interest Depreciation & Non cash charges PBT Taxation Net Profit Minority Interest after tax Adjusted Net Profit FY10 3,127.5 636.9 252.7 4,017.1 1,089.1 16.7 235.2 837.1 117.6 719.6 113.8 605.8 FY11 3,694.6 641.2 417.1 4,752.9 1,691.7 44.3 278.0 1,369.3 277.2 1,092.1 226.4 865.7 FY12 4,637.0 715.0 480.0 5,832.0 2,336.8 145.0 355.0 1,836.8 452.0 1,384.8 286.0 1,098.8 FY13E 5,586.3 785.0 538.0 6,909.3 2,829.3 180.0 410.0 2,239.3 581.0 1,658.3 342.0 1,316.3

Balance Sheet:
SOURCES OF FUNDS (Rs mn) Shareholders' Funds: Equity Capital Reserves & Surplus Net Worth Total Debt Minority Interest Net Def Tax Total Liabilities APPLICATION OF FUNDS Fixed Assets: Gross Block Net Block Investments: Goodwill on consolidation CA, Loans & Advances: Total Current Assets Current Liabilities & Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Total Assets FY10 205.6 5,974.6 6,180.2 115.7 1,181.8 (33.6) 7,444.1 FY11 205.6 6,492.0 6,697.5 1,024.4 1,524.2 56.5 9,302.6 FY12E 205.6 7,230.1 7,435.6 874.4 1,810.2 56.5 10,176.7 FY13E 205.6 8,185.6 8,391.1 999.4 2,152.2 56.5 11,599.2

2,929.8 2,293.5 2,525.0 111.4 4,156.5 1,643.3 2,513.2 1.1 7,444.1

3,632.1 2,434.1 2,726.7 222.1 5,586.8 1,667.1 3,919.7 9,302.6

4,171.4 2,554.1 2,726.7 222.1 6,612.8 1,939.0 4,673.8 10,176.7

4,496.4 2,429.1 2,726.7 222.1 8,274.3 2,053.0 6,221.3 11,599.2

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Key Ratios:
Particulars EPS (Rs) PE (X) Book Value (Rs) P/BV (X) Market cap / Sales (X) EV/EBITDA (X) EBITDA (%) PAT (%) ROCE (%) RONW (%) Debt / Equity (X) FY10 29.47 13.07 300.66 1.28 2.53 7.02 26.74 19.37 9.74 9.80 0.02 FY11 42.12 9.14 325.84 1.18 2.14 5.02 34.50 23.43 13.46 12.93 0.15 FY12 53.46 7.20 361.74 1.06 1.71 3.18 40.04 23.70 15.34 14.78 0.12 FY13E 64.04 6.01 408.23 0.94 1.42 2.28 41.02 23.56 16.45 15.69 0.12

Analyst: Harshal Patil Metals, Oil & Gas, Midcaps - harshal.patil@hdfcsec.com

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Retail Research