The BLUE BOOK (Cash Flows) - Centrum

Institutional Research l ϭϲ September 2021
Please see Appendix for analyst certifications and all other important disclosures.
The Blue Book ϭϲ September 2021
Foreword
THE BLUE BOOK – Putting 10-year cash flows in perspective
The idea behind this product is that while the future remains uncertain, a deep dive into
past performance can bring to the fore intrinsic strengths and weaknesses of businesses
across economic cycles. Such a study can also help spot structural changes in the businesses
and demonstrate the track record of capital allocation decisions, thus separating the
winners from the laggards within the same sector. It helps us have an analytical framework
to make sense of the hugely varying valuations of various sectors and even of companies
within the same sector. This exercise has made us think harder about how we rate stocks
and we hope we will be able to add value to you as well.
We have analyzed the past 10 years of cash flows and returns for 105 stocks in our coverage
universe spanning a wide gamut of sectors. We have looked into metrics like operating cash
flows, working capital trends, EBITDA to OCF conversion, capex and acquisition intensity,
performance of acquisitions, and finally, free cash flow trends, leverage and return ratios.
Operating cash flows improving, partially led by efficiency but largely by squeezing
suppliers; tougher conditions for MSME/SME sectors: One common observation across
both cyclical and non-cyclical sectors is that working capital levels and operating cash flows
have remained strong or improved for most sectors. Among other drivers, this has also been
led by extracting better credit terms from suppliers. This is especially visible in Automobiles,
Cement, FMCG, Consumer Electricals and in select Pharma stocks. The most prominent
improvement is in Oil & Gas, led by deregulation of fuel prices; in Pharmaceuticals, led by a
greater domestic focus; and in Metals, led by improved capacity utilization and higher
product prices. Construction too has seen an improvement in operating cash flows.
Operating cash flows for Automobiles and Cement & Building Products have been steady,
while FMCG and Consumer Electricals have retained the top slot due to inherent strengths
in their business models. Mining continues to witness elevated working capital levels and
weak cash generation. There are outliers to these general trends, which we discuss in
greater detail inside.
Capex recovering after big trough in FY14-17; recovery led by Cement, Metals & Mining
and Chemicals: Capital expenditure has been on a recovery path since FY18 after plunging
over FY14-17. For our sample set comprising of 12 traditionally capex-intensive sectors,
capital expenditure plummeted 17% from Rs3tn in FY14 to Rs2.5tn in FY16. The decline in
capex levels was prevalent across capex-intensive sectors like Cement, Metals & Mining,
Utilities, and Oil & Gas. Starting FY17, however, there has been a visible uptick in capex in
the Cement and Metals & Mining sectors, while capex has remained muted in Automobiles.
The Auto Components sector is seeing a surge in capex, led by tyre manufacturers.
Chemicals and Telecom have seen a consistent rise in capital expenditure since FY14.
Acquisition intensity in the Pharma sector is coming down, though the sector continues to
invest in R&D. By FY20, the total capital expenditure of the same sample of companies had
recovered to Rs3.6tn.
Indian corporates curtailing overseas ambitions after huge losses; also highlights Indian
corporates not ready to become MNCs yet: The experience of Indian corporates with
overseas acquisitions has been far from remunerative and this highlights that they were ill-
prepared to operate in complex or unfamiliar regulatory and market environments. Large-
ticket acquisitions in Automobiles, Metals & Mining, upstream Oil & Gas are clearly
struggling. Thankfully, Indian corporates have been re-orienting their focus towards the
domestic markets, and in fact have benefitted from increased consolidation in various
sectors in recent years.
Centrum Institutional Research 2

The Blue Book ϭϲSeptember 2021
Free cash flows cyclical but have improved, leading to deleveraging; low risk-taking
appetite: Free cash flows have exhibited a fair amount of cyclicality but have remained
positive for most sectors, leading to reduction in leverage. FMCG, Consumer Electricals,
Automobiles and Pharmaceuticals lead the pack in terms of FCF generation, followed by
Cement, Metals, Refining, and Gas Utility sectors. For Metals, FCFs have been rather cyclical
but have improved, leading to deleveraging in the sector. Upstream Oil & Gas and Mining
have seen weak FCFs, and consequently, leverage remains elevated. Infra asset owners in
Ports and Highways have also seen increased investments in asset creation, though leverage
ratios and liquidity profile remain comfortable.
Return ratios trend mixed; better pricing management and operating leverage helps:
Return ratios have expanded only for a handful of sectors, while for most others, they are
just about maintained or have hovered within their cyclical range. Return ratios for Cement
& Building Materials have expanded due to pricing-led improvement in profitability and
improvement in working capital levels. The Metals sector has seen a strong recovery, led by
higher volumes and higher product prices. CGDs have benefitted from strong penetration-
led volume growth and margin expansion. MNC Pharma has seen improved growth and
improved operating leverage, leading to better margins, which in turn has led to improved
returns. Retail and Upstream witnessed compression in return ratios, led by elevated
working capital levels and increased investments, respectively.
Surprisingly, high cash generators show no improvement in return ratios as they continue
to hoard cash: Corporates in traditionally strong cash generating sectors are in need of a
better strategy on utilization of their excess cash. FMCG, Consumer Electricals and
Automobiles have not seen much improvement in return ratios despite healthy cash flows,
as cash distribution has not kept pace with cash generation. This is evident from the fact
that ROICs for these sectors have improved.
Asset quality of Large Banks improving; stress continues for Midsize Banks and NBFCs:
Large Banks, which had seen a significant worsening in asset quality from FY15 to FY17, have
started seeing an improvement in the last two years. Overall balance sheet stress has
reduced while CASA has remained strong. Increased retail focus and lower credit costs have
helped expand NIMs. Hence, PPOP has improved, except for SBI; return ratios have
increased, led by lower provisions. Meanwhile, asset quality for Midsize Banks and NBFCs
has generally worsened. However, for NBFCs, NIMs are improving, as diversification in their
liability mix has brought down the cost of capital. Return ratios, nevertheless, have
worsened for both.
Nischal Maheshwari
CEO, Centrum Broking Ltd.

Findings of our cash flow analysis at a glance
Consumer Electricals
Building Materials
Overall Pharma
Non-ferrous
Gas Utilities
Big Pharma
MNC Pack
Chemicals
Upstream
Aviation
Cement
Ferrous
Mining
FMCG
Retail
CGDs
Auto
Infra
RIL
Working capital
Operating cash flows
Free cash flows
Leverage
Return ratios
Large Banks
Mid-Banks
Ratings
NBFCs
AMCs
Asset quality Market share Working capital Legend
Asset/Liability mix Operating yields Operating cash flows Improved
NIM Return ratios Free cash flows Neutral
PPoP Distribution Return ratios Worsened
Return ratios

Index
l Auto & Auto Ancillaries
Ashok Leyland (AL) .......................................................................................................7
Bajaj Auto (BJAUT)...................................................................................................... 10
Eicher Motors............................................................................................................. 13
Endurance Technologies (ENDU)................................................................................. 16
Hero Motocorp (HMCL) .............................................................................................. 19
Mahindra & Mahindra (MM) ...................................................................................... 22
Maruti Suzuki (MSIL) .................................................................................................. 25
TVS Motors (TVSL) ...................................................................................................... 28
l Aviation
InterGlobe Aviation (IndiGo) ....................................................................................... 31
SpiceJet ...................................................................................................................... 34
l BFSI
Axis Bank.................................................................................................................... 37
Can Fin Homes (Canfin) .............................................................................................. 40
CARE Ratings (CARE) ................................................................................................... 43
CRISIL ......................................................................................................................... 46
City Union Bank (CUBK) .............................................................................................. 49
DCB Bank (DCB) .......................................................................................................... 52
Federal Bank (FB) ....................................................................................................... 55
HDFC AMC.................................................................................................................. 58
ICICI Bank ................................................................................................................... 61
LIC Housing Finance (LICHF) ........................................................................................ 64
M&M Financial Services (MMFS) ................................................................................ 67
Nippon Life AMC (NAM) ............................................................................................. 70
State Bank of India (SBIN) ........................................................................................... 73
Sundaram Finance (SUF) ............................................................................................. 76
Ujjivan Small Finance Bank (USFB) .............................................................................. 79
UTI AMC..................................................................................................................... 82
l Cement
ACC ............................................................................................................................ 85
Ambuja Cement (ACEM) ............................................................................................. 88
Cera Sanitaryware (CRS) ............................................................................................. 91
Heidelberg Cement India (HEIM) ................................................................................ 94
JK Cement (JKCE) ........................................................................................................ 97
JK Lakshmi Cement (JKLC) ......................................................................................... 100
Kajaria Ceramics (KJC)............................................................................................... 103
Orient Cement (ORCMNT) ........................................................................................ 106
The Ramco Cements (TRCL) ...................................................................................... 109
Shree Cement (SRCM) .............................................................................................. 112
Star Cement (STRCEM) ............................................................................................. 115
Ultratech Cement (UTCEM) ...................................................................................... 118
l Chemicals
Dhanuka Agritech (DAGRI) ........................................................................................ 121
PI Industries (PII) ...................................................................................................... 124
UPL .......................................................................................................................... 127
l Consumer
Asian Paints (APNT) .................................................................................................. 130
Bajaj Consumer Care ................................................................................................ 133
Britannia Industries .................................................................................................. 136
Colgate Palmolive India (CLGT) ................................................................................. 139
Dabur India (DABUR) ................................................................................................ 142
Emami ...................................................................................................................... 145
Godfrey Phillips India (GP) ........................................................................................ 148
Hindustan Unilever (HUVR)....................................................................................... 151
ITC ........................................................................................................................... 154
V-Mart Retail (VMART) ............................................................................................. 157
VST Industries (VST).................................................................................................. 160

l Consumer Electricals
Bajaj Electricals ........................................................................................................ 163
Crompton Greaves Consumer Electricals .................................................................. 166
Havells India ............................................................................................................. 169
Orient Electric .......................................................................................................... 172
Polycab India ............................................................................................................ 175
V-Guard Industries ................................................................................................... 178
l Infrastructure
Adani Ports and SEZ (APSEZ) ..................................................................................... 181
Ahluwalia Contracts (ACIL)........................................................................................ 184
Ashoka Buildcon (ABL) .............................................................................................. 187
G R Infraprojects (GRIL) ............................................................................................ 190
Gujarat Pipavav Port (GPPL)...................................................................................... 193
HG Infra Engineering (HG) ........................................................................................ 196
KEC International (KEC)............................................................................................. 199
KNR Constructions (KNR) .......................................................................................... 202
Larsen & Toubro (L&T).............................................................................................. 205
NCC Ltd (NCC) .......................................................................................................... 208
PNC Infratech (PNC) ................................................................................................. 211
l Metals & Mining
APL Apollo (APAT) .................................................................................................... 214
Coal India (COAL)...................................................................................................... 217
Hindalco (HNDL) ....................................................................................................... 220
Hindustan Zinc (HZ) .................................................................................................. 223
Jindal Stainless (JDSL) ............................................................................................... 226
Jindal Steel and Power (JSP)...................................................................................... 229
JSW Steel ................................................................................................................. 232
NMDC ...................................................................................................................... 235
Steel Authority of India (SAIL) ................................................................................... 238
Tata Steel (TATA) ...................................................................................................... 241
Vedanta (VEDL) ........................................................................................................ 244
l Oil & Gas
BPCL......................................................................................................................... 247
GAIL India (GAIL) ...................................................................................................... 250
Gujarat Gas .............................................................................................................. 253
Gujarat State Petronet (GSPL)................................................................................... 256
HPCL ........................................................................................................................ 259
IOCL ......................................................................................................................... 262
Indraprastha Gas (IGL) .............................................................................................. 265
Mahanagar Gas (MGL) .............................................................................................. 268
ONGC ....................................................................................................................... 271
Oil India (OIL) ........................................................................................................... 274
Petronet LNG (PLNG) ................................................................................................ 277
RIL............................................................................................................................ 280
l Pharmaceuticals
Aarti Drugs (ARTD) ................................................................................................... 283
Abbott...................................................................................................................... 286
Aurobindo Pharma (ARBP) ........................................................................................ 289
Biocon...................................................................................................................... 292
Cipla......................................................................................................................... 295
Dr Reddy’s Laboratories (DRRD)................................................................................ 298
FDC .......................................................................................................................... 301
GlaxoSmithKline Pharmaceuticals (GLXO) ................................................................. 304
Granules India (GRAN) .............................................................................................. 307
Lupin ........................................................................................................................ 310
Pfizer........................................................................................................................ 313
Sanofi India (SANL) ................................................................................................... 316
Sun Pharma (SUNP) .................................................................................................. 319
Annexure ................................................................................................................. 322
Centrum Institutional Research ϲ

16 September 2021
Institutional Research
Anish Rankawat
Research Analyst, Auto & Auto Ancillaries
+91 22 4215 9053
[email protected]
SECTOR: AUTO & AUTO ANCILLARIES
Ashok Leyland (AL)

AL is in a cyclical business – sale of M&HCVs. Since FY14 (consolidated financials Market data
available from FY14), OCF has been negative on four occasions due to industry Current price: Rs127
slowdowns. Over FY15-19, OCF before WC saw consistent improvement on the back Bloomberg: AL IN
of growth in operations. AL has invested Rs25bn in subsidiaries since FY14, of which 52-week H/L: Rs143/67
Rs11bn was in Hinduja Leyland Finance, mainly in the last three years for capital
Market cap: Rs373.4bn
adequacy. It has incurred cumulative capex of Rs66bn since FY14, of which Rs39bn
was in the last four years, towards BS6, modular platform, Phoenix (LCV) platform Free float: 63.4%
and EVs. Net fixed asset turnover has been 2-5x over the years. Avg. daily vol. 3mth: 20,418,490
Source: Bloomberg
Cyclical cash flows from operations: M&HCVs is a cyclical business. Since FY14, AL’s OCF has been negative in four years –
FY14: industry slowdown, negative PBT; and FY16, FY19 and FY21: negative WC change. It was the worst in FY19, as dealer
advances were lower on a high base, and as inventory was high at the year-end due to sudden slowdown in demand. Over
FY15-19, OCF before WC has seen consistent improvement on the back of growth in operations.
Exhibit 1: Cash flows from operations reflect cyclical nature of M&HCV business
40
20
0
Rs Bn
-20
Lower dealer advances on
-40
high base and higher
-60 inventory due to sudden
slowdown in demand
-80
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
OCF before WC WC Change OCF
Source: Company, Centrum Broking
Analysis of working capital movement: AL has a history of negative cash conversion cycle, similar to the industry. NWC
was also broadly negative over the last 8 years. Debtor and creditor days have been higher in the last few years, given the
industry slowdown and the pandemic. OCF has been negative in FY14, FY16, FY19, and FY21; as a result, the OCF ratios for
these years appear distorted.
Exhibit 2: As is the case with the industry, AL’s NWC has been broadly negative
150
100
Days of Revenue
50
-50
-100
Debtors Inventory Creditors NWC
xxxxx
Ashok Leyland (AL) 16 September 2021
Exhibit 3: OCF/PAT (x) Exhibit 4: OCF/EBITDA (x)
4 3.5 1
0.5
0.5 0.3
3 0.1 0.1
2 0
0.9 1.0
1 -0.5
0.2 0.4
0.2 -0.6
-1
0 -0.9
-1.5 -1.2
-1
-1.1 -2
-2 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -2.0
-1.8 -2.5
-3 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Source: Company, Centrum Broking Source: Company, Centrum Broking
Capex, investments and FCF: Since FY14, AL has invested Rs25bn in subsidiaries, of which Rs11bn was in Hinduja Leyland
Finance, mainly in the last three years for capital adequacy. It has incurred cumulative capex of Rs66bn, of which Rs39bn was
in the last four years towards BS6, modular platform, Phoenix (LCV) platform, and EVs.
Exhibit 5: Capex intensity was higher in last four years towards BS6, modular platform, Phoenix (LCV) platform, and EVs
20
10
0
-10
Rs. Bn
-20
-30
-40
-50
-60
OCF Capex Investments in JVs, Subs and Asso Net FCF
Exhibit 6: Net fixed asset turnover

Net Fixed Asset turn (x) 2.2 3.2 4.0 4.0 5.3 5.2 2.6 2.2
Net Debt/Equity (x) 1.7 1.4 1.3 1.4 1.5 1.5 1.8 1.7
Exhibit 7: RoE trend mimics cyclical nature of core business – M&HCV

ROE (%) -14.8 6.3 25.2 27.0 23.7 26.3 5.1 -4.2
Investments (Rs Bn) 11.6 15.0 10.3 19.3 43.8 14.9 9.6 10.5

Ashok Leyland (AL) 16 September 2021
P&L Balance sheet

YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Revenues 286,140 172,672 152,292 213,754 288,746 Equity share capital 2,936 2,936 2,936 2,936 2,936
Operating Expense 206,796 123,692 114,033 156,351 205,506 Reserves & surplus 80,389 69,704 66,837 69,693 79,587
Employee cost 20,988 16,151 15,839 16,152 20,347 Shareholders fund 83,324 72,640 69,772 72,628 82,522
Others 31,409 23,096 17,791 27,566 34,881 Minority Interest 0 0 0 0 0
EBITDA 31,357 11,737 5,351 15,291 29,939 Total debt 3,984 31,053 37,463 33,463 26,463
Depreciation & Amortisation 6,210 6,698 7,477 7,653 7,859 Non Current Liabilities 0 0 0 0 0
EBIT 25,147 5,039 (2,126) 7,638 22,080 Def tax liab. (net) 2,497 2,648 1,708 1,708 1,708
Interest expenses 704 1,095 3,068 1,773 1,498 Total liabilities 89,806 106,341 108,943 107,799 110,693
Other income 1,099 1,233 1,195 1,720 2,051 Gross block 75,926 96,199 105,576 113,076 118,076
PBT 25,543 5,177 (3,999) 7,585 22,633 Less: acc. Depreciation (19,791) (28,163) (35,072) (42,725) (50,584)
Taxes 5,136 1,224 (982) 1,896 5,658 Net block 56,135 68,036 70,504 70,351 67,492
Effective tax rate (%) 20.1 23.6 24.6 25.0 25.0 Capital WIP 6,576 5,941 3,719 3,719 3,719
PAT 20,407 3,953 (3,016) 5,688 16,974 Net fixed assets 62,711 73,977 74,222 74,070 71,210
Minority/Associates 0 0 0 0 0 Non Current Assets 0 0 0 0 0
Recurring PAT 20,407 3,953 (3,016) 5,688 16,974 Investments 26,365 27,196 30,687 32,687 35,687
Extraordinary items (575) (1,558) (121) 0 0 Inventories 26,847 12,380 21,423 24,251 23,891
Reported PAT 19,832 2,395 (3,137) 5,688 16,974 Sundry debtors 25,055 11,804 28,163 29,501 23,891
Cash & Cash Equivalents 13,736 13,225 8,230 5,478 10,843
Ratios Loans & advances 542 554 411 411 411
YE Mar FY19A FY20A FY21A FY22E FY23E
Other current assets 26,978 24,760 21,363 21,363 21,363
Growth (%) Trade payables 50,179 26,239 51,647 56,053 51,764
Revenue 18.8 (39.7) (11.8) 40.4 35.1 Other current liab. 31,725 23,261 17,364 17,364 17,364
EBITDA 14.5 (62.6) (54.4) 185.7 95.8 Provisions 10,524 8,055 6,545 6,545 7,475
Adj. EPS 29.2 (80.6) nm nm 198.4 Net current assets 729 5,168 4,033 1,042 3,796
Margins (%) Total assets 89,806 106,341 108,943 107,799 110,693
Gross 29.3 29.5 25.6 27.6 29.5
EBITDA 10.8 6.7 3.5 7.1 10.3 Cashflow
EBIT 8.7 2.9 (1.4) 3.5 7.6 YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Adjusted PAT 7.0 2.3 (2.0) 2.6 5.8 Profit Before Tax 25,543 5,177 (3,999) 7,585 22,633
Returns (%) Depreciation & Amortisation 6,210 6,698 7,477 7,653 7,859
ROE 26.3 5.1 (4.2) 8.0 21.9 Net Interest 704 1,095 3,068 1,773 1,498
ROCE 25.6 5.0 (0.7) 6.6 16.8 Net Change – WC (29,030) (4,950) (3,861) 239 2,612
ROIC 71.8 7.0 (2.4) 8.4 25.4 Direct taxes (5,623) (1,073) 42 (1,896) (5,658)
Turnover (days) Net cash from operations (1,837) (6,223) 4,637 14,870 27,734
Gross block turnover ratio (x) 3.8 1.8 1.4 1.9 2.4 Capital expenditure (15,167) (17,964) (7,722) (7,500) (5,000)
Debtors 22 39 48 49 34 Acquisitions, net 0 0 0 0 0
Inventory 39 58 54 53 43 Investments 31,661 (831) (3,491) (2,000) (3,000)
Creditors 85 113 125 126 96 Others 0 0 0 0 0
Net working capital 1 11 10 2 5 Net cash from investing 16,495 (18,795) (11,214) (9,500) (8,000)
Solvency (x) FCF 14,658 (25,018) (6,576) 5,370 19,734
Net debt-equity (0.1) 0.2 0.4 0.4 0.2 Issue of share capital 8 0 0 0 0
Interest coverage ratio 44.6 10.7 1.7 8.6 20.0 Increase/(decrease) in debt (1,173) 27,069 6,410 (4,000) (7,000)
Net debt/EBITDA (0.3) 1.5 5.5 1.8 0.5 Dividend paid (9,098) (1,468) (1,761) (2,348) (5,871)
Per share (Rs) Interest paid (704) (1,095) (3,068) (1,773) (1,498)
Adjusted EPS 7.0 1.3 (1.0) 1.9 5.8 Others 0 0 0 0 0
BVPS 28.4 24.7 23.8 24.7 28.1 Net cash from financing (10,966) 24,507 1,581 (8,122) (14,369)
CEPS 9.1 3.6 1.5 4.5 8.5 Net change in Cash 3,692 (511) (4,996) (2,752) 5,365
DPS 3.1 0.5 0.6 0.8 2.0 Source: Company, Centrum Broking
Dividend payout (%) 45.9 61.3 nm 41.3 34.6
Valuation (x)
P/E 18.3 94.2 nm 65.6 22.0
P/BV 4.5 5.1 5.4 5.1 4.5
EV/EBITDA 11.6 33.3 75.2 26.3 13.0
Dividend yield (%) 2.4 0.4 0.5 0.6 1.6

16 September 2021
Anish Rankawat
+91 22 4215 9053
[email protected]
Bajaj Auto (BJAUT)

BJAUT’s operating profits have consistently expanded over the last 10 years, but Market data
there have been a few hiccups due to industry downturns. Working capital intensity Current price: Rs3,814
has been low to moderate, enabling it to generate strong OCF. The company has a Bloomberg: BJAUT IN
negative cash conversion cycle, given the nature of its business. It has not done any 52-week H/L: Rs4,361/2,822
greenfield capex in the last decade. In FY13, it increased its stake in KTM AG from
~41% to ~48% for Rs2.3bn. In the last 8 years, KTM’s PAT contribution has improved
from Rs1.5bn to Rs3.1bn. Return ratios have been declining, as more cash is getting Free float: 43.5%
invested in non-core assets (mutual funds, bonds, etc). Avg. daily vol. 3mth: 477,711
Source: Bloomberg
Stable cash flows from operations: Over the last decade, operating profits have improved directionally, but there have been
a few hiccups on the back of industry downcycle. In FY15, the company underperformed the industry due to increasing
competition. In FY19, BJAUT reduced prices of six models to gain market share at the cost of profitability.
Exhibit 8: OCF has improved directionally over the last decade, though there have been hiccups due to downturns
70 Margin impact Industry downcycle;
Industry Domestic sales
due to price war pandemic
downcycle decline; market
50 share loss
30
Rs Bn
10
-10
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-30 Unrealized VAT refund

OCF before WC change WC change OCF
Negative cash conversion cycle: The company has a negative cash conversion cycle, given the nature of the
business. Debtors days have increased in the last few years due to industry slowdown and the pandemic.
Exhibit 9: Debtor days increased in the last few years due to industry slowdown, pandemic
80.0
60.0
Days of revenue
40.0
20.0
0.0
-20.0
-40.0

xxxxx
Bajaj Auto (BJAUT) 16 September 2021
1.2 0.9 0.8

1.1 1.0 0.8 0.8
1.0 0.8
0.8 0.7 0.7
1.0 0.9
0.9 0.7 0.6
0.7 0.8 0.6
0.8 0.7 0.7 0.6
0.5 0.5
0.6 0.5
0.6
0.4
0.4 0.3
0.2
0.2
0.1
0.0 0.0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Capex, investments and FCF: The company has not done any greenfield capex in the last decade. In FY13, it increased its
stake in KTM AG from ~41% to ~48% for Rs2.3bn. In the last 8 years, KTM’s PAT contribution has improved from Rs1.5bn to
Rs3.1bn. In the last five years, company has done annual capex of Rs2bn on an average towards debottlenecking and
maintenance of its plants. Capex has been a tad higher in the last two years, as BJAUT spent on BS6 and EV technologies.
Exhibit 12: BJAUT has not done any greenfield capex in the last decade
50
40
30
20
Rs Bn
10
0
-10 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-20 Investment in KTM

Debottlenecking, BS6 and maintenance capex
OCF Capex Investments in Subs and Asso Net FCF
Exhibit 13: Net fixed asset turn

Net Fixed Asset turn (x) 12.5 10.8 9.8 11.0 10.6 10.7 13.2 16.8 17.1 16.3
Return ratios declining: Return ratios have been declining, as more cash is getting invested in non-core assets (mutual
funds, bonds, etc).
Exhibit 14: RoE declining, as more cash getting invested in non-core financial assets
ROE (%) 57.3 41.8 37.9 32.1 32.8 25.3 22.7 21.2 24.5 20.2
Investments (Rs Bn) 48.8 64.3 85.5 91.5 102.6 147.3 175.9 191.6 182.0 226.3

Bajaj Auto (BJAUT) 16 September 2021
P&L Balance sheet

EBITDA 52,717 51,455 49,285 62,270 75,162 Total debt 0 0 0 0 0
Depreciation & Amortisation 2,657 2,464 2,593 2,916 3,226 Non Current Liabilities 5,427 3,464 5,221 5,221 5,221
EBIT 50,060 48,990 46,692 59,354 71,936 Def tax liab. (net) 0 0 0 0 0
Interest expenses 45 32 67 50 35 Total liabilities 223,226 202,719 257,244 263,635 271,477
PBT 63,612 65,802 59,390 72,657 85,900 Less: acc. Depreciation (25,317) (24,583) (26,794) (29,710) (32,936)
Taxes 20,280 14,802 13,844 17,074 20,187 Net block 17,639 16,990 16,649 18,893 20,827
Effective tax rate (%) 31.9 22.5 23.3 23.5 23.5 Capital WIP 480 602 160 160 160
PAT 43,332 51,000 45,546 55,582 65,714 Net fixed assets 18,120 17,592 16,809 19,053 20,987
Minority/Associates 0 0 0 0 0 Non Current Assets 9,229 10,009 10,713 11,785 12,963
Recurring PAT 43,332 51,000 45,546 55,582 65,714 Investments 175,829 154,162 146,028 146,028 146,028
Extraordinary items 3,420 0 0 0 0 Inventories 9,615 10,635 14,939 16,842 19,699
Reported PAT 46,752 51,000 45,546 55,582 65,714 Sundry debtors 25,597 17,251 27,169 32,749 35,021
Adj. EPS 5.7 17.7 (10.7) 22.0 18.2 Net current assets 20,048 20,955 83,693 86,769 91,499
Gross 29.5 30.8 30.0 29.4 30.1
EBITDA 17.3 17.2 17.8 17.9 18.5 Cashflow
EBIT 16.4 16.3 16.8 17.0 17.7 YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Adjusted PAT 14.2 17.0 16.4 15.9 16.1 Profit Before Tax 63,612 65,802 59,390 72,657 85,900
ROE 21.2 24.5 20.2 21.8 25.0 Net Interest 45 32 67 50 35
ROCE 21.2 24.5 20.2 21.8 25.1 Net Change – WC (13,023) 4,200 (8,767) 2,324 (1,640)
ROIC 280.1 243.5 206.7 222.6 248.5 Direct taxes (18,087) (16,765) (12,087) (17,074) (20,187)
Turnover (days) Net cash from operations 38,623 55,733 41,196 60,872 67,335
Inventory 14 18 24 23 23 Investments (15,711) 9,634 (44,350) (8,000) (5,000)
Net working capital 25 26 113 93 84 Net cash from investing (17,139) 7,697 (46,160) (13,160) (10,160)
Solvency (x) FCF 21,484 63,430 (4,964) 47,713 57,175
Net debt-equity (0.1) (0.2) (0.3) (0.4) (0.4) Issue of share capital (26) (29,612) 53,809 7,379 8,681
Interest coverage ratio 1,176.7 1,628.3 740.0 1,245.4 2,147.5 Increase/(decrease) in debt 0 0 0 0 0
Net debt/EBITDA (0.5) (0.6) (1.7) (1.5) (1.3) Dividend paid (45) (32) (67) (50) (35)
Per share (Rs) Interest paid (19,966) (39,932) (46,587) (56,570) (66,553)
Adjusted EPS 149.7 176.2 157.4 192.1 227.1 Others 0 0 0 0 0
BVPS 752.7 688.6 870.9 893.0 920.1 Net cash from financing (20,036) (69,576) 7,155 (49,241) (57,907)
CEPS 158.9 184.8 166.4 202.2 238.2 Net change in Cash 1,448 (6,145) 2,191 (1,529) (732)
Dividend payout (%) 37.1 68.1 88.9 88.5 88.1
Valuation (x)
P/E 25.5 21.6 24.2 19.9 16.8
P/BV 5.1 5.5 4.4 4.3 4.1
EV/EBITDA 20.5 20.8 20.7 16.2 13.4
Dividend yield (%) 1.6 3.1 3.7 4.5 5.2

16 September 2021
Anish Rankawat
+91 22 4215 9053
[email protected]
Eicher Motors
Riding on strong order book, Eicher’s PAT grew at a CAGR of 39% over CY11-FY18. Market data
Over this time, the company’s operating profits improved significantly. Working Current price: Rs2,860
capital change has been favorable in most years during the last decade. EBITDA to Bloomberg: EIM IN
OCF conversion has been at a decent level of ~1x. Fixed asset turnover has been 52-week H/L: Rs3,037/2,015
impressive owing to high utilization levels, except in FY20 and FY21. The company
Market cap: Rs782bn
has incurred capex of over Rs60bn in the last decade mainly on capacity addition.
Capacity increased from 70,000 units in CY11 to 1.2mn units in FY21. Capacity Free float: 46.5%
utilization has been 90%+ between CY14 and FY19. Net FCF deteriorated in the last Avg. daily vol. 3mth: 898,816
three years, as demand slowed, but committed capex continued. Source: Bloomberg
OCF stagnant for last three years: Riding on strong order book, Eicher’s PAT grew at a CAGR of 39% over CY11-FY18. Over the
same time, the company’s operating profits improved significantly. Working capital change has been favorable every year
during the last decade, except in FY19, when inventory increased after production improvement and the industry slowed
down in the exit quarter. Since then, revenue and profitability have been under pressure; hence, OCF has not improved.
Exhibit 15: After consistent improvement until FY18, OCF has stagnated in the last three years
30 EPPL shut down in FY19; loss
25 of Rs2.2bn incurred
20
15
Rs.Bn
10
5
0
-5
CY11 CY12 CY13 CY14 FY16 FY17 FY18 FY19 FY20 FY21
-10
Analysis of working capital movement: Eicher has enjoyed a healthy order pipeline until FY18, which explains why its
debtor days and inventory days have been at the lower end. Creditor days have always been high at 45-70 days in the last 10
years. EBITDA to OCF conversion has been around a decent level of 1x. Fixed asset turnover has been impressive owing to
high utilization levels, except in FY20 and FY21.
Exhibit 16: Working capital is negative due to the nature of the business and in line with the industry
100
50
Days of Revenue
0
CY11 CY12 CY13 CY14 FY16 FY17 FY18 FY19 FY20 FY21
-50
-100
-150
xxxxx
Eicher Motors 16 September 2021
1.6 1.6
1.4 1.4
1.4 1.3 1.4
1.2 1.2 1.3
1.1 1.1 1.2
1.2 1.2 1.0
0.9 0.9 0.9 0.9
1 1 0.9
0.8 0.8 0.8
0.8 0.7 0.8
0.5
0.6 0.6
0.4 0.4
0.2 0.2
0 0
CY11 CY12 CY13 CY14 FY16 FY17 FY18 FY19 FY20 FY21 CY11 CY12 CY13 CY14 FY16 FY17 FY18 FY19 FY20 FY21
Capex, investments and FCF: The company incurred capex of above Rs60bn over the last decade mainly on capacity addition.
Capacity increased from 70,000 units in CY11 to 1.2mn units in FY21. Capacity utilization has been 90%+ between CY14 and
FY19. Net FCF deteriorated in the last three years, as demand slowed, but committed capex continued.
Exhibit 19: Capex of ~Rs60bn in the last decade, mainly towards greenfield capacity addition
30 Set up 3rd plant in Chennai in August 2017; capacity increased
25 to 825,000 units
Bought 50-acre land
20 in Chennai in 2014
15
Eicher Polaris (EPPL) JV set up
Rs. Bn
10
in October 2012
5
0
-5
-10 CY11 CY12 CY13 CY14 FY16 FY17 FY18 FY19 FY20 FY21
CFO Capex Investments in JVs, Subs and Asso Net FCF

Asset turn: Asset turn has been healthy, except in the last couple of years, when it has been hit by industry slowdown.
Return ratios on decline: Return ratios have declined steadily, especially in the last four years. This is majorly due to
slowdown in the industry and lower capacity utilization.
Exhibit 20: RoE has declined steadily in the last four years due to industry slowdown and lower utilization
Net Fixed Asset Turnover(x) 5.72 5.27 5.34 5.29 6.94 5.63 4.87 4.19 3.36 3.14
Capacity Utilisation (%) 108.6 75.6 67.9 93.1 80.1 98.8 92.1 93.6 56.7 51.0
ROE (%) 27.0 26.7 42.0 62.5 71.6 62.5 52.2 37.9 27.5 16.2

Eicher Motors 16 September 2021
P&L Balance sheet

Revenues 97,174 90,736 86,616 113,724 141,363 Equity share capital 273 273 273 273 273
EBIT 26,028 17,988 13,805 21,769 29,905 Def tax liab. (net) 2,739 2,522 2,215 2,215 2,215
Taxes 10,770 5,275 4,515 6,788 9,136 Net block 18,746 23,775 24,333 24,704 23,805
Minority/Associates 2,584 317 311 1,647 3,600 Non Current Assets 0 0 0 0 0
Extraordinary items (175) 0 (500) 0 0 Inventories 6,334 5,724 8,746 10,905 11,619
Reported PAT 22,027 18,274 13,469 22,012 31,008 Sundry debtors 903 868 1,582 2,077 1,936
Ratios Loans & advances 13 1 4,592 4,617 4,642
EBITDA 3.4 (24.9) (16.0) 46.9 33.1 Provisions 807 974 1,128 1,303 1,478
Adj. EPS 1.9 (17.8) (23.6) 57.6 40.9 Net current assets 26,013 45,561 63,052 78,102 91,769
Gross 48.8 45.8 41.7 44.6 45.5
EBITDA 29.6 23.8 21.0 23.5 25.2 Cashflow
ROE 27.8 19.3 13.0 18.0 22.0 Net Interest 73 189 165 189 218
ROCE 24.2 18.7 12.6 16.5 19.2 Net Change – WC (4,720) 742 (3,057) 2,313 (3,150)
Inventory 37 44 52 56 53 Investments 6,583 (8,263) 18,466 (20,000) (20,000)
Net working capital 98 183 266 251 237 Net cash from investing (1,314) (15,732) 13,380 (25,500) (25,000)
Solvency (x) FCF 21,356 3,534 34,863 4,144 8,974
Net debt-equity (0.4) (0.5) (0.6) (0.6) (0.6) Issue of share capital 0 0 0 0 0
Interest coverage ratio 396.1 115.5 111.3 142.2 164.6 Increase/(decrease) in debt 359 622 (298) 0 0
Net debt/EBITDA (1.1) (2.4) (3.7) (3.1) (2.6) Dividend paid (4,109) (4,115) (5,603) (6,592) (8,240)
Per share (Rs) Interest paid (73) (189) (165) (189) (218)
BVPS 327.2 365.6 418.5 474.9 558.2 Net cash from financing (3,824) (3,681) (6,065) (6,781) (8,458)
CEPS 92.5 80.9 67.6 99.3 135.0 Net change in Cash 17,533 (147) 28,798 (2,637) 517
Dividend payout (%) 15.5 18.7 34.5 24.8 22.0
Valuation (x)
P/E 35.1 42.7 56.0 35.5 25.2
P/BV 8.7 7.8 6.8 6.0 5.1
EV/EBITDA 25.8 33.5 39.1 25.9 19.2
Dividend yield (%) 0.4 0.4 0.6 0.7 0.9

16 September 2021
Anish Rankawat
+91 22 4215 9053
[email protected]
Endurance Technologies (ENDU)

ENDU’s operating cash flows have been improving consistently, with minimal change Market data
in working capital requirement, except in the pandemic year. Over FY16-21, its Current price: Rs1,625
debtor days have hovered at 40-60, inventory days at 30-40, and creditor days at 50- Bloomberg: ENDU IN
60. Net working capital excluding current investments has increased significantly in 52-week H/L: Rs1,830/975
the last couple of years. OCF/EBITDA has been a bit lower than 1x. Since FY16,
cumulative capex has been Rs30bn; other than that, there is no major impact on free
cash flows. This is also visible in the fixed asset turnover ratio, which has consistently Free float: 23%
been over 1.5x, except in FY21. Avg. daily vol. 3mth: 120,316
Source: Bloomberg
Consistent improvement in cash flows from operations: Operating cash flows have been improving consistently, with
minimal change in working capital requirement, except in the pandemic year. Over FY16-20 PBT grew consistently at a CAGR
of 15.4%, with EBITDA margin expanding from 12.9% in FY16 to 16.3% in FY20. The company has won new orders worth over
Rs18bn in India and EUR100mn+ in Europe in the last three years. Order inflows have been strong for the last 4-5 years. As
the peak of new order revenue starts coming in from the third year onwards, we have seen high capex in the last four years.
Exhibit 21: Steady improvement in cash flows from operations with minimal working capital movement
12
10
8
6
Rs.Bn
4
2
0
-2
-4
FY16 FY17 FY18 FY19 FY20 FY21

Analysis of working capital movement: Over FY16-21, ENDU’s debtor days have hovered at 40-60 days, inventory days at
30-40, and creditor days at 50-60. Net working capital excluding current investments has increased significantly in the last
couple of years. OCF/EBITDA has been a bit lower than 1x.
Exhibit 22: Working capital is impacted by higher debtor days, being a tier-1 supplier
80
70
Days of Revenue
60
50
40
30
20
10
0
xxxxx
Endurance Technologies (ENDU) 16 September 2021
1.2
1.0
2.5 2.3
1 0.9
0.8 0.8
2 1.8 1.7 1.8 0.8 0.7
1.6
0.6
1.5 0.6
1.2
1 0.4
0.5 0.2
0
0
Capex, investments and FCF: Over the last few years, ENDU’s order inflows have been robust. It has been expanding capacity
to cater to its piling order book. Since FY16, cumulative capex has been Rs30bn. Other than that, there is no major impact on
free cash flows. This is also visible in the fixed asset turnover ratio, which has been consistently over 1.5x, except in FY21.
Exhibit 25: Capex intensity has been high due to the need to fulfil order book and add new products
15
10
5
Rs. Bn
-5
-10
CFO Capex Investments in JVs, Subs and Asso Net FCF

Net Fixed Asset turn (x) 3.30 3.42 3.43 3.47 2.65 2.52
Return ratios have been steady

Exhibit 27: RoE (%) trend
ROE (%) 23.2 20.8 21.4 21.8 20.3 16.2
Investments (Rs Bn) 0.5 0.3 0.5 0.4 1.7 4.4

Endurance Technologies (ENDU) 16 September 2021
P&L Balance sheet

EBIT 7,526 7,165 6,411 9,058 11,784 Def tax liab. (net) (150) (242) (597) (597) (597)
Other income 270 476 307 369 442 Gross block 33,860 42,204 45,793 50,293 54,793
Taxes 2,381 1,810 1,272 2,327 3,037 Net block 21,631 26,063 26,026 26,135 25,806
Effective tax rate (%) 31.6 24.2 19.3 25.0 25.0 Capital WIP 1,178 1,260 962 962 962
Recurring PAT 5,158 5,655 5,308 6,980 9,110 Investments 361 1,660 4,431 6,443 8,443
Ratios Loans & advances 2,065 1,385 1,956 2,249 2,587
EBITDA 21.7 0.2 (8.0) 29.3 23.5 Provisions 1,039 1,111 1,032 1,032 1,032
Gross 42.1 46.0 45.5 45.7 46.2
EBITDA 15.0 16.3 15.9 16.3 17.4 Cashflow
ROE 21.8 20.3 16.2 18.2 20.3 Net Interest 257 175 138 120 80
ROCE 18.2 17.3 14.4 16.8 19.5 Net Change – WC (3) 2,424 (2,484) (1,146) (958)
Inventory 43 53 59 56 59 Investments 98 (1,299) (2,783) (2,000) (2,000)
Net working capital 38 33 43 45 53 Net cash from investing (7,276) (9,955) (6,439) (6,500) (6,500)
Solvency (x) FCF 1,643 2,350 (64) 3,954 6,561
Net debt-equity 0.0 0.0 0.0 (0.1) (0.2) Issue of share capital (103) (313) 1,378 0 0
Interest coverage ratio 43.9 64.5 75.6 112.1 207.7 Increase/(decrease) in debt (2) (102) (1,240) (1,000) (2,000)
Net debt/EBITDA 0.0 (0.1) (0.1) (0.2) (0.5) Dividend paid (928) (928) (1,013) (1,435) (1,772)
CEPS 63.4 69.7 66.1 80.8 99.1 Net change in Cash 352 831 (1,076) 1,399 2,708
Dividend payout (%) 15.6 13.7 16.2 17.1 16.2
Valuation (x)
P/E 44.3 40.4 43.1 32.7 25.1
P/BV 8.9 7.6 6.4 5.6 4.7
EV/EBITDA 19.8 19.7 21.9 16.8 13.3
Dividend yield (%) 0.3 0.3 0.4 0.5 0.6

16 September 2021
Anish Rankawat
+91 22 4215 9053
[email protected]
Hero Motocorp (HMCL)

HMCL’s operating profits have been robust and have consistently expanded over the Market data
last 10 years. Working capital intensity in the business has been low to moderate Current price: Rs2,920
except in the last three years. Overall, OCF trend largely mirrors the cyclical nature of Bloomberg: HMCL IN
the industry. Excluding current investments, working capital has been negative in 52-week H/L: Rs3616/2636
most years. Over the last 10 years, HMCL has incurred capex of Rs98bn towards
greenfield projects at three new locations, increasing achievable capacity from
6.2mn units to 11mn units (FY22E onwards). Investments of Rs25bn in subsidiaries Free float: 77.3%
and associates have been mainly towards associates, Hero Fincorp and Ather. Avg. daily vol. 3mth: 595,474
Source: Bloomberg
History of robust cash flows from operations: Operating profits have been robust and have consistently expanded over the
last 10 years. Working capital intensity in the business has been low to moderate except in the last three years. In FY19,
demand was hit by slowdown in Q4, resulting in higher inventory and receivables. Overall, OCF trend largely mirrors the
cyclical nature of the industry. Over FY20-21, HMCL too has been impacted by the industry slowdown and the pandemic.
However, OCF was higher, as debtors declined in FY20 and creditors increased in FY21. OCF before WC improved in FY20,
after the shift to the new corporate tax regime.
Exhibit 28: Barring FY19, cash flows from operations have been robust
60,000 Consistent improvement in OCF High inventory and receivables
due to slowdown in Q4
40,000
20,000
Rs Mn
-20,000
-40,000 Strong OCF despite

industry downcycle
OCF before WC WC change OCF and pandemic
Analysis of working capital movement: NWC movement reflects the cyclical nature of the industry. Excluding current
investments, working capital has been negative in most years. Debtor days have been 15-20 days on an average, but there
was a spike in FY19 due to sudden slowdown in demand towards the end of year, leaving higher channel inventory in the
system. Inventory days have been hovering around 10 days. Creditors are normally around 30 days, but have been on the
higher side in FY18, FY19 and FY21. During upcycles, OCF/EBITDA improves, but in most years it has been below 1.
Exhibit 29: NWC movement reflects the cyclical nature of the industry
60.0
40.0
20.0
0.0
-20.0
-40.0 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-60.0
xxxxx
Hero Motocorp (HMCL) 16 September 2021
1.6 1.5 1.2 1.1

1.3 1.0
1.4
1.2 1.0
1.2 1.1 0.8
1.0 0.7
0.9 1.0 0.8 0.7
1.0 0.7 0.7
0.7 0.5
0.8 0.7 0.6 0.5
x
x
0.6
0.4
0.3 0.2
0.4
0.2
0.2
0.0 0.0
Capex, investments and FCF: In FY12, HMCL was manufacturing out of three plants with a utilization of 98%. Over the last 10
years, it has incurred capex of Rs98bn towards greenfield projects at three new locations, increasing achievable capacity from
6.2mn units to 11mn units (FY22 onwards). Its total capacity in FY21 was 9.5mn. The company started manufacturing in
Colombia in FY16 and in Bangladesh in FY18. Capacity utilization has been 80%+ in most years. However, industry slowdown
has affected utilization in the last couple of years. HMCL’s investments in subsidiaries and associates of Rs25bn have been
mainly towards Hero Fincorp and Ather lately, both associates.
Exhibit 32: Capex intensity, acquisitions and free cash flows
60,000 FY14 onwards – Neemrana and FY17 – Andhra greenfield capex started
50,000 Gujarat greenfield capex started
40,000
30,000
Rs Mn
20,000
10,000
0
-10,000 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-20,000
Sudden slowdown in the industry resulted
FCF in line with the cyclical nature of the industry
in overproduction
OCF Capex investments in Subs and Asso Net FCF
Source: Company Centrum Broking

Capacity Utilization (%) 98.2 88.0 89.2 86.7 81.9 73.2 83.4 85.9 70.4 60.9
Net Asset Turn (x) 14.5 14.6 15.0 10.1 9.3 7.8 6.4 6.9 5.9 7.1
Muted activity on acquisitions, zero debt; returns healthy, albeit declining: HMCL has a healthy balance sheet, with
no debt and a sizeable investment and cash book. However, we have not seen any significant acquisition or investment in
core operations in the last decade (except Rs8.5bn in Jaipur Tech Center inaugurated in FY16), which is the key reason for its
declining return ratios. However, the ratios are still at respectable levels.
Exhibit 34: Though declining, return ratios are still at respectable levels
ROE (%) 131.3 69.2 39.8 41.9 41.1 35.7 33.8 27.5 21.9 20.2
ROCE (%) (before tax) 134.6 101.5 54.3 57.6 57.8 49.2 48.0 40.8 28.9 26.5

Hero Motocorp (HMCL) 16 September 2021
P&L Balance sheet

EBITDA 49,301 39,580 40,192 47,295 56,203 Total debt 0 1,217 1,298 1,298 1,298
Taxes 16,259 9,404 9,362 11,687 13,861 Net block 44,775 59,770 56,982 55,611 54,226
Extraordinary items 0 6,774 0 0 0 Inventories 10,724 10,920 14,696 15,706 15,735
Ratios Loans & advances 850 896 892 1,037 1,188
Revenue 4.4 (14.3) 6.8 16.3 14.5 Other current liab. 7,161 7,990 8,913 8,913 8,913
EBITDA (6.6) (19.7) 1.5 17.7 18.8 Provisions 1,762 2,689 3,328 3,661 4,027
Adj. EPS (8.5) (12.7) 0.3 17.0 18.6 Net current assets 54,317 46,644 49,992 58,573 69,627
Gross 30.7 31.7 29.3 29.3 29.8
EBITDA 14.7 13.7 13.0 13.2 13.7 Cashflow
ROE 27.5 21.9 20.2 21.9 23.9 Net Interest 86 220 218 200 200
ROCE 27.5 21.9 20.1 21.8 23.8 Net Change – WC (24,871) 24,001 11,775 847 (6,784)
Inventory 15 20 21 22 20 Investments 15,566 (22,540) (22,770) (14,500) (11,500)
Net working capital 59 59 59 60 62 Net cash from investing 7,671 (43,699) (29,205) (21,000) (19,000)
Solvency (x) FCF 23,004 23,597 17,033 21,607 23,444
Net debt-equity (0.3) (0.3) (0.4) (0.4) (0.4) Issue of share capital (5,588) (5,562) 1,957 0 0
Interest coverage ratio 573.3 179.7 184.0 236.5 281.0 Increase/(decrease) in debt 0 1,217 81 0 0
CEPS 199.6 188.9 182.2 210.5 247.9 Net change in Cash (49) 1,054 (2,126) (571) (2,730)
Dividend payout (%) 51.3 49.5 70.8 63.4 63.1
Valuation (x)
P/E 17.2 19.7 19.7 16.8 14.2
P/BV 4.5 4.1 3.8 3.5 3.2
EV/EBITDA 11.2 13.5 12.9 10.8 9.0
Dividend yield (%) 3.0 3.1 3.6 3.8 4.5

16 September 2021
Anish Rankawat
+91 22 4215 9053
[email protected]
Mahindra & Mahindra (MM)

MM has 167 subsidiaries, 31 JVs, and 28 associates. We have analyzed its Market data
consolidated cash flows in this note. Over the last decade, the company has reported Current price: Rs757
negative OCF on four occasions, driven by higher working capital. In FY18, FY19 and Bloomberg: MM IN
FY20, losses from international subsidiaries dragged OCF. MM has invested heavily in 52-week H/L: Rs952/566
international subsidiaries like SsangYong in the last decade. These investments have
Market cap: Rs941bn
turned out to be the key reason for the company’s poor performance at the
consolidated level. In FY21, MM took a write-off of investments in SsangYong, GenZ, Free float: 86.9%
GippsAero, and MFCS. As a result, we saw a big turnaround in FY21. OCF/PAT and Avg. daily vol. 3mth: 3,077,389
OCF/EBITDA have been inconsistent, driven by loss-making subsidiaries. This has Source: Bloomberg
affected the company’s return ratios as well.
Story of capital mismanagement: Over the last decade, MM has reported negative OCF on four occasions, driven by higher
working capital. In FY18, FY19 and FY20, losses from international subsidiaries dragged OCF. The company has invested
heavily in international subsidiaries in the last decade, which has turned out to be the key reason for its poor performance at
the consolidated level. FY21 marks a stark improvement on the back of the management’s change in strategy to focus on
core business and rationalize capital allocation.
Exhibit 35: Over FY18-20, losses from international subsidiaries dragged OCF
200,000 Rationalizing loss-
making subsidiaries
100,000
Rs Mn
-100,000
Effect of poor performance of
OCF before WC WC change OCF international subsidiaries
Exhibit 36: Impact of subsidiaries/associates on OCF

200
100
OCF Rs Bn
-100
Standalone Consolidated
Analysis of working capital movement: MM has a negative working capital cycle, given the nature of its business.
Debtors have been at 20-30 days, inventory at 35-45 days, and creditors at 60-70 days in the last decade. OCF/PAT and
OCF/EBITDA have been inconsistent, driven by loss-making subsidiaries. This impacted return ratios as well.
Exhibit 37: Negative working capital cycle in most years is in line with the nature of the industry
100.0 20
Days of revenue
50.0 0
0.0 -20
Debtors Inventory Creditors NWC (RHS)
xxxxx
Mahindra & Mahindra (MM) 16 September 2021

2.0 1.7
15.0 12.9 FY21: Sharp improvement
FY21: Sharp improvement 1.5
after writing off loss-making after writing off loss-making
10.0
subsidiaries. 1.0 subsidairies.
5.0
0.0 0.5 0.9 0.1 0.2 0.5 0.1 0.2
0.0 0.0 0.1
0.0
0.0
FY16
FY20
FY12
FY13
FY14
FY15
FY17
FY18
FY19
FY21
FY14
FY17
FY12
FY13
FY15
FY16
FY18
FY19
FY20
FY21
-5.0 -0.5
-0.3 -0.1 -1.0 -2.4
-0.1 0.0 -0.3 -0.1
Exhibit 40: Standalone OCF/PAT and OCF/EBITDA

2.5
2
1.5
x
1
0.5
0
OCF/PAT OCF/EBITDA
Capex, investments and FCF: MM acquired 70% stake in SsangYong in FY13 for Rs21bn. SsangYong reported a loss of Rs30bn
in FY20, up from Rs3.5bn in FY19. In fact, it reported losses every year except in FY14&17. Total international subsidiary
losses increased progressively from Rs530mn in FY17, to Rs11bn in FY18, to Rs20bn in FY19, and then to Rs53bn in FY20. In
FY21, MM took a write-off of investments in SsangYong, GenZ, GippsAero and MFCS. As a result, we see a big turnaround in
FY21.
Exhibit 41: Capex intensity and acquisitions have impacted free cash flows
200,000
Write-off and shutdown of loss making
150,000 subidiaries like SSangyoung, GenZ, Gipps
FY12: Rs1.75bn FY14: Rs2bn for 51%
100,000 for 49% share in share in Peugeot FY17: Rs9.3bn for controlling stake
Navistar Motorcycles in Hisarlar and Erkunt
50,000
Rs Mn
-50,000
-100,000
-150,000 FY13: Rs21bn for 70% Mounting subsidairy losses
share in SSangyong CFO Capex investments in Subs and Asso Net FCF
Exhibit 42: SsangYong’s performance over the years have deteriorated significantly
Rs Mn FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
M&M Investments 17,396 17,396 21,339 21,339 21,339 21,339 21,339 24,503 24,503
Loans Balance 4,288 4,653
Revenue 122,561 149,746 202,407 182,710 195,196 211,531 204,104 241,844 200,377
PAT -7,175 -5,092 736 -7,095 -1,430 2,332 -4,984 -3,454 -30,386
% Shareholding 70.04% 69.63% 72.85% 72.85% 72.85% 72.46% 72.46% 74.65% 74.65%
Revenue/Investment Turnover 4.0 4.7 6.9 6.3 6.7 7.2 6.9 7.4 6.1
Exhibit 43: Net fixed asset turn and RoE trend

ROCE (%) 36.2 20.5 19.1 14.8 16.6 15.7 16.2 16.0 9.8 9.7
ROE (%) 32.5 17.4 18.5 9.4 10.2 9.6 12.7 11.5 1.5 3.4
Net Fixed Asset Turn (x) 3.5 3.8 4.0 3.8 3.7 4.0 3.5 3.6 3.2 4.2
D/E (x) 1.0 1.0 1.1 0.9 0.9 1.0 0.9 1.1 1.3 1.3

Mahindra & Mahindra (MM) 16 September 2021
P&L Balance sheet

YE Mar (Rs mn) FY19A FY20A FY21E FY22E FY23E YE Mar (Rs mn) FY19A FY20A FY21E FY22E FY23E
Interest expenses 1,467 1,245 3,957 4,029 3,429 Total liabilities 384,636 392,889 439,852 471,803 517,122
Taxes 15,867 18,513 13,183 15,939 21,349 Net block 118,532 120,511 120,070 162,103 199,477
Extraordinary items (227) (28,112) (31,745) 0 0 Inventories 47,631 40,408 47,827 57,690 66,379
YE Mar FY19A FY20A FY21E FY22E FY23E
EBITDA 6.9 (15.7) 9.9 14.1 25.9 Provisions 16,154 15,781 15,077 16,584 18,243
Adj. EPS 29.5 (34.5) 15.4 15.6 33.9 Net current assets 63,245 70,363 80,550 25,583 13,528
Gross 31.9 33.4 32.3 31.5 32.5
EBITDA 14.2 14.2 15.7 14.8 16.2 Cashflow
EBIT 10.5 8.9 10.4 9.9 11.5 YE Mar (Rs mn) FY19A FY20A FY21E FY22E FY23E
ROE 16.6 10.2 11.7 12.7 15.0 Net Interest 1,467 1,245 3,957 4,029 3,429
ROCE 15.5 9.6 10.9 11.4 13.8 Net Change – WC (6,822) (11,017) 32,992 8,517 7,715
Inventory 41 54 53 52 54 Investments (12,263) 30,933 (47,533) (35,000) (30,000)
Solvency (x) FCF 24,834 11,605 (14,157) (17,102) 7,239
Net debt-equity (0.1) (0.1) (0.1) 0.0 0.0 Issue of share capital 1,225 (8,231) 8,165 (646) (970)
Net debt/EBITDA (0.5) (0.5) (0.5) 0.0 0.0 Dividend paid (10,174) (2,813) (10,473) (4,788) (7,181)
BVPS 292.4 289.3 295.1 330.2 376.4 Net cash from financing (15,755) (7,561) 34,348 (19,463) (21,580)
CEPS 62.1 49.4 54.0 61.8 77.4 Net change in Cash 9,079 4,045 20,190 (36,564) (14,341)
Dividend payout (%) 18.8 38.0 113.5 10.1 11.3
Valuation (x)
P/E 16.7 25.5 22.1 19.1 14.3
P/BV 2.6 2.6 2.6 2.3 2.0
EV/EBITDA 11.9 14.3 13.0 11.8 9.3
Dividend yield (%) 1.1 0.3 1.2 0.5 0.8

16 September 2021
Anish Rankawat
+91 22 4215 9053
[email protected]
Maruti Suzuki (MSIL)

MSIL’s operating profits have been robust and have consistently expanded over Market data
FY11-18. The industry slowed down from Q4FY19, impacting operating profits and Current price: Rs6,931
cash flows. Working capital intensity in the business has been low to moderate and Bloomberg: MSIL IN
positive except in FY19 and FY20, when the industry slowed down. Capex and 52-week H/L: Rs8,400/6270
investments in subsidiaries have been negligible in the last decade. MSIL has
Market cap: Rs2,093.7bn
accumulated cash over the years in the form of investments. Total cash +
investments reached Rs448bn by the end of FY21, not far from the net worth of the Free float: 38.1%
company. We have not seen any significant acquisition or investment in core Avg. daily vol. 3mth: 700,408
operations in the last decade, which is the key reason for its declining return ratios. Source: Bloomberg
OCF improved consistently until FY18, post which industry downturn took a toll: Operating profits have been robust and
consistently expanded until FY18. Industry slowed down from Q4FY19, impacting operating profits and cash flows. Working
capital intensity in the business has been low to moderate and positive except in FY19 and FY20, when the industry slowed
down. In FY19, demand was hit by slowdown in Q4, resulting in higher inventory and receivables. Over FY20-21, demand has
been battered by industry slowdown and the pandemic. However, OCF was better, as creditors increased in FY21.
Exhibit 44: Industry downturn from FY19 broke the trend of consistent improvement in OCF
140,000
Industry downcycle and pandemic
120,000 Consistent improvement in OCF until FY18
100,000
80,000
60,000
Rs Bn
40,000
20,000
0
-20,000
-40,000 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
OCF before WC WC change OCF
Analysis of working capital movement: Creditors have always been on the higher end, and hence, NWC has been
negative in most years. Debtor days have been at around 10 days, inventory days at 10-20 days, and creditor days at 30-50
days. Working capital has been in the negative zone in most years due to the nature of the business.
Exhibit 45: High creditors have kept NWC negative in most years
60.0
40.0
Days of revenue
20.0
0.0
-20.0
-40.0
-60.0
xxxxx
Maruti Suzuki (MSIL) 16 September 2021
Exhibit 46: OCF/PAT Exhibit 47: OCF/EBITDA
2.5 1.8 1.7

2.1 1.6
2.0 1.8 1.8 1.4
1.5 1.6 1.5
1.4 1.4 1.2 1.0 1.0
1.5 0.9 1.0 1.0 1.0
1.0 0.9
x
x
0.9 0.8 0.6
1.0
0.6 0.6 0.5
0.5 0.4
0.2
0.0 0.0
Capex, investments and FCF: Capex and investments in subsidiaries have been negligible in the last decade. MSIL has
accumulated cash over the years in the form of investments. Total cash + investments reached Rs448bn by the end of FY21,
which is not far from the net worth of the company.
Exhibit 48: Free cash flows equivalent to cash flows from operations
140,000
120,000
100,000
80,000
Rs Bn
60,000
40,000
20,000
0
CFO Capex Investments in Subs and Asso Net FCF
Exhibit 49: Net fixed asset turn

Healthy balance sheet with no debt; return ratios declining: MSIL has a healthy balance sheet with no debt and a sizeable
investment and cash book. However, we have not seen any significant acquisition or investment in core operations in the last
decade, which is the key reason for its declining return ratios.
Exhibit 50: RoE declining
ROE (%) 25.5 20.2 14.1 18.5 20.0 22.2 19.8 17.1 12.2 8.5

Maruti Suzuki (MSIL) 16 September 2021
P&L Balance sheet

Interest expenses 758 1,329 1,008 969 1,049 Total liabilities 468,551 491,967 522,756 564,290 625,544
Taxes 29,650 14,142 9,297 17,672 24,091 Net block 154,078 157,812 149,570 160,316 162,686
Extraordinary items 0 (1,250) 0 0 0 Inventories 33,257 32,149 30,500 36,289 38,471
Revenue 6.3 (13.7) (7.2) 25.6 13.3 Other current liab. 0 0 0 0 0
EBITDA (8.8) (32.5) (28.0) 48.7 38.8 Provisions 6,639 7,312 7,863 8,158 8,973
Adj. EPS (2.9) (23.0) (26.8) 48.1 36.3 Net current assets (16,223) (31,707) 24,578 55,366 114,250
Gross 31.9 31.5 29.3 29.9 31.8
EBITDA 12.8 9.8 7.6 9.0 11.0 Cashflow
ROE 17.1 12.2 8.5 11.7 14.5 Net Interest 758 1,329 1,008 969 1,049
ROCE 17.1 12.4 8.6 11.7 14.6 Net Change – WC (15,725) (24,361) 45,837 (26,410) 14,073
Inventory 20 23 22 19 19 Investments (12,248) 474 (53,191) (33,809) (70,000)
Net working capital (7) (16) 13 24 44 Net cash from investing (57,667) (35,890) (76,788) (78,809) (115,000)
Solvency (x) FCF 32,612 33,185 40,532 (7,342) 28,166
Net debt-equity (0.1) 0.0 (0.2) (0.2) (0.3) Issue of share capital (7,004) (15,431) 591 0 0
Interest coverage ratio 145.1 55.9 53.0 82.0 105.2 Increase/(decrease) in debt 388 117 3,628 (3,000) 0
Net debt/EBITDA (0.5) (0.1) (2.0) (1.5) (1.7) Dividend paid (758) (1,329) (1,008) (969) (1,049)
BVPS 1,527.9 1,603.9 1,700.9 1,848.4 2,051.2 Net cash from financing (31,534) (34,763) (10,379) (22,089) (25,209)
CEPS 348.3 308.0 240.4 320.9 424.0 Net change in Cash 1,078 (1,578) 30,153 (29,431) 2,957
Dividend payout (%) 32.2 32.1 32.1 28.9 28.3
Valuation (x)
P/E 27.9 36.2 49.5 33.4 24.5
P/BV 4.5 4.3 4.1 3.7 3.4
EV/EBITDA 18.6 28.0 37.1 24.9 17.3
Dividend yield (%) 1.2 0.9 0.6 0.9 1.2

16 September 2021
Anish Rankawat
+91 22 4215 9053
[email protected]
TVS Motors (TVSL)

TVSL’s operating cash flows have improved consistently in the past decade, despite Market data
multiple industry disruptions. The company has followed a lean inventory strategy, Current price: Rs545
which yielded benefits during the industry-wide slowdown in FY19. TVSL has a Bloomberg: TVSL IN
history of negative cash conversion cycle, similar to the industry. In FY15, inventory, 52-week H/L: Rs666/407
debtors, and loans and advances increased, impacting working capital, and hence,
OCF. Otherwise, OCF to EBITDA has been around 1x, similar to other OEMs. Return
ratios have declined steadily, especially in the last four years. This is majorly due to Free float: 42%
higher investments in subsidiaries such as TVS Singapore, TVS Indonesia, and Avg. daily vol. 3mth: 1,814,973
Sundaram Auto Components starting from FY18. Source: Bloomberg
Consistent improvement in cash flows from operations: OCF has improved consistently in the past decade, despite multiple
industry disruptions. The company followed a lean inventory strategy, which yielded benefits during the industry-wide
slowdown in FY19. In the last three years, payables have seen a sharp rise, leading to better working capital and operating
cash flows.
Exhibit 51: OCF has improved consistently in the last decade
30
Lean inventory
25
strategy, nullifying WC
20 Consistent improvement in OCF generation impact in FY19
15
Rs Bn
10
5
0
-10
OCF (before WC change) WC Change OCF
Analysis of working capital movement: TVSL has a history of negative cash conversion cycle, similar to the industry. Net
working capital has been broadly negative, except in FY15, when short-term loans and advances went up due to VAT
receivables and excise duty dues from the government. Debtor and creditor days have been higher in the last few years,
given the industry slowdown and the pandemic. In FY15, inventory, debtors, and loans and advances increased, impacting
working capital, and hence, OCF. Otherwise, OCF to EBITDA has been around 1x, similar to other OEMs.
Exhibit 52: Working capital has been negative in most years, in line with the industry
100 Negative cash conversion cycle, mirroring the industry
80
60
In Days of Revenue
40
20
0
-40 FY15 NWC higher due to

increased ST loans &
-60 advances
Debtors Inventory
xxxxx
TVS Motors (TVSL) 16 September 2021
4.5 4.2 2 1.8

4 1.8
3.5 1.6
3 1.4
1.1 1.2 1.1
2.3 1.2 1.1 1.0
2.5 2.1 2.0 0.9
1.9 2.0 1
2 1.8 1.6 0.8 0.8
0.8
1.5 1.2
0.6
1 0.4
0.2 0.1
0.5 0.2
0 0
Capex, investments and FCF: TVSL acquired Norton Motorcycles for GBP16mn in FY20 in an all-cash deal. Investment in
subsidiaries and associates has seen a jump since FY18, with significant uptick in investment in subsidiaries in Singapore and
Indonesia. TVS Credit has seen constant capital infusion from TVSL, reaching Rs1bn by FY21. In the last two years, the
company has invested Rs400mn in Ultraviolet. Over the years, overall capex and investments have slowly moved from
conventional projects to EVs and digital initiatives.
Exhibit 55: Capex intensity and investment in subsidiaries and associates have been high in the last four years
30 Higher investment in subsidiaries since FY18
25
20
Norton acquistion in FY20
15
Rs Bn
10
5
0
-5
CFO Capex Investment in subs and Associates Net FCF

Asset turn: Asset turn has been above a healthy 5x, except in the last couple of years on industry slowdown.
Return ratios declining: Return ratios have been declining steadily, especially in the last four years. This is majorly due to
higher investments in subsidiaries, TVS Singapore, TVS Indonesia, and Sundaram Auto components, starting from FY18; and
slowdown in the industry in last 2 years. This naturally increased the investment base for the company. In FY21, TVS
Indonesia reported annual profits for the first time.
Exhibit 57: RoE on a declining trend
ROE (%) 45.9 24.4 19.8 22.7 27.2 28.2 25.1 21.5 17.9 15.7

TVS Motors (TVSL) 16 September 2021
P&L Balance sheet

YE Mar (Rs mn) FY19A FY20A FY21A FY22A FY23A YE Mar (Rs mn) FY19A FY20A FY21A FY22A FY23A
Depreciation & Amortisation 3,993 4,890 4,937 6,051 6,681 Non Current Liabilities 597 929 1,163 1,291 1,433
Interest expenses 806 1,022 1,416 1,172 1,196 Total liabilities 49,975 59,533 56,417 64,717 72,763
Taxes 2,908 1,622 2,142 2,990 4,114 Net block 25,793 28,999 30,104 32,053 31,372
Extraordinary items 0 (323) 0 0 0 Inventories 11,759 10,389 11,518 13,553 15,689
Cash & Cash Equivalents 439 4,192 8,590 1,542 2,245
YE Mar FY19A FY20A FY21A FY22A FY23A
EBITDA 26.9 (6.1) 6.1 31.3 27.2 Provisions 586 834 762 762 762
Adj. EPS 1.1 (6.8) (2.0) 45.3 37.6 Net current assets (1,397) 1,621 (9,618) (7,268) (1,540)
Gross 24.0 26.1 24.0 24.2 24.5
EBITDA 7.9 8.2 8.5 9.1 10.0 Cashflow
EBIT 5.7 5.2 5.6 6.2 7.2 YE Mar (Rs mn) FY19A FY20A FY21A FY22A FY23A
ROE 21.5 17.9 15.7 19.7 23.2 Net Interest 75 321 329 345 363
ROCE 16.8 13.5 13.0 17.0 20.1 Net Change – WC (2,405) 1,068 15,871 (9,270) (4,882)
Inventory 28 33 31 29 30 Investments (2,653) (3,052) (7,086) (4,000) (3,000)
Net working capital (3) 4 (21) (13) (2) Net cash from investing (9,981) (11,431) (13,060) (12,000) (9,000)
Solvency (x) FCF (972) 225 14,571 (5,985) 5,393
Net debt-equity 0.4 0.5 0.1 0.2 0.2 Issue of share capital (28) (1,274) 1,072 0 0
Interest coverage ratio 17.8 13.2 10.1 16.0 19.9 Increase/(decrease) in debt 3,410 7,064 (9,253) 1,500 (1,000)
Net debt/EBITDA 0.9 1.2 0.2 0.6 0.4 Dividend paid (2,005) (1,940) (1,663) (2,218) (3,327)
Per share (Rs) Interest paid (806) (1,022) (1,416) (1,172) (1,196)
BVPS 70.5 76.2 87.8 101.8 120.6 Net cash from financing 572 2,827 (11,260) (1,890) (5,523)
CEPS 22.5 23.4 23.3 31.4 39.8 Net change in Cash (401) 3,052 3,311 (7,875) (130)
Dividend payout (%) 29.9 32.8 27.2 24.9 27.2
Valuation (x)
P/E 38.6 41.4 42.3 29.1 21.2
P/BV 7.7 7.2 6.2 5.3 4.5
EV/EBITDA 19.0 20.5 18.3 14.4 11.3
Dividend yield (%) 0.8 0.7 0.6 0.9 1.3

16 September 2021
Ashish Shah
Research Analyst, Aviation
+91 22 4215 9021
SECTOR: AVIATION [email protected]
Vaibhav Shah
Research Associate, Aviation
InterGlobe Aviation (IndiGo) +91 22 4215 9815

[email protected]
IndiGo has generated strong operating cash flows over the last decade (except for Market data
Covid-impacted FY21), albeit with some amount of cyclicality. This cyclicality is Current price: Rs1,979
caused by higher linkage with crude prices (~1/3rd of the total cost) as well as Bloomberg: INDIGO IN
fluctuations in yield. Demand growth over this period has remained strong by and
52-week H/L: Rs2,024/1,181
large. Working capital levels have been low till FY18, post which there has been an
increase due to GST paid under protest and higher levels of restricted cash. IndiGo
has generated total operating cash flows of Rs112bn and FCF of Rs45.4bn over FY12- Free float: 25.2%
21 (FCF of Rs82bn over FY12-20). Free cash balance declined to Rs71bn as at March Avg. daily vol. 3mth: 677,877
2021 from Rs89.2bn in March 2020 and further to Rs56.2bn in June 2021. Source: Bloomberg
Cash generation largely positive, but cyclical: Cash flows from operations have been positive except in the Covid-impacted
FY21. However, given the volatility in the business, especially due to dependence on crude, there is cyclicality in cash
generation. Operating cash flows (net of interest) plunged in FY19 due to higher crude prices and weaker yields and
rebounded in FY20 as the impact reversed. The plunge in FY21 was driven by disruption caused by Covid.
Exhibit 58: Operating cash flows* of Rs112bn over the last 10 years
45,000 Sharp fall in
30,000 traffic amid
Covid
15,000
-
Rs mn
(15,000) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
(30,000)
Robust volume growth Lower yields and Fall in crude prices
(45,000)
and healthy spreads led higher crude price and improved yields
(60,000) to strong CFO led to weak CFO improved CFO
Operating profit before wcap changes (Rs mn) Wcap changes (Rs mn) CFO post lease payments (Rs mn)
Source: Company, Centrum Broking; *: net of lease payments
Working capital levels low historically: The Aviation business – driven by forward sales of tickets, minimum inventories,
provisions for future maintenance and deferred payments of supplementary rentals – is typically not a working capital
intensive business. IndiGo’s working capital cycle has been low over large part of the decade in the range of 5 to 15 days.
However, in the recent years, it has increased materially due to GST payments under protest carried as collectibles and
increase in restricted cash levels. FY21 was highly disrupted year amid outbreak of Covid.
Exhibit 59: Working capital levels* largely moderate; have risen materially in last 2-3 years
175 Rise in working capital levels due
150 to GST receivables and rise in
restricted cash levels
125
100
Days
75
50
25
-
(25) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Forward sales and advances (days) Provisions (days) Supplementary rentals (days) NWC ex cash (days)
Source: Company, Centrum Broking; *: including restricted cash balances
InterGlobe Aviation (IndiGo) 16 September 2021
Exhibit 60: EBITDAR to CFO* conversion at 29% in 10 years Exhibit 61: PAT to CFO conversion remained strong
75% 400%
300%
50%
200%
25%
100%
0% 0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21# FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Source: Company, Centrum Broking *net of lease payments; #: CFO negative and
EBITDAR miniscule making the ratio irrelevant in FY21
FCF generation impacted by Covid in FY21: Total operating cash flows of Rs112bn over FY12-21 have adequately supported
capex of Rs86bn. Also, IndiGo generated gain on sale and leaseback of aircraft worth Rs18.8bn in FY21. Overall, FCF of
Rs45.4bn appears modest, as it was impacted by (-ve) FCF of Rs36.6bn in FY21. IndiGo had free cash balance of Rs71bn as at
March 2021 (Rs89.2bn in March 2020), which got further depleted to Rs56.2bn in June 2021.
Exhibit 62: FCF generation modest at Rs45.4bn over FY12-21, impacted by steep cash burn in FY21
40,000
20,000
-
Rs mn
(20,000)
(40,000)
(60,000)
CFO post lease payments Capex Proceeds from sale and lease back of aircrafts Net FCF
Exhibit 63: FCF used for debt repayment and for dividends; payouts declined since FY19
Rs mn FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21
FCF 5,056 3,434 (12,535) 6,316 21,942 33,132 14,009 (7,305) 17,897 (36,588) 45,358
Inflow from equity raise/dividend outflow (5,700) (6,376) - (16,128) (1,133) (6,515) 10,281 (2,780) (2,073) 93 (30,332)
Increase/ (decrease) in net debt 644 2,943 12,535 9,812 (20,808) (26,618) (24,290) 10,085 (15,823) 36,495 (15,025)
Exhibit 64: Return ratios volatile due to accounting issues and inherent volatility in business
Return Ratios (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
RoE 81.3% 402.7% 117.0% 307.6% 126.1% 51.0% 41.3% 2.2% -3.9% -196.5%
RoCE pre-tax -0.6% 95.5% 20.0% 48.3% 62.0% 41.6% 44.1% 3.9% 8.5% -12.6%
RoCE -1.1% 75.7% 20.0% 34.1% 43.6% 32.2% 31.7% -4.0% 7.7% -12.6%

InterGlobe Aviation (IndiGo) 16 September 2021
P&L Balance sheet

Revenues 2,84,968 3,57,560 1,46,406 2,37,587 3,71,070 Equity share capital 3,844 3,848 3,849 3,849 3,849
Operating Expense 1,89,667 1,60,400 57,801 1,05,874 1,41,772 Reserves & surplus 65,604 54,776 (3,140) (54,784) (37,233)
Employee cost 31,378 43,954 30,262 32,298 37,466 Shareholders fund 69,448 58,624 709 (50,935) (33,384)
Others 65,977 1,12,825 58,598 81,918 97,905 Minority Interest 0 0 0 0 0
EBITDAR 40,861 50,824 6,101 22,085 99,903 Total debt 21,937 24,343 41,210 65,056 65,056
Depreciation & Amortisation 7,596 39,736 46,987 52,744 52,145 Non Current Liabilities 0 2,02,849 2,57,387 3,11,674 3,70,490
EBIT (9,650) 645 (47,241) (35,246) 41,781 Def tax liab. (net) 644 (2,949) (2,949) (2,949) (2,949)
Interest expenses 5,090 18,759 21,420 23,017 27,165 Total liabilities 92,029 2,82,867 2,96,356 3,22,846 3,99,213
Other income 13,249 15,362 10,363 6,619 8,838 Gross block 86,167 2,12,375 2,73,689 3,56,431 4,46,581
PBT (1,490) (2,751) (58,298) (51,644) 23,455 Less: acc. Depreciation (29,547) (44,593) (85,535) (1,38,234) (1,90,334)
Taxes (3,052) (269) 0 0 5,904 Net block 56,620 1,67,782 1,88,155 2,18,197 2,56,247
Effective tax rate (%) 204.8 9.8 0.0 0.0 25.2 Capital WIP 220 1,402 717 717 717
PAT 1,562 (2,482) (58,298) (51,644) 17,551 Net fixed assets 56,841 1,69,184 1,88,872 2,18,915 2,56,964
Recurring PAT 1,562 (2,482) (58,298) (51,644) 17,551 Investments 65,167 94,994 72,902 42,902 42,902
Extraordinary items 0 0 0 0 0 Inventories 2,114 2,861 3,164 3,374 2,414
Reported PAT 1,562 (2,482) (58,298) (51,644) 17,551 Sundry debtors 3,625 2,596 2,192 1,953 3,050
Other current assets 1,04,718 1,23,847 1,37,506 1,26,732 1,43,391
Growth (%)
Trade payables 14,552 15,655 15,561 11,592 15,526
Revenue 23.8 25.5 (59.1) 62.3 56.2
Other current liab. 1,39,148 99,530 93,436 90,781 1,12,834
EBITDAR (38.6) 24.4 (88.0) 1039.5 15.2 Provisions 4,372 19,484 21,440 14,665 10,053
Adj. EPS (93.0) nm NM NM 14.6 Net current assets (29,979) 18,689 34,582 61,030 99,347
Margins (%) Total assets 92,029 2,82,867 2,96,356 3,22,846 3,99,213
Gross 33.4 55.1 60.5 55.4 61.8
EBITDAR 14.3 14.2 4.2 9.3 26.9 Cashflow
EBIT (3.4) 0.2 (32.3) (14.8) 11.3 YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Adjusted PAT 0.5 (0.7) (39.8) (21.7) 4.7 Operating profit bef working capital
6,105 21,902 (40,243) (25,122) 47,466
Returns (%) changes
ROE 2.2 (3.9) NM NM NM Net change - WC 19,844 165 (17,095) 2,762 (2,004)
ROCE (4.0) 7.7 NM NM 11.0 Direct Taxes - (8) - - (5,904)
ROIC 41.6 0.6 NM NM 11.8 Cash flow from operations 25,950 22,059 (57,338) (22,359) 39,558
Turnover (days) Net Capex (18,323) (10,605) 16,795 (2,278) (3,245)
Gross block turnover ratio (x) 3.3 1.7 0.5 0.7 0.8 Long term Investments (1,727) (29,827) 22,092 30,000 -
Debtors 4 3 6 3 2 Others (120) 15,595 (95) 0
Inventory 4 6 19 11 7 Cash flow from investing activities (20,170) (24,837) 38,792 27,723 (3,245)
Creditors 24 34 99 47 35 FCF 7,626 11,454 (40,543) (24,637) 36,313
Net working capital (38) 19 86 94 98 Issue of share capital - 4 1 - -
Solvency (x) Increase/(decrease) in debt (2,591) 2,406 16,867 23,846 -
Net debt-equity 0.2 0.3 50.9 (0.6) 0.2 Dividend (2,768) - - - -
Interest coverage ratio 8.0 2.7 0.3 1.0 3.7 Cash flow from financing (5,358) 2,410 16,868 23,846 -
Net debt/EBITDAR 0.4 0.3 5.9 1.4 (0.1) Net change in cash 422 (367) (1,678) 29,210 36,313
Per share (Rs) Source: Company, Centrum Broking
Adjusted EPS 4.1 NM NM NM 45.6
BVPS 180.7 152.4 1.8 NM NM
CEPS 23.8 96.8 (29.4) 2.9 181.1
DPS 0.0 0.0 0.0 0.0 0.0
Dividend payout (%) 0.0 NM NM NM 0.0
Valuation (x)
P/E 270.8 nm nm nm 42.9
P/BV 6.1 9.7 717.6 nm nm
EV/EBITDAR 14.7 12.9 1,024.2 53.6 11.7
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

16 September 2021
Ashish Shah
Research Analyst, Aviation
+91 22 4215 9021
SECTOR: AVIATION [email protected]
Vaibhav Shah
SpiceJet Research Associate, Aviation

+91 22 4215 9815
[email protected]
SpiceJet’s cash generation has been poor over the last decade (except for a brief Market data
recovery during FY16-18) due to the distress it went through during FY12-15. Cash Current price: Rs76
flows improved during FY16-18 post restructuring of the company and general Bloomberg: SJET IN
improvement in the industry (lower crude prices and better yields). CFO deteriorated 52-week H/L: Rs108/46
again since FY19, as the pricing could not keep up with the rising crude prices. NWC
has remained negative throughout, as SpiceJet was able to delay its payments to
vendors, lessors, etc, consistently. SpiceJet has generated total CFO of only Rs16.4bn Free float: 40.5%
and negative FCF of Rs14.5bn over FY12-21. RoE is immaterial for the company, as its Avg. daily vol. 3mth: 5,264,939
net worth has remained negative for the past 10 years. Source: Bloomberg
Cash generation largely poor: Cash flow from operations was negative during FY12-15 due to low yields, low load factors,
and high crude prices. CFO improved during FY16-18 post restructuring of the company and strong tailwinds of growth and
low/moderate crude prices. In this period, fuel costs declined, SpiceJet rationalized its fleet, and yields remained strong,
leading to strong cash flows. However, with falling yields and rising crude, CFO once again deteriorated over FY19/20. The
decline in CFO in FY21 was restricted by deferment of lease payments.
Exhibit 65: Operating cash flows* weakened again after a brief recovery
12,000 Low yields, over-capacity/low load factors and
High crude
high crude prices led to negative CFO in FY12-15
9,000 prices led to
contraction in
6,000
CFO in FY19-20
3,000
Rs mn
-
(6,000)
(9,000) Despite Covid impact, fall in
Improved volumes and rationalization of fleet
CFO was not material, led by
along with falling crude led to strong CFO
deferrals of lease payments
Operating profit before wcap changes (Rs mn) Wcap changes (Rs mn) CFO (Rs mn)
Source: Company, Centrum Broking *net of lease payments
Working capital has remained negative: SpiceJet’s WC cycle has been negative throughout the decade, in line with the
inherent characteristics of the industry (forward ticket sales, future maintenance provisions, deferred incentives, etc) and
also owing to delay in payments to vendors and lessors. During FY20 and FY21, the build-up in receivables is due to accruing
of claims worth Rs12.3bn from Boeing.
Exhibit 66: WC remained negative, aided by delayed payments; recent deterioration due to rise in Boeing receivables
180 Elongated payables and increase in Claims of Rs12.3bn
provision for aircraft maintenance Unwinding of payables, (cumulative) from Boeing
120 aided by improved CFO
60
Days
0
-60
-120 Deferral of
lease payments
Payables (days) Provisions (days) Receivables days NWC ex cash (days)
SpiceJet 16 September 2021
Exhibit 67: EBITDAR to CFO^ conversion at 16% in 10 years Exhibit 68: PAT to CFO^ conversion negative due to losses
75% 200%
50% 150%
100%
25%
50%
0%
FY12* FY13 FY14 FY15* FY16 FY17 FY18 FY19 FY20 FY21
0%
-25% FY12*FY13*FY14*FY15* FY16 FY17 FY18 FY19*FY20*FY21*
Source: Company, Centrum Broking; ^: net of lease payments; *: CFO or EBITDAR Source: Company, Centrum Broking; *: company has made losses in these years;
negligible in these years ^: net of lease payments
FCF generation largely weak, except for a brief period of FY16-18: Total operating cash flow of Rs16.4bn over FY12-21 could
not even suffice capex requirements of Rs27bn. Over and above, deposits of Rs5.8bn made with Delhi HC over FY18-20
further deteriorated FCF. Consequently, SpiceJet has reported negative FCF of Rs14.5bn over this period. SpiceJet could
generate strong FCF only for a brief period of FY16-18, when the aviation industry performed well. Otherwise, FCF generation
has been largely negative.
Exhibit 69: Negative FCF of Rs14.5bn over FY12-21 accentuated by steep cash burn in FY21
10,000
5,000
Rs mn
-
(5,000)
(10,000)
CFO Capex Investments in subs/Deposits with Delhi HC Net FCF
Exhibit 70: Negative FCF has been funded through capital raise and incremental debt proceeds over FY12-21
FCF (7,564) (9,096) (1,253) (5,386) 4,328 1,898 4,579 375 (367) (1,987) (14,473)
Inflow from capital raise 1,315 1,130 990 4,254 500 - - 3 4 9 8,204
Increase/ (decrease) in net debt 6,249 7,966 263 1,132 (4,828) (1,898) (4,579) (378) 364 1,978 6,269

SpiceJet 16 September 2021
P&L Balance sheet

Operating Expense 69,983 82,955 35,460 58,462 80,361 Reserves & surplus (9,504) (21,793) (31,725) (46,932) (42,530)
Employee cost 10,570 15,258 6,762 7,777 12,443 Shareholders fund (3,507) (15,793) (25,715) (40,923) (36,520)
EBITDAR 12,868 15,313 9,832 9,035 28,912 Total debt 11,098 10,967 7,072 7,072 7,072
Depreciation & Amortisation 2,562 17,339 15,580 13,454 13,617 Non Current Liabilities 0 89,532 84,462 78,139 56,744
EBIT (2,661) (12,375) (13,837) (13,359) 8,946 Def tax liab. (net) 0 0 0 0 0
PBT (2,526) (9,348) (9,983) (15,207) 4,402 Less: acc. Depreciation (8,852) (25,265) (39,513) (52,967) (66,584)
Taxes 0 0 0 0 0 Net block 16,038 86,810 70,060 54,639 41,286
PAT (2,526) (9,348) (9,983) (15,207) 4,402 Net fixed assets 16,038 86,810 70,060 54,639 41,286
Recurring PAT (2,526) (9,348) (9,983) (15,207) 4,402 Investments 4 5 26 26 26
Extraordinary items (635) 0 0 0 0 Inventories 1,373 1,776 1,558 1,768 1,767
Reported PAT (3,161) (9,348) (9,983) (15,207) 4,402 Sundry debtors 7,144 15,458 20,398 11,602 10,997
Cash & Cash Equivalents 779 402 320 331 757
Growth (%)
Trade payables 10,591 17,371 17,106 15,921 15,718
Revenue 16.9 35.6 (58.5) 50.5 65.6
Other current liab. 23,310 16,545 20,407 18,705 22,200
EBITDAR (28.1) 19.0 (35.8) (8.1) 220.0 Provisions 6,459 11,047 10,423 10,860 11,029
Adj. EPS nm 269.8 6.6 52.3 nm Net current assets (8,451) (2,109) (4,267) (10,376) (14,017)
Gross 23.2 32.9 30.9 24.3 37.2
EBITDAR 14.1 12.4 19.2 11.7 22.6 Cashflow
EBIT (2.9) (10.0) (27.0) (17.3) 7.0 YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Adjusted PAT (2.8) (7.6) (19.4) (19.7) 3.4 Operating profit bef working capital
36 164 3,618 (6,597) (3,375)
Returns (%) changes
ROE 128.3 96.9 48.1 45.6 (11.4) Trade and other receivables (6,293) (8,314) (4,940) 8,796 604
ROCE (13.1) (8.4) (5.3) (16.9) 28.1 Trade payables 3,558 6,780 (265) (1,186) (202)
ROIC (34.9) (27.2) (18.5) (24.4) 25.4 Net change - WC 1,713 5,345 2,077 6,120 4,066
Turnover (days) Direct Taxes - - - - -
Gross block turnover ratio (x) 3.7 1.1 0.5 0.7 1.2 Cash flow from operations 1,749 5,509 5,695 (477) 691
Debtors 16 33 127 76 32 Net Capex (2,623) (3,395) (1,921) 487 (265)
Inventory 7 7 17 10 8 Long term Investments 1,009 (1) (21) - -
Creditors 46 62 177 103 72 Others (554) (2,364) 52 - -
Net working capital (34) (6) (30) (49) (40) Cash flow from investing activities (2,168) (5,760) (1,889) 487 (265)
Solvency (x) FCF (419) (251) 3,806 11 426
Net debt-equity (2.9) (0.7) (0.3) (0.2) (0.2) Issue of share capital 3 4 9 - -
Interest coverage ratio 9.8 2.8 1.6 1.5 5.1 Increase/(decrease) in debt (263) (131) (3,896) - -
Net debt/EBITDAR 0.8 0.7 0.7 0.7 0.2 Dividend - - - - -
Per share (Rs) Cash flow from financing (260) (127) (3,887) - -
Adjusted EPS (4.2) (15.6) (16.6) (25.3) 7.3 Net change in cash (679) (377) (81) 11 426
BVPS (5.8) (26.3) (42.8) (68.1) (60.8) Source: Company, Centrum Broking
CEPS 0.1 13.3 9.3 (2.9) 30.0
DPS 0.0 0.0 0.0 0.0 0.0
Dividend payout (%) nm nm nm nm 0.0
Valuation (x)
P/E nm nm nm nm 10.4
P/BV nm nm nm nm nm
EV/EBITDAR 13.2 17.2 23.8 26.7 8.1
Dividend yield (%) 0.0 0.0 0.0 0.0 0.00

16 September 2021
Gaurav Jani
Research Analyst, BFSI
+91 22 4215 9110
SECTOR: BFSI [email protected]
Axis Bank
Axis Bank has done well on building up its retail franchise, with the share of RTD and Market data
retail loans growing over FY12-21. Though stress to average assets peaked in FY18, Current price: Rs803
credit costs remained elevated post FY18, driven by a miss on asset quality, which Bloomberg: AXSB IN
resulted in sub-optimal returns profile. NIM, which saw a declining trend mainly led 52-week H/L: Rs819/400
by interest reversals, improved over FY18-21. Fee income performance has been
Market cap: Rs2,461bn
weaker as the share of corporate declined while operating leverage played out well
as the bank increased its reach. ALM profile suggests a negative mismatch in the <1- Free float: 85.7%
year bucket, which exposes the bank to interest rate risk in a rising interest rate Avg. daily vol. 3mth: 7,275,114
scenario. Over FY19-21, this negative imbalance has reduced. Source: Bloomberg
Wholesale funding reduced in favour of RTD: CASA contribution to total deposits has been rather volatile for Axis; FY12-18
saw CASA ratio rising from 41.5% to 53.8% (stagnant over FY13-15 at 44.5%). FY18-21 saw the CASA ratio reverting to 44%
levels. Its strategy of concentrating on building a granular and sticky deposit franchise has worked well for Axis. The share of
RTD has consistently risen from 22% to 40% of total deposits, while the share of bulk deposits has reduced from 32% to 14%
over FY12-21. On loan mix, the share of retail has increased from 32% in FY12 to 54% in FY21. The other positive has been the
reduction of overseas loan contribution, which declined from 15% to 7% over FY12-21.
Exhibit 71: RTD share improved consistently Exhibit 72: Retail share improved; overseas share declined
Deposit mix Advances mix

100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
RTD Savings Current Wholesale Overseas Retail Corporate SME Overseas
Stress recognized over FY13-18; improvement slower post FY18 compared to ICICI: Total stress, defined as NNPA +
restructuring + net SR, rose over FY13-18 from 1.6% to 3.4%, led by stress in the infrastructure space. This was also reflected
in a rise in industry GNPA from 1.7% in FY15 to 15.2% in FY18. Overall stress declined drastically over FY18-21 from 3.4% to
1.3%. Compared to ICICI, Axis saw lower stress recognition over FY16-18; however, post FY18, ICICI saw a sharper improvement
in asset quality as also reflected in lower delinquencies in terms of slippage ratio for ICICI compared to Axis. Led by the
pandemic-related lockdown, overall stress rose slightly in FY21. FY21 saw personal loan GNPA rising from 0.7% to 1.5%.
Exhibit 73: Stress has reduced post FY18 Exhibit 74: FY21 saw a spike in personal loan GNPA
Balance sheet stress Segment-wise GNPA

4% 40% 16%
14%
3% 30% 12%
10%
2% 20% 8%
6%
1% 10% 4%
2%
0% 0% 0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Agri Industry Services Personal Overall
Stress to avg. assets Stress to equity (RHS) FY15 FY16 FY17 FY18 FY19 FY20 FY21
xxxxx
Axis Bank 16 September 2021
Exhibit 75: Weak NIM profile; opex has improved Exhibit 76: Elevated credit cost cycle depressed RoE
Du pont % (to avg. assets) Return ratios (%)

3.5 2.8 1.8 21
3.0 2.4 1.5 18
2.0 1.2 15
2.5
1.6 12
2.0 0.9
1.2 9
1.5 0.6 6
0.8
1.0 0.4 0.3 3
0.5 0.0 0.0 0
NIM Opex PPoP Fees (RHS) Provisions (RHS) RoA RoE (RHS)
NIM performance over FY12-21 has been weak; opex has done better: Despite a rise in retail share over FY12-21, NIM has
remained stagnant, which means market share gains may have happened by diluting pricing. Although NIM improved from
2.91% to 3.35% over FY12-16, it declined over FY17-20, also led by interest reversals and CASA decline. Fees to average assets
has been at 1.2-1.3% over FY16-21, down from ~1.6% over FY12-13, as corporate share shifted in favour of retail. Opex leverage
played out, with opex to assets declining over FY12-20 from 227bp to 200bp. Provisioning costs spiked from 43bp in FY12 to
239bp in FY18 and remained at elevated levels, which led to a RoE decline (peak 20% in FY12, bottom 0.5% in FY18).
Exhibit 77: Shift from borrowings to deposits Exhibit 78: Balance sheet liquidity increased recently
Liability mix Asset mix
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Deposits Borrowings Capital Other Liabilities Advances Investments Cash Other assets Fixed assets
Liability mix shifting from borrowings to deposits; increased liquidity recently: Over FY12-18, Axis relied more on borrowings,
which increased from 12% of total liabilities to 21%. Since it started focusing on RTD, the share of borrowings reduced from
21% in FY18 to 14% in FY21. In the last decade, the bank raised equity thrice, in FY13, FY18 and FY21, leading to an improvement
in CET-1 ratio. As at FY21, CET-1 ratio stood at 15.4%. On assets, liquidity declined over FY12-18, while the share of advances
rose from 59% to 64%. However, from FY19 to FY21, the bank again increased liquidity buffers, as asset quality issues were not
completely resolved till FY20.
Exhibit 79: ALM profile stabilized only recently Exhibit 80: Mismatch in the <1-year bucket has reduced
Asset (A) Liability (L) Maturity pattern ALM mismatch (%)
100% 0
80% -5
60%
-10
40%
20% -15
0% -20
A L A L A L A L A L A L A L A L A L A L
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -25
<1yr 1-3yr 3-5yr >5yr FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
ALM profile was unbalanced, with a negative gap; it improved only recently: Over FY12-19, the bank’s ALM profile was more
volatile with a negative drift. The <1-year bucket saw a largely negative gap ranging from -10% to -26%, indicating that liabilities
matured faster than assets. A more unbalanced ALM mix suggests NIM would also be sensitive to systemic interest rate
movements. Post FY19, the bank’s ALM profile became more balanced, led by a focus on retail term deposits. Share of >5-year
deposits rose from 36% in FY19 to 63% in FY21. A more balanced ALM profile would lead to more dependence on loan and
deposit mix rather than systemic interest rates.

Axis Bank 16 September 2021
P&L Balance sheet

Interest earned 549,858 626,352 636,453 686,118 799,050 Share capital 5,143 5,643 6,128 6,128 6,128
Interest expended 332,776 374,290 344,062 362,904 435,851 Reserves & surplus 661,620 843,835 1,009,903 1,106,722 1,231,990
Net Interest Income 217,082 252,062 292,391 323,214 363,199 Deposits 5,484,714 6,401,050 7,073,061 7,921,828 8,872,447
Other income 131,303 155,369 148,382 178,077 197,800 Borrowings 1,527,758 1,479,541 1,428,732 1,508,920 1,689,990
Total Income 348,385 407,431 440,773 501,291 560,999 Other Liabilities 330,731 421,579 443,362 445,444 481,004
Operating Expenses 158,334 173,046 183,752 215,555 237,864 Total liabilities 8,009,966 9,151,649 9,961,184 10,989,041 12,281,559
Employees 47,473 51,508 61,640 70,886 81,519 Cash balances with RBI 350,987 849,593 518,086 471,537 528,122
Others 110,861 121,538 122,111 140,428 161,492 Balances with banks 321,059 123,090 99,213 100,998 102,816
Operating profit 190,051 234,385 257,022 285,736 323,135 Investments 1,749,693 1,567,343 2,261,193 2,376,549 2,661,734
Provisions 120,310 185,339 168,963 141,485 135,913 Advances 4,947,980 5,714,242 6,237,202 6,985,666 7,900,789
Profit before tax 69,741 49,046 88,058 144,251 187,222 Fixed Assets 40,366 43,129 42,450 43,299 44,165
Taxes 22,975 32,772 22,173 36,351 47,180 Other Assets 599,880 854,252 803,041 1,010,992 1,043,933
Net Profit 46,766 16,274 65,885 107,900 140,042 Total assets 8,009,965 9,151,649 9,961,184 10,989,041 12,281,559
Ratios Ratios
YE Mar FY19A FY20A FY21A FY22E FY23E YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Growth (%) Balance Sheet (%)
Loans 12.5 15.5 9.2 12.0 13.1 Loans / Deposits 90.2 89.3 88.2 88.2 89.0
Deposits 20.9 16.7 10.5 12.0 12.0 Investments / Deposits 31.9 24.5 32.0 30.0 30.0
RWA growth 6.6 11.1 4.0 12.0 15.2 CASA 44.4 41.2 44.9 44.0 43.0
NII 16.6 16.1 16.0 10.5 12.4 Assets/equity (x) 12.0 10.8 9.8 9.9 9.9
Other income 19.7 18.3 (4.5) 20.0 11.1 RWA / Total assets 68.9 67.0 64.0 65.0 67.0
Opex 13.2 9.3 6.2 17.3 10.3 Capital ratios (%)
PPoP 21.9 23.3 9.7 11.2 13.1 CET-1 11.3 13.3 15.4 15.1 14.7
Provisions (22.2) 54.1 (8.8) (16.3) (3.9) Tier-1 12.5 14.5 16.5 16.1 15.5
Net profit 1,596.4 (65.2) 304.9 63.8 29.8 Tier-2 3.3 3.0 2.6 2.8 3.0
Profitability (%) CRAR 15.8 17.5 19.1 18.9 18.5
Yield on assets 8.4 8.7 8.0 7.6 7.9 Asset quality ratios (%)
Cost of funds 5.1 5.0 4.2 4.0 4.4 GNPA (Rs mn) 297,896 302,346 253,148 258,280 284,227
NIM 3.3 3.5 3.7 3.6 3.6 NNPA (Rs mn) 114,389 93,602 69,935 77,484 90,953
Other income / Total inc. 37.7 38.1 33.7 35.5 35.3 GNPA 5.8 5.1 3.9 3.6 3.5
Other inc. / avg assets 1.8 1.8 1.6 1.7 1.7 NNPA 2.3 1.6 1.1 1.1 1.2
Cost/Income 45.4 42.5 41.7 43.0 42.4 PCR 61.6 69.0 72.4 70.0 68.0
Employee 13.6 12.6 14.0 14.1 14.5 Slippage 3.0 3.7 2.9 2.8 2.5
Other 31.8 29.8 27.7 28.0 28.8 NNPA / Equity 17.2 11.0 6.9 7.0 7.3
Opex/ Avg assets 2.1 2.0 1.9 2.1 2.0 Per share
Provisioning cost 2.6 3.5 2.8 2.1 1.8 EPS 18.2 5.8 21.5 35.2 45.7
Tax rate 32.9 66.8 25.2 25.2 25.2 BVPS 259.3 301.1 331.6 363.2 404.1
RoE 7.2 2.1 7.1 10.1 11.9 ABVPS 214.8 267.9 308.8 337.9 374.4
RoA 0.6 0.2 0.7 1.0 1.2 Valuation (x)
RoRWA 0.9 0.3 1.1 1.6 1.8 P/E 33.2 123.6 24.6 22.8 17.6
Du-pont (%) P/BV 2.3 2.4 1.6 2.2 2.0
Interest income 7.4 7.3 6.7 6.5 6.9 P/ABV 2.8 2.7 1.7 2.4 2.1
Interest expenses 4.5 4.4 3.6 3.5 3.7 Source: Company, Centrum Broking
NII 2.9 2.9 3.1 3.1 3.1
Other income 1.8 1.8 1.6 1.7 1.7
Total income 4.7 4.7 4.6 4.8 4.8
Operating expenses 2.1 2.0 1.9 2.1 2.0
Employee 0.6 0.6 0.6 0.7 0.7
Other 1.5 1.4 1.3 1.4 1.4
PPOP 2.5 2.7 2.7 2.7 2.8
Provisions 1.6 2.2 1.8 1.4 1.2
PBT 0.9 0.6 0.9 1.4 1.6
Tax 0.3 0.4 0.2 0.3 0.4
RoA 0.6 0.2 0.7 1.0 1.2

16 September 2021
Gaurav Jani
+91 22 4215 9110
[email protected]
SECTOR: BFSI
Can Fin Homes (Canfin)

Canfin has seen improved performance on the back of controlled asset quality, better Market data
operating leverage and NIM enhancement over FY15-21, supported by lower funding Current price: Rs624
cost driven by sovereign holding, affordable home focus, favourable interest rate Bloomberg: CANF IN
regime, and conducive ALM profile. Share of individual housing has consistently 52-week H/L: Rs653/390
stayed near 90% over FY15-21 and developer exposure has been negligible, leading
to superior credit quality. Share of self-employed rose over FY15-21, leading to
increase in GNPA over FY18-21 from 0.2% to 0.9%. NIM/CASA could have done better. Free float: 68.6%
Single product concentration exposes Canfin to interest rate risk since ALM profile Avg. daily vol. 3mth: 1,216,788
suggests a negative mismatch in the <1-year bucket. Source: Bloomberg
Bank funding mix in FY21 similar to FY12 levels; home loans dominate credit: Borrowing mix broadly saw two cycles. Over
FY12-17, the share of banks decreased from 68% to 19%, which was replaced by NCD/NHB/CP. As systemic rates eased post
FY17, funding mix shifted back towards banks and NHB in FY21. Share of banks increased back to 51% in FY17. Affordable
housing focus, asset quality control and sovereign holding allowed access to relatively lower cost bank and NHB funding. Hence,
Canfin has the lowest funding cost among peers. On the loan mix side, share of individual housing has consistently improved
over FY15-21 from 86% to 90%. From the customer segmentation perspective, the share of salaried declined over FY15-21
from 84% to 73.3% while the share of self-employed increased.
Exhibit 81: Lower rates led to increase in bank funding Exhibit 82: Housing share consistently rose from 85% to 90%
Borrowings mix Advances mix
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0%
FY15 FY16 FY17 FY18 FY19 FY20 FY21
Bank NCD NHB CP Deposits Home LAP Builder Others
Overall GNPA controlled; rise in GNPA led by increase in self-employed share: Over the last 10 years, Canfin’s asset quality
has been broadly controlled. Its GNPA has been best-in-class and has not crossed 1%. However, owing to a rise in self-employed
share, overall GNPA rose from 0.4% in FY13 to 0.9% in FY21. Against 0.5% in the salaried customer segment, GNPA in the self-
employed segment is 1.6%. The rise in overall, housing and non-housing GNPA can be attributed to the rise in the share of self-
employed customers. The overall proportion of stage-2 assets increased over FY18-20 from 4.4% to 6% and improved a bit to
5.4% in FY21. Stage 1&2 provisioning, indicating a buffer, remained largely stable over FY18-21.
Exhibit 83: Non-housing NPA a concern Exhibit 84: Stage 1+2 provisioning adequate for likely stress
Segment-wise GNPA Stage-2 + provision cover
1.5% 6% 55
1.2% 5% 51
0.9% 4% 47
0.6% 3% 43
0.3% 2% 39
0.0% 1% 35
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY18 FY19 FY20 FY21
Housing Non Housing Overall Stage 2 Assets Stage 1+ Stage 2 (Bps)
xxxxx
Can Fin Homes (Canfin) 16 September 2021
Exhibit 85: Rise in stress with increase in self-employed Exhibit 86: Leverage reduced sharply over FY16-21
Debt/Equity (x)
Balance sheet stress 12.0
1.0% 10%
10.0
0.8% 8%
8.0
0.6% 6%
6.0
0.4% 4%
4.0
0.2% 2%
2.0
0.0% 0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0.0
Stress to AuM Stress to Equity
Stress rose over the last four years, though still controlled compared to peers: With a rise in the share of self-employed,
overall balance sheet stress increased over FY17-21 from 0% to 0.5%. The spike in FY21 was mainly led by increase in the
restructured pool (0.35% of loans), which could further increase in the coming quarters. Debt to equity consistently declined
for Canfin over FY16-21 from 11x to 7.4x, which also supported the decline in funding cost over the same period. Increase in
equity outpaced debt growth, led by reduction in payout ratio and declining loan growth.
Exhibit 87: Control over credit costs has been the mainstay Exhibit 88: Rising NIM, lower opex /credit costs drove RoE
4.0 1.2 2.1 23
3.5 1.1
3.0 0.9 1.7 19
2.5 0.8 1.3 15
2.0 0.6
1.5 0.5 0.9 11
1.0 0.3
0.5 7
0.5 0.2
0.0 0.0 0.1 3
NIM PPoP Opex Provisions (RHS) RoA RoE (RHS)
Controlled provisions and operating leverage led to a strong RoE profile: Over a 10-year cycle, NIMs have remained a tad
volatile. FY12-15 saw margins contracting since the focus was on growth and gaining market share. Over FY16-18, NIMs
improved, as focus shifted to pricing over growth. Margins dipped in FY19, but improved over FY19-21 owing to a favourable
interest rate cycle coupled with a favourable ALM. Return ratios dipped over FY12-15 in tandem with margins. From FY15 to
FY21, RoA improved from 1.2% to 2.1%, mainly led by improving opex and controlled credit costs. Opex to assets has declined
from 77bp to 57bp while provisions have remained under 30bp.
Exhibit 89: Share of short-term liabilities has increased Exhibit 90: Negative ALM mismatch has increased
Asset (A) Liability (L) Maturity Pattern ALM mismatch (%)
0
100%
-5
80%
-10
60%
-15
40% -20
20% -25
0% -30
-35
<1yr 1-3yr 3-5yr >5yr
Negative mismatch in the portfolio has increased: After FY15, negative mismatch increased in the <1-year bucket since share
of less than 1-year liabilities increased at the expense of 1-3 year and 3-5 year buckets. ~80% of assets had a maturity of 3 years
and above, since housing loans are generally longer term. Hence, the ALM profile for an HFC is generally negative in the less
than 1-year bucket. This also exposes them to interest rate risk in case of a rising rate environment, as liabilities would mature
faster than assets. Currently, as systemic rates are at historic lows, HFCs are exposed to interest rate risk, which coupled with
competition from banks may pressurize NIMs.

Can Fin Homes (Canfin) 16 September 2021
P&L Balance sheet

Interest income 17,134 20,189 20,064 18,138 21,910 Financial assets 186,735 209,457 219,670 248,185 287,960
Interest expense 11,693 13,442 12,083 10,317 13,097 Cash 4,015 3,723 8 1,261 1,463
NII 5,441 6,747 7,980 7,821 8,812 Bank balance 187 201 208 303 351
Other income 179 115 121 141 161 Loans 182,342 205,257 218,915 246,321 285,797
Total income 5,621 6,862 8,101 7,962 8,974 Investment 163 243 496 252 293
Operating expenses 915 1,075 1,240 1,339 1,470 Other financial assets 28 33 44 48 56
Employee 414 565 700 772 851 Non-financial assets 560 979 1,067 908 1,053
Others 501 511 540 567 620 Current tax assets 206 240 183 156 181
PPOP 4,706 5,787 6,861 6,623 7,504 Deferred tax assets 240 339 455 319 417
Provisions 11 603 685 525 480 Fixed Assets 99 379 378 390 405
PBT 4,695 5,184 6,176 6,098 7,024 Other Non-fin. assets 15 20 51 44 51
Tax 1,728 1,422 1,615 1,616 1,861 Total Assets 187,295 210,436 220,737 249,093 289,013
PAT 2,967 3,762 4,561 4,482 5,163 Financial liabilities 169,059 188,114 193,480 218,038 253,054
Debt securities 56,347 38,096 48,913 43,298 50,253
Ratios Borrowings 111,425 148,360 142,987 173,193 201,013
Subordinated Debt 1,029 1,029 1,029 854 991
Growth (%) Other financial liabilities 258 630 551 693 797
AUM 16.8 12.7 6.7 14.1 16.0 Non-financial liabilities 414 821 1,159 1,082 1,206
Borrowings 21.3 11.1 2.9 12.2 16.1 Provisions 266 662 1,023 955 1,064
NII 6.8 24.0 18.3 (2.0) 12.7
Other Non-fin liabilities 148 159 137 128 142
Other income (42.9) (35.6) 4.5 16.8 14.5
Total equity 17,822 21,501 26,098 29,973 34,753
Opex 4.2 17.6 15.3 8.0 9.8
Share capital 266 266 266 266 266
PPoP 3.8 23.0 18.6 (3.5) 13.3 Other equity 17,556 21,235 25,832 29,706 34,487
Provisions (95.1) 5,422.4 13.6 (23.4) (8.5) Total Liabilities 187,295 210,436 220,737 249,093 289,013
PAT 3.7 26.8 21.2 (1.7) 15.2 Balance Sheet ratios (%)
Profitability (%) Debt / Equity 9.5 8.7 7.4 7.3 7.3
Yield on advances 10.0 10.3 9.3 7.6 8.0 Assets / Equity 10.5 9.8 8.5 8.3 8.3
Cost of funds 7.6 7.5 6.4 5.0 5.6
Cash / Borrowings 2.5 2.1 0.1 0.7 0.7
NIM (on AuM) 3.2 3.4 3.7 3.3 3.2
Capital Adequacy (%)
Other Income/ Total Income 3.2 1.7 1.5 1.8 1.8
CRAR 19.2 22.3 25.6 25.8 25.6
Other Income / Total Assets 0.1 0.1 0.1 0.1 0.1 Tier-1 17.4 20.5 23.8 23.9 23.7
Cost/Income 16.3 15.7 15.3 16.8 16.4 Tier-2 1.8 1.8 1.8 1.9 1.8
Employee 7.4 8.2 8.6 9.7 9.5 Asset quality (%)
Others 8.9 7.4 6.7 7.1 6.9 GNPA (Rs mn) 1,135 1,571 2,021 2,453 2,788
Opex/ Avg AuM 0.5 0.5 0.6 0.6 0.5 NNPA (Rs mn) 795 1,118 1,338 1,618 1,859
Provisions 0.0 0.3 0.3 0.2 0.2
GNPA 0.6 0.8 0.9 1.0 1.0
Tax Rate 36.8 27.4 26.2 26.5 26.5
NNPA 0.4 0.5 0.6 0.6 0.6
RoA 1.6 1.8 2.1 1.8 1.8
PCR 30.0 28.8 33.8 34.0 33.3
RoE 18.2 19.1 19.2 16.0 16.0 NNPA / Equity 4.5 5.2 5.1 5.4 5.3
Per share (Rs)
DuPont (% avg assets)
EPS 22.3 28.3 34.2 33.7 38.8
BVPS 133.8 161.5 196.0 225.1 261.0
Interest income 9.9 10.1 9.3 7.6 8.0
ABVPS 127.9 153.1 185.9 212.9 247.0
Interest expense 6.8 6.7 5.6 4.3 4.8 Valuation (x)
NII 3.2 3.4 3.7 3.3 3.2 P/E 11.1 11.4 12.2 18.5 16.1
Other income 0.1 0.1 0.1 0.1 0.1 P/BV 1.9 2.0 2.1 2.8 2.4
Total income 3.3 3.4 3.7 3.4 3.3 P/ABV 2.1 2.1 2.0 2.9 2.5
Operating expenses 0.5 0.5 0.6 0.6 0.5 Source: Company, Centrum Broking
Employee 0.2 0.3 0.3 0.3 0.3
Others 0.3 0.3 0.2 0.2 0.2
PPOP 2.7 2.9 3.2 2.8 2.7
Provisions 0.0 0.3 0.3 0.2 0.2
PBT 2.7 2.6 2.9 2.6 2.6
Tax 1.0 0.7 0.7 0.7 0.7
PAT 1.7 1.9 2.1 1.9 1.9

16 September 2021
Gaurav Jani
+91 22 4215 9110
CARE Ratings (CARE)

CARE was a significant player in the ratings space, with 10% revenue CAGR over FY12- Market data
18. Over the same time frame, its cash flows improved, led by better EBITDA. Current price: Rs737
However, revenue declined sharply over FY18-20, leading to a fall in market share due Bloomberg: CARE IN
to the SEBI enquiry in FY20. In line with the ratings business model, working capital 52-week H/L: Rs791/296
was largely negative, while capex requirement was immaterial. During the last
decade, total OCF/FCF generated was Rs10.2bn/Rs9.5bn, which was mainly a function
of low debt and capex requirements. However, compared to CRISIL, it was less Free float: 97.7%
efficient in converting profits to cash. CARE’s return ratios were comparable to CRISIL Avg. daily vol. 3mth: 465,019
over FY14-18, but were marred thereafter due to the NBFC crises. Source: Bloomberg
Cash generation good, but impacted by NBFC crises: Cash flows from operations saw a consistent rise over FY12-18, but declined
over FY18-21, mainly led by a sharp decline in revenue. The decline in FY20 was due to the turmoil caused by the SEBI enquiry
on its officers and penalty, which was exacerbated by weak debt and credit market conditions. This led to a decline in business
volumes, mainly led by a reduction in the volume of new bank loans and lower debt issuances.
Exhibit 91: Operating cash flows of Rs10bn over the last 10 years
2,250 1,600
1,750 1,200
1,250 800
750 400
250 0
(250) (400)
Operating profit before Wcap changes (Rs mn) Wcap changes (Rs mn) CFO (Rs mn)
Working capital reverts to negative: Despite no creditors, net working capital was largely negative in the early part of the decade
due to high provisions for salaries, unearned revenue, and advance from customers. The ratings business is generally
characterized by negative working capital because of the upfront payment for services rendered. There was a steady decline
in negative working capital levels in line with increasing receivables over FY14-19, which dropped sharply after FY18 due to
revenue decline for CARE led by the NBFC crises.
Exhibit 92: Working capital levels negative, in line with the nature of ratings business
60 60
40 40
20 20
0 0
(20) (20)
(40) (40)
(60) (60)
Trade receivables (days) Trade payables (days) NWC (ex cash)

CARE Ratings (CARE) 16 September 2021
Exhibit 93: EBITDA to OCF conversion of 59% over 10 years Exhibit 94: PAT to OCF conversion of 84% over 10 years
70% 100%
90%
60%
80%
50% 70%
40% 60%
50%
30%
40%
20% 30%
10% 20%
10%
0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0%
Cash conversion ratios volatile: Though operating profits increased gradually over FY12-18, both EBITDA to OCF and PAT to OCF
conversion ratios were volatile due to the positive and negative working capital changes. The ratios improved in FY21 because
of a fall in EBITDA driven by lower revenue, and simultaneous positive working capital change.
FCF generation weakened recently: CARE generated operating cash flow of Rs10bn over FY12-21, mainly driven by improving
EBITDA. The OCF was sufficient to oversee any capital investments without affecting the free cash flow generation. However,
the free cash flow dipped in tandem with OCF over FY18-20, led by the significant impact on revenues as a fallout of the SEBI
enquiry due to the ILFS debacle.
Exhibit 95: Good OCF and low capex needs have led to healthy FCF generation
1,500 1,600
1,000 1,100
500 600
0 100
(500) (400)
CFO (Rs mn) Capex FCF (Rs mn)
Exhibit 96: Revenue from publications and info services rising fast
Revenue Mix (Rsmn) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Rating income 1,768 1,973 2,269 2,549 2,622 2,779 3,183 2,948 2,260 2,282
Sale of Publications/Info services 12 15 26 23 27 26 34 26 188 215
Fee for Technical know-how services 2 - - - - - - - - -
Exhibit 97: Rated volume per instrument growing

Volume/Instrument (Rsmn) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Long term debentures/bonds 6,384 8,792 10,311 11,987 13,015 16,446 17,918 24,053 21,828 -
Bank Facilities 1,391 794 911 1,276 903 1,018 789 1051 1028 -
Source: Company, Centrum broking
Exhibit 98: Return ratios consistent, but affected by Covid

ROE 29% 28% 28% 33% 31% 33% 29% 23% 15% 15%
ROCE 32% 28% 28% 33% 31% 33% 29% 23% 15% 15%
ROIC 24% 19% 20% 23% 25% 25% 25% 19% 10% 14%

CARE Ratings (CARE) 16 September 2021
P&L Balance sheet

Operating Expense 189 226 139 146 156 Reserves & surplus 5,202 5,021 5,538 6,076 6,712
Employee cost 935 967 1,032 1,084 1,160 Shareholders fund 5,497 5,316 5,833 6,371 7,007
Others 136 233 143 150 161 Minority Interest 0 0 0 0 0
EBITDA 1,713 766 883 1,037 1,327 Total debt 0 0 0 0 0
Depreciation & Amortisation 31 69 71 74 78 Non Current Liabilities 0 65 40 40 40
EBIT 1,682 696 812 962 1,249 Def tax liab. (net) 0 0 0 0 0
Other income 298 313 321 353 396 Gross block 732 728 697 731 768
PBT 1,980 1,002 1,127 1,310 1,639 Less: acc. Depreciation 0 0 0 0 0
Taxes 631 197 269 330 413 Net block 732 728 697 731 768
PAT 1,350 805 858 980 1,226 Net fixed assets 748 830 801 836 872
Recurring PAT 1,350 805 858 980 1,226 Investments 4,582 3,594 2,649 2,811 2,553
Extraordinary items 0 0 0 0 0 Inventories 0 0 0 0 0
Reported PAT 1,350 805 858 980 1,226 Sundry debtors 435 360 167 167 167
Other current assets 32 171 216 216 216
Growth (%)
Trade payables 0 0 0 0 0
Revenue (7.5) (26.3) 0.3 10.0 16.0
Other current liab. 372 469 399 384 402
EBITDA (18.2) (55.3) 15.3 17.4 28.0 Provisions 101 120 135 140 140
Adj. EPS (16.2) (40.4) 6.6 14.2 25.1 Net current assets 233 1,015 2,528 2,869 3,727
Gross 93.6 89.7 93.7 94.0 94.4
EBITDA 57.6 34.9 40.2 42.9 47.3 Cashflow
Returns (%) Depreciation & Amortisation 31 69 71 74 78
ROE 23.5 14.9 15.4 16.1 18.3 Net Interest 0 0 0 0 0
ROCE 23.5 15.0 15.5 16.1 18.4 Net Change – WC (99) 46 117 (10) 18
ROIC 210.2 78.8 96.9 122.5 150.7 Direct taxes (631) 334 (269) (330) (413)
Turnover (days) Net cash from operations (143) 650 880 1,044 1,322
Gross block turnover ratio (x) 4.1 3.0 3.2 3.3 3.6 Capital expenditure (255) (36) (42) (109) (115)
Inventory 0 0 0 0 0 Investments 789 1,246 945 (162) 258
Net working capital 29 169 420 433 485 Net cash from investing 534 1,210 903 (271) 143
Solvency (x) FCF 391 1,860 1,783 772 1,465
Net debt-equity 0.0 (0.2) (0.4) (0.5) (0.5) Issue of share capital 0 0 0 0 0
Interest coverage ratio 0.0 103.6 155.7 182.9 234.1 Increase/(decrease) in debt 0 0 0 0 0
Net debt/EBITDA (0.1) (1.3) (3.0) (2.8) (2.9) Dividend paid (426) (1,060) (177) (442) (589)
Per share (Rs) Interest paid 0 0 0 0 0
BVPS 186.6 180.4 198.0 216.2 237.8 Net cash from financing (426) (1,060) (177) (442) (589)
CEPS 9.4 1.9 42.5 49.5 36.7 Net change in Cash (35) 685 1,607 330 876
Dividend payout (%) 65.5 71.4 20.6 45.1 48.1
Valuation (x)
P/E 41.5 22.7 12.8 21.9 17.5
P/BV 6.3 3.3 2.0 3.4 3.1
EV/EBITDA 19.4 24.1 11.3 17.8 13.3
Dividend yield (%) 2.6 2.9 1.4 2.1 2.8

16 September 2021
Gaurav Jani
+91 22 4215 9110
CRISIL
CRISIL is currently the market leader in the ratings business in India. Operating profits Market data
and OCF have seen a steady rise in the last decade, with the latter growing faster since Current price: Rs2,790
CY17. Due to the fee-based nature of business, OCF generation is high, also Bloomberg: CRISIL IN
contributed by negative working capital driven by unearned revenues. The company 52-week H/L: Rs3,330/1,680
has generated cumulative OCF of Rs30.4bn in the last decade, and given its low capex,
it has been able to generate FCF totalling to Rs27.8bn. Another strong suit has been
its healthy conversion of PAT to OCF, averaging at more than 100%, led by higher Free float: 17.1%
EBITDA to OCF conversion. The company has shown strong return ratios, suggesting Avg. daily vol. 3mth: 125,334
a clear competitive advantage. Source: Bloomberg
Cash generation consistent and growing: Cash flow from operations has steadily gone up since FY12 due to increasing revenues,
mainly driven by the growth in the European and North American markets. Given human capital as the major expense, CRISIL
has steadily improved revenue generated per employee. Further, its working capital changes have been positive for CY19 and
CY20, leading to increased OCF. The company has generated total OCF of over Rs30bn in the last decade, mainly driven by
higher-margin Ratings and Research Services segments.
6,000 6,000
5,000 5,000
4,000 4,000
3,000 3,000
2,000 2,000
1,000 1,000
0 0
(1,000) (1,000)
CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Operating profit before Wcap changes (Rs mn) Wcap changes (Rs mn) CFO (Rs mn)
Working capital remains negative: Working capital has been negative, led by current liabilities (mainly unearned revenue and
employee-related payables) exceeding trade receivables. CRISIL has been able to largely maintain consistent receivable and
payable days. Quantum of negative working capital declined over CY11-16 due to substantial increase in receivables from
related parties. However, CY17-20 saw a reversal to the previous trend, led by higher payables and unearned revenue.
Exhibit 100: Working capital levels negative in line with the nature of Ratings business
100 20
0
50
(20)
0 (40)
(60)
(50)
(80)
(100) (100)
Trade receivables (days) Trade payables (days) NWC (ex cash)

CRISIL 16 September 2021
Exhibit 101: EBITDA to OCF conversion of 67% over 10 years Exhibit 102: PAT to OCF conversion of 104% over 10 years
90% 140%
80% 120%
70%
100%
60%
50% 80%
40% 60%
30%
40%
20%
10% 20%
0% 0%
CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Cash conversion ratios have improved in the last two years: EBITDA to OCF conversion dropped sharply in CY12 due to a large
increase in EBITDA, led by strong increase in operating income and negative working capital changes. The conversion increased
in CY19 and CY20 due to positive working capital changes. Similar trend was also observed in the PAT to OCF conversion ratio,
as higher operating income led to a higher PAT in CY12, leading to a sharp decline in the ratio, which increased again in CY19
due to positive working capital changes.
FCF generation has been strong: Despite the Covid impact, the company generated strong cash flows. FCF being a function of
OCF was in line with the OCF growth. With minimal capex, given the nature of the business, the company generated FCF of
nearly Rs28bn over the decade.
Exhibit 103: Consistent OCF, low capex needs have led to strong FCF generation
5,000 5,000
4,000 4,000
3,000 3,000
2,000 2,000
1,000 1,000
0 0
(1,000) (1,000)
CFO (Rs mn) Capex FCF (Rs mn)

Exhibit 104: Revenue mix highlights focus on Ratings and Research and the US as the biggest market
Revenue mix (Rsmn) CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Ratings services 3,260 3,964 4,103 4,450 4,341 4,676 4,803 5,073 5,448 5,650
Research services 4,237 5,260 6,446 7,449 8,797 10,038 10,804 11,060 10,444 12,827
Advisory services 573 553 557 635 661 761 978 1,352 1,425 1,341
Revenue by Geography (Rsmn)
India 3,314 3,626 3,903 4,321 4,398 4,624 5,276 5,147 5,749 5,596
Europe 1,842 2,968 3,372 3,853 4,089 4,637 4,184 4,514 4,473 4,551
North America 2,132 2,617 3,149 3,557 4,495 5,085 5,784 6,202 5,446 8,176
ROW 781 566 682 803 817 1,129 1,340 1,622 1,650 1,495
Exhibit 105: Return ratios

Return Ratios (%) CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
ROE 49% 47% 49% 35% 32% 32% 31% 34% 30% 29%
ROCE 58% 46% 38% 34% 31% 32% 31% 33% 29% 27%
ROIC 45% 89% 55% 46% 38% 39% 37% 42% 41% 36%

CRISIL 16 September 2021
P&L Balance sheet

YE Dec (Rs mn) CY18A CY19A CY20A CY21E CY22E YE Dec (Rs mn) CY18A CY19A CY20A CY21E CY22E
Depreciation & Amortisation 361 361 1,211 1,235 1,260 Non Current Liabilities 77 78 1,846 1,846 1,846
Other income 734 728 945 992 1,042 Gross block 1,883 2,132 3,402 4,514 5,688
Taxes 1,365 1,476 1,036 1,234 1,427 Net block 410 351 410 287 201
YE Dec CY18A CY19A CY20A CY21E CY22E
Growth (%)
Trade payables 648 755 1,053 1,210 1,392
Revenue 5.4 (1.0) 14.4 8.2 9.3
EBITDA 3.5 (3.3) 9.5 6.4 14.3 Provisions 771 813 1,053 1,099 1,149
Gross 89.3 88.8 89.8 89.8 90.1
EBITDA 27.0 26.3 25.2 24.8 25.9 Cashflow
EBIT 24.9 24.2 19.1 19.0 20.5 YE Dec (Rs mn) CY18A CY19A CY20A CY21E CY22E
Returns (%) Depreciation & Amortisation 361 361 1,211 1,235 1,260
ROE 33.9 29.9 28.6 27.2 29.1 Net Interest 0 0 0 0 0
ROCE 34.0 29.8 29.4 28.0 29.8 Net Change – WC (234) 827 2,342 (199) (248)
Gross block turnover ratio (x) 9.3 8.1 5.8 4.7 4.1 Capital expenditure (318) (403) (5,365) (1,385) (1,502)
Inventory 0 0 0 0 0 Investments (413) 236 (230) (611) (734)
Net working capital 54 70 35 34 38 Net cash from investing (731) (167) (5,595) (1,997) (2,235)
Solvency (x) FCF 2,773 4,163 2,085 2,731 3,058
Interest coverage ratio 211.3 1,981.9 34.7 37.4 42.7 Increase/(decrease) in debt 0 0 0 0 0
CEPS 44.7 38.9 66.3 68.4 71.4 Net change in Cash 753 1,385 (669) (66) 218
Dividend payout (%) 58.5 67.1 64.5 62.9 55.1
Valuation (x)
P/E 37.0 30.1 33.2 55.4 47.8
P/BV 10.9 8.1 8.7 14.6 13.2
EV/EBITDA 26.6 22.5 24.0 38.0 33.2
Dividend yield (%) 1.7 2.2 1.9 1.1 1.2

16 September 2021
Gaurav Jani
+91 22 4215 9110
City Union Bank (CUBK)

Over the last 10 years, CUBK has generated consistent and healthy returns – RoA of Market data
1.4%+ and RoE of 15%+, barring the Covid-impacted FY20/FY21. Material Current price: Rs158
improvement in CASA share and ability to attractively price products in the face of Bloomberg: CUBK IN
competition owing to its sole banking relationships enabled NIM enhancement from 52-week H/L: Rs200/132
3.1% to 3.8% over FY14-19. Even though credit costs have risen, granularity of the
portfolio due to SME/retail focus has led to better risk-adjusted returns. Recoveries
from delinquencies would be the key monitorable, since balance sheet stress saw a Free float: 90%
sharp spike in FY21. Positive ALM gap in the <1-year bucket bodes well, as the Avg. daily vol. 3mth: 2,097,543
likelihood of a rising interest scenario is higher. Source: Bloomberg
CASA share improving; retail loans gaining share: CASA share has consistently improved from 18% in FY14 to 29% in FY21,
which has been possible due to CUBK’s sole banking relationships. Along with a falling interest rate scenario, growth in CASA
also helped to bring down cost of deposits from 8.2% to 5.2%. On advances mix, CUBK maintained over 55% share in the higher
yielding SME loans for the period under discussion, which has also contributed to the higher NIM profile. Retail share was
constant in the 13-14% range over FY15-20, but rose sharply to 19% in FY21, led by strong growth in gold loans. Share of
corporate loans has declined over FY12-21, with the book becoming more granular.
Exhibit 106: CASA growing gradually, mainly led by savings Exhibit 107: Retail gaining share; SME remains 55%+
100% 100%
80% 80%
60% 60%
40% 40%
57% 58% 58% 59% 58% 55% 58%
20% 47% 44% 51%
20%
0% 0%
Term Savings Current SME Retail Agri Corporate
Stress within controllable levels till FY19; FY21 was challenging: CUBK managed to keep stress under check over FY13-19
(stress to average assets below 3%). The pandemic-hit FY20 and FY21 were tough for SME businesses. During the first lockdown,
as the SME segment was the hardest hit, stress to average assets spiked in FY21 to 7.1%, mainly led by MSME restructuring.
Industry segment saw high GNPA levels at 7.7%/6.7% in FY20/FY21, which remains a concern. Personal segment is doing well
– after a spike in FY17 to 8.8%, GNPA declined to 1.7% in FY21. Services also saw spike in GNPA numbers from 2.2% in FY19 to
6.3% in FY21. Overall GNPA has risen to 5.1% in FY21 from a stable ~3% over FY17-19, while stress to equity is ~62% in FY21,
which is worrisome. Recoveries would be the key monitorable.
Exhibit 108: Stress spiked in FY21 on account of restructuring Exhibit 109: Industry segment concerning; personal improved
7.1% 63% 9.0%
6.1% 54% 8.0%
7.0%
5.1% 45% 6.0%
4.1% 36% 5.0%
3.1% 27% 4.0%
3.0%
2.1% 18%
2.0%
1.1% 9% 1.0%
0.1% 0% 0.0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Agri Industry Services Personal Others Overall
xxxxx
City Union Bank (CUBK) 16 September 2021
Exhibit 110: Better risk-adjusted returns over FY15-19 Exhibit 111: Consistent RoA/RoE over FY15-19 led to re-rating
4.0 1.8 1.8 25.0
3.5 1.5 1.5 21.0
3.0 1.2 1.2 17.0
2.5 0.9 0.9 13.0
2.0 0.6 0.6 9.0
1.5 0.3 0.3 5.0
1.0 0.0 0.0 1.0
Consistent attractive return profile over FY15-19 led to re-rating; recoveries a key to stress: CUBK has created a niche in SME
lending by developing entrenched sole banking relationships. This enabled it to price its products better, garner higher CASA
share, and charge adequate fees (~70bp over FY14-19). The strategy worked well, especially over FY15-19, resulting in better
risk-adjusted returns and strong RoA/RoE of 15%/1.5%. This drove its subsequent re-rating. Owing to stress in SME that led to
a provisioning spike over FY20-21, RoA/RoE were hit in FY20/21. Opex largely remained in the ~2% range over FY14-18, post
which it saw a slight blip in FY19 and FY20 due to wage revision that led to higher employee cost.
Exhibit 113: Liquidity has reduced leading to higher loan
Exhibit 112: Funding has slightly tilted in favour of capital
share
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Deposits Capital Borrowings Other Liabilities Advances Investments Cash Other assets Fixed assets
CUBK largely deposit-funded, though share of capital has risen: CUBK largely remains a deposit-funded franchise, with
deposits forming 83.5% of liabilities (share of deposits was 89% in FY12). It has minimal reliance on external borrowings, which
constitute 1-4% of liabilities. Equity capital share has risen consistently from 6.8% in FY12 to 11% in FY21, which is a positive.
In the last 10 years, CUBK has raised money thrice – in FY13, FY14 and FY15. On asset mix, advances’ share has ranged from
65% to 72% over FY12-21, with a lower share over FY12-15 since balance sheet liquidity was higher with investments
contributing 23-24% to total assets. Share of investments gradually declined from 25% in FY12 to 17.7% in FY21.
Exhibit 114: ALM profile stable; could have been better Exhibit 115: Positive gap in mismatch increasing from FY16
100% 25
80% 20
60%
15
40%
20% 10
0% 5
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0
ALM profile indicates a positive gap in the <1-year bucket for CUBK: A 10-year cycle indicates that CUBK has a positive ALM
profile in the <1-year bucket, suggesting that maturity of assets is shorter than liabilities. This has transpired since the bank has
a higher share of working capital loans (~60% share), which are relatively short-term in nature. A positive ALM gap exposes the
bank to interest rate risk in a falling rate scenario, but could be advantageous in a rising rate scenario, as assets would be
repriced higher at a faster rate than liabilities. In terms of maturity profile, assets are equally distributed in the <1-year and 1-
3 year buckets, while liabilities are largely concentrated (~60% share) in the 1-3year bucket.

City Union Bank (CUBK) 16 September 2021
P&L Balance sheet

Interest earned 37,672 41,686 41,347 41,790 47,204 Share capital 735 737 739 739 739
Interest expended 21,557 24,934 23,050 22,451 25,622 Reserves & surplus 47,673 52,223 57,686 64,543 73,265
Net Interest Income 16,114 16,752 18,297 19,340 21,582 Deposits 384,480 408,325 445,374 465,007 511,052
Other income 5,144 6,799 7,048 6,700 7,244 Borrowings 4,809 20,324 13,457 13,950 15,332
Operating Expenses 8,859 10,137 10,506 11,068 12,270 Total liabilities 452,589 497,335 533,117 560,045 616,548
Operating profit 12,400 13,414 14,838 14,971 16,556 Investments 77,122 91,168 94,359 97,652 104,766
Provisions 3,151 7,551 7,910 6,463 5,127 Advances 326,733 339,275 361,578 388,762 437,986
Taxes 2,420 1,100 1,000 1,702 2,400 Other Assets 16,600 17,225 18,702 20,429 21,710
Net Profit 6,829 4,763 5,928 6,807 9,029 Total assets 452,589 497,335 533,117 560,045 616,548
Ratios Ratios
RWA growth 20.6 3.7 (2.8) 10.4 14.7 CASA 25.2 25.0 29.1 27.0 27.0
Other income (3.3) 32.2 3.7 (4.9) 8.1 RWA / Total assets 69.5 65.6 59.5 62.5 65.2
PPoP 2.7 8.2 10.6 0.9 10.6 CET-1 15.0 15.8 18.5 18.4 18.1
Provisions (24.6) 139.7 4.8 (18.3) (20.7) Tier-1 15.0 15.8 18.5 18.4 18.1
Net profit 15.4 (30.3) 24.5 14.8 32.6 Tier-2 0.5 1.0 1.1 1.0 1.0
NIM 4.1 3.8 3.9 3.9 4.0 NNPA (Rs mn) 5,915 7,785 10,752 10,577 10,061
Cost/Income 41.7 43.0 41.5 42.5 42.6 PCR 39.5 44.9 43.2 40.0 39.0
Tax rate 26.2 18.8 14.4 20.0 21.0 BVPS 65.9 71.8 79.1 88.4 100.2
RoE 15.2 9.4 10.6 11.0 13.0 ABVPS 57.9 61.3 64.5 74.0 86.5
RoA 1.6 1.0 1.2 1.2 1.5 Valuation (x)
RoRWA 2.4 1.5 1.8 2.0 2.4 P/E 27.4 26.2 18.7 17.1 12.9
Du-pont (%) P/BV 2.5 2.7 1.7 1.8 1.6
NII 3.8 3.5 3.6 3.5 3.7
Other income 1.2 1.4 1.4 1.2 1.2
Total income 5.0 5.0 4.9 4.8 4.9
Employee 0.9 0.9 0.9 0.9 0.9
Other 1.2 1.2 1.1 1.1 1.2
PPOP 2.9 2.8 2.9 2.7 2.8
Provisions 0.7 1.6 1.5 1.2 0.9
PBT 2.2 1.2 1.3 1.6 1.9
Tax 0.6 0.2 0.2 0.3 0.4
RoA 1.6 1.0 1.2 1.2 1.5

16 September 2021
Gaurav Jani
+91 22 4215 9110
DCB Bank (DCB)

DCB’s performance over the last 10 years was a mixed bag. Retail liability build-up Market data
over FY12-18 fluctuated, though FY18-21 saw good traction on RTD while CASA Current price: Rs94
accretion was weak. On the asset side, retail exposure increased while corporate Bloomberg: DCBB IN
exposure declined. DCB saw higher opex over FY12-18 (average 280bp) owing to 52-week H/L: Rs127/74
aggressive growth focus, which translated to investments in branches and collection
architecture owing to its major SME focus. Over FY18-21, focus shifted to conservative
growth and operating leverage (opex to assets improved); however, as a fallout of the Free float: 99.1%
pandemic hitting the SME segment hard, credit costs spiked. Negative ALM profile in Avg. daily vol. 3mth: 1,425,277
a likely rising rate environment exposes DCB to risk of an NIM blip. Source: Bloomberg
Deposits more granular since FY18; loan mix tilted towards retail/agri: CASA performance has been a bit lackluster over FY12-
21. CASA ratio declined from 32% to 24% over FY12-18. Post FY18, deposit performance was rather mixed, as DCB started
focusing on garnering RTD and reducing wholesale deposits. Over FY18-21, RTD ratio improved from 49% to 61%, while
wholesale deposit share declined from 27% to 17%, which is a positive, but CASA ratio declined slightly from 24% to 23%, which
is a negative. On the loan mix side, DCB saw two sub-cycles. Over FY12-16, retail mix increased from 35% to 56%, while the
share of corporate/SME decreased from 23%/27% to 15%/12%. Over FY16-21, corporate share decreased from 15% to 11%,
while agri share increased from 17% to 22%.
Exhibit 116: RTD accretion improved over FY18-21 Exhibit 117: Corporate share rose over FY14-19
100% 100%
14% 16% 17% 15% 16% 17% 13% 12% 11%
20% 21% 22% 24% 27% 21% 22% 23% 24% 26% 23%
80% 80%
17% 20% 21% 22%
60% 60% 18% 18%
15%
12% 14%
40% 40% 15%
54% 52% 54% 60% 55% 52% 55% 57% 61% 56% 54% 53% 55% 56% 57%
49% 44% 49%
20% 20% 35% 41%
0% 0%
Retail term Savings Current Wholesale Retail Agri SME Corporate
Stress largely controlled over FY13-19; pandemic impact after FY19: Total stress as defined by NNPA + restructuring + net SR
was largely controlled over FY13-19 and was in the 0.8-1.2% range, as corporate share also declined over the same time frame.
DCB was largely insulated from the stressed asset cycle that large banks saw over FY14-19, as the bank has a granular portfolio,
being mainly focused on retail/SME/agri. Provisions rose from 30bp in FY14 to ~50bp over FY15-17, led by corporate stress.
Covid appears to have done more financial damage to DCB customers – its agri/industries/services GNPA spiked sharply while
peers did not witness as much pain. Delinquent pool rose over FY18-21 from 0.6% to 6.9%.
Exhibit 118: Stress reduced over FY14-20 from 4.9% to 1.3% Exhibit 119: FY21 saw a spike in personal loan GNPA
7.0% 75% 5.0%
6.0% 65% 4.0%
5.0% 55%
3.0%
4.0% 45%
3.0% 35% 2.0%
2.0% 25%
1.0%
1.0% 15%
0.0% 5% 0.0%
xxxxx
DCB Bank (DCB) 16 September 2021
Exhibit 120: NIM, opex have led to better PPoP to assets Exhibit 121: Multiple levers have resulted in RoE build-up

4.0 1.2 1.4 16
3.5 1.0 1.2 14
3.0 0.8 1.0 12
0.8 10
2.5 0.6
0.6 8
2.0 0.4
0.4 6
1.5 0.2
0.2 4
1.0 0.0 0.0 2
NIM Opex PPoP RoA RoE (RHS)
Operating metrics see an improving trend: NIM improved over FY12-18, largely led by increase in retail / decline in corporate
mix, coupled with supportive ALM mix. NIM declined in FY19, led by lower growth and excess liquidity. FY20/21 saw a sharp
decline in NIM due to lower growth and interest reversals. Fees to average assets has gradually declined over FY12-20 from
100bp to 83bp in tandem with a decline in corporate share. FY21 saw a much sharper contraction in fees to assets, led by the
pandemic impact. Opex remained elevated over 260bp over FY12-18, as the bank was in expansion mode. Opex leverage
started playing out after FY18 that saw opex to asset ratio decline over FY18-20 from 288bp to 243bp.
Exhibit 122: Borrowing rising; bulk deposit share falling Exhibit 123: Advances share has been stable over FY19-21
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Bank has largely been deposit-funded; loan share stable after FY16: Share of deposits in total liabilities improved over FY12-
17 from 73% to 80%, while the share of borrowings declined from 13% to 5%. However, borrowing share rose over FY17-21
from 5.3% to 11.3% at the cost of deposits though bulk deposit contribution has fallen. Hence deposit share fell slightly over
FY17-20 from 80% to 75% though due to the bank’s focus on retail deposits, RTD share enhanced. In the last 10 years, DCB has
raised equity twice – in FY15 and in FY18. On assets, share of loans also improved over FY12-16 from 61% to 68%, as the bank
was in a high growth phase. Loan share declined after FY18, as DCB concentrated on risk-adjusted return, which resulted in
lower loan growth and more efficiency.
Exhibit 124: Balance sheet maturity has become more stable Exhibit 125: Mismatch in the <1-year bucket has reduced
100% 6
80% 0
-6
60%
-12
40%
-18
20%
-24
0%
A L A L A L A L A L A L A L A L A L A L -30
ALM profile largely imbalanced with a negative tilt: DCB has generally witnessed a negative ALM in the 1-year bucket,
suggesting that the bank usually borrows short-term and lends long-term. This has also been led by an increasing share of
retail, particularly longer-term home loans and LAP. While this strategy has largely supported NIM improvement over FY12-17,
since systemic rates were declining, a negative ALM also exposes DCB to interest rate risk in case domestic rates rise. The <1-
year ALM gap has been negative at ~30% over FY12-20 that improved in FY21. Asset tenure is more concentrated in the 1-3
year and 3-5 year buckets, while liabilities’ maturity is weighted more in the 1-3 year bucket.

DCB Bank (DCB) 16 September 2021
P&L Balance sheet

Provisions 1,401 2,611 4,457 3,602 3,045 Advances 235,680 253,453 259,592 288,127 331,251
Net Profit 3,254 3,379 3,358 3,206 4,613 Total assets 357,918 385,052 396,021 423,686 487,449
Ratios Ratios
Deposits 18.4 6.8 (2.2) 11.5 15.1 Investments / Deposits 27.6 25.5 28.3 25.0 25.0
RWA growth 6.8 5.5 (0.9) 11.0 13.0 CASA 23.9 21.5 22.8 23.0 23.0
Other income 12.9 11.7 17.2 (9.9) 3.8 RWA / Total assets 62.0 60.8 58.5 60.7 59.7
Opex 9.2 5.9 (6.2) 10.8 6.1 Capital ratios (%)
PPoP 23.2 16.5 19.3 (11.6) 16.9 CET-1 13.1 13.9 15.5 14.5 14.0
Provisions 0.9 86.4 70.7 (19.2) (15.5) Tier-1 13.1 13.9 15.5 14.5 14.0
Net profit 32.6 3.9 (0.6) (4.5) 43.9 Tier-2 3.7 3.8 4.2 4.0 4.0
NIM 3.8 3.7 3.6 3.5 3.6 NNPA (Rs mn) 1,538 2,935 5,942 6,497 4,243
Cost/Income 56.9 54.5 48.5 54.2 51.7 PCR 65.0 53.5 45.2 42.0 48.7
Tax rate 35.8 31.3 25.8 26.1 26.1 BVPS 92.4 102.3 113.0 118.6 130.2
RoE 11.0 10.3 9.4 8.3 11.2 ABVPS 87.5 92.8 94.0 97.7 116.6
RoA 1.0 0.9 0.9 0.8 1.0 Valuation (x)
RoRWA 1.5 1.5 1.4 1.3 1.7 P/E 16.8 17.7 8.6 9.1 6.3
Du-pont (%) P/BV 1.8 1.7 0.8 0.8 0.7
NII 3.5 3.4 3.3 3.2 3.3
Other income 1.1 1.1 1.2 1.0 0.9
Total income 4.5 4.5 4.5 4.2 4.2
Employee 1.3 1.2 1.1 1.2 1.1
Other 1.3 1.2 1.1 1.1 1.1
PPOP 2.0 2.0 2.3 1.9 2.0
Provisions 0.4 0.7 1.1 0.9 0.7
PBT 1.5 1.3 1.2 1.1 1.4
Tax 0.5 0.4 0.3 0.3 0.4
RoA 1.0 0.9 0.9 0.8 1.0

16 September 2021
Gaurav Jani
+91 22 4215 9110
Federal Bank (FB)

Over the last 10 years, FB has performed well on stress, fee income and balance sheet Market data
profile. NIM/CASA could have done better. A chunk of the employee base being IBA- Current price: Rs86
related poses an opex risk, which is offset by higher treasury income. RTD+CASA make Bloomberg: FB IN
up 90% of deposits, also led by a strong NRI business franchise. Loan mix, which saw 52-week H/L: Rs93/45
corporate share rising over FY14-19, resulting in NIM decline, reverted to
retail/SME/agri over FY19-21, leading to an NIM uptick. ALM mismatch declined,
indicating a reduction in interest rate risk. Overall stress declined over FY14-20 from Free float: 90.3%
4.9% to 1.3%, also driven by a significant improvement in corporate underwriting. Avg. daily vol. 3mth: 16,666,350
FY21 delinquency rose, driven by personal loans. Source: Bloomberg
Strong retail deposit franchise; loan mix back towards non-corporate: RTD+CASA make up 90% of total deposits, which is
better than some peers. This is also a function of its strong NRI business franchise. However, CASA performance has been
muted. While its share had improved from 27% to 33% over FY12-16, which was a positive, post FY16, it has stagnated in the
31-34% range. On the loan mix side, FB saw three sub-cycles. Over FY12-14, that saw muted loan growth, corporate share
declined from 46% to 31% while retail/SME share increased from 27%/16% to 32%/25%. Over FY14-19, credit flow reverted to
corporate, with its share rising from 31% to 42.5%. Over FY19-21, corporate share declined from 42.5% to 36%, while retail/SME
share rose from 47% to 52%. Agri also saw its share increase over FY19-21 from 10% to 12%.
Exhibit 126: RTD accretion healthy; CASA stagnated Exhibit 127: Corporate share rose over FY14-19
100% 5% 5% 2% 7% 7%
100%
15% 15% 9% 10% 10%
80% 80%
60% 60%
40% 40%
20% 20% 46% 42% 38% 42% 43% 41%
31% 32% 35% 36%
0% 0%
Retail term Savings Current Wholesale Corporate Retail SME Agri
FB has done well to control overall stress over FY14-20: Total stress as defined by NNPA + restructuring + net SR declined over
FY14-20 from 4.9% to 1.3%. Corporate underwriting has improved, with the share of ‘A & above’ rising from 23% to 78%.
Overall provisions reduced from ~80bp to 60bp in the years following stress recognition. Led by the pandemic-related
lockdown, overall stress escalated from 1.3% in FY20 to 2% in FY21. Overall GNPA rose from 2.8% in FY20 to 3.4% in FY21.
Contrary to the previous two stress testing cycles in FY16 and FY18 that saw corporate stress rising, FY21 saw stress
deterioration largely led by personal loans. Personal loan GNPA rose from 2.2% to 4.9%.
5% 52% 7.0%
6.0%
4% 42%
5.0%
3% 32% 4.0%
2% 22% 3.0%
2.0%
1% 12%
1.0%
0% 2% 0.0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Agri Industry Services Personal Others Overall
xxxxx
Federal Bank (FB) 16 September 2021
Exhibit 130: NIM, fees, opex have led to rise in PPoP to assets Exhibit 131: Multiple levers have resulted in RoE build-up
3.5 1.0 1.4 14
3.0 0.8 1.2 12
1.0 10
2.5 0.6 0.8 8
2.0 0.4 0.6 6
0.4 4
1.5 0.2
0.2 2
1.0 0.0 0.0 0
Operating metrics see an improving trend: NIM declined over FY14-20, largely led by increase in corporate share from 31% to
41%. However, NIM improved from 3% in FY20 to 3.2% in FY21 since combined share of retail/SME/agri increased from 59%
to 64%. Fees to average assets has risen from 45-47bp over FY12-16 to ~54bp over FY17-21 since the bank focused more on
cross-sell and improving the self-funding ratio across customers. Opex to assets spiked over FY12-14 from 175bp to 198bp, as
branch/employee addition was aggressive. During FY14-20, this ratio was stable to declining. In FY20, opex to assets escalated,
led by decline in discount rate from 7.8% to 6.85%, resulting in an increase in pension liability.
Exhibit 132: Deposit share in liabilities relatively higher Exhibit 133: LDR improved though NIM execution was mixed
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Deposits share relatively higher; loan share saw three cycles: FB has largely been deposit-funded; the share of deposits rose
to ~85% of total assets over FY15-21 from ~80% over FY12-14. In the last 10 years, FB has raised equity only once in FY18 that
resulted in CET-1 ratio improving from 11.8% to 14.2%. On assets, FB has seen three sub-cycles – FY12-14 saw controlled credit
growth (loan CAGR was 7.3%) that resulted in loan share declining from 62% to 58%; FY14-19 witnessed a strong 20.5% loan
CAGR; FY19-21 again saw the bank slowing its growth. Share of other assets jumped in FY15 from 2.8% to 6.9%, as priority
sector shortfall deposits (PSSD) were reclassified from investments to other assets.
100% 5
80% 0
60% -5
40% -10
20% -15
0% -20
ALM profile has become more balanced from FY14 to FY21: Advances’ tenure has remained largely stable over FY12-21, with
the 1-3 year bucket seeing the maximum share of 40-50%. Share of >5-year deposits saw a jump from 2% to 20% in FY15, while
investments declined in its >5-year bucket from 74% to 42%, implying an increase in borrowing tenor and a decline in
investment tenor. This suggests FB shifted to borrowing long-term and investing in shorter tenor securities, which largely
reduces interest rate risk and NIM outcomes would more be a function of asset-liability mix rather than systemic interest rates.
This is also indicated by a reduction in its negative <1-year ALM gap from -21% in FY14 to -5% in FY21.

Federal Bank (FB) 16 September 2021
P&L Balance sheet

Ratios Ratios
RWA growth 12.9 12.8 5.5 7.7 10.0 CASA 32.4 30.7 34.0 32.7 33.0
Other income 16.6 43.0 0.7 (2.0) 5.2 RWA / Total assets 58.8 58.6 55.4 54.2 53.3
PPoP 20.6 16.0 18.2 4.4 8.4 CET-1 13.4 13.3 13.8 14.6 14.4
Provisions (9.6) 37.0 40.7 (4.3) (8.9) Tier-1 13.4 13.3 13.8 14.6 14.4
Net profit 41.5 24.0 3.1 11.8 19.9 Tier-2 0.8 1.1 0.8 1.0 1.0
NIM 3.1 3.0 3.2 3.2 3.2 NNPA (Rs mn) 16,262 16,072 15,693 19,124 21,414
Cost/Income 50.0 51.3 49.4 50.5 51.1 PCR 50.1 54.5 65.9 63.0 60.1
Tax rate 34.8 24.1 25.6 25.2 25.2 BVPS 66.8 72.8 80.7 87.1 93.9
RoE 9.8 11.1 10.4 10.3 11.2 ABVPS 58.7 64.8 72.9 78.1 83.7
RoA 0.8 0.9 0.8 0.8 0.9 Valuation (x)
RoRWA 1.4 1.5 1.5 1.5 1.7 P/E 11.1 11.2 7.4 10.2 8.5
Du-pont (%) P/BV 1.2 1.1 0.7 1.0 0.9
NII 2.8 2.7 2.9 2.9 2.9
Other income 0.9 1.1 1.0 0.9 0.9
Total income 3.7 3.9 3.9 3.8 3.7
Employee 0.9 1.0 1.1 1.0 1.0
Other 0.9 0.9 0.9 0.9 0.9
PPOP 1.9 1.9 2.0 1.9 1.8
Provisions 0.6 0.7 0.9 0.7 0.6
PBT 1.3 1.2 1.1 1.1 1.2
Tax 0.4 0.3 0.3 0.3 0.3
RoA 0.8 0.9 0.8 0.8 0.9

16 September 2021
Gaurav Jani
+91 22 4215 9110
HDFC AMC
HDFC AMC delivered robust performance over FY12-20, maintaining overall market Market data
share and operating yields, driven by strong parentage and distribution network. This Current price: Rs3,288
led to best return ratios in the industry, enabling HDFC AMC to command a premium Bloomberg: HDFCAMC IN
to peers. However, its equity market share declined over the last decade, led by lower 52-week H/L: Rs3,365/2070
flows due to heightened competition, and FY21 was a bit challenging. Debt share in
AUM shifted to liquid over FY12-20, also partly contributing to lower blended yields,
though ETF share remains low, cushioning margins. Operating yields saw a V-shaped Free float: 20.5%
trend over FY14-20 with yield compression being higher in the initial phase; in the Avg. daily vol. 3mth: 363,816
following period, opex control led to better profitability. Source: Bloomberg
Equity share one of the highest; equity and debt share reduced from FY19: HDFC AMC saw equity proportion being
consistently better than the industry over FY16-19 (equity CAGR of 23.3% over FY12-19). This coupled with healthy payout
ratios led to best return ratios in the industry. However, share of equity and debt reduced after FY19, mainly on account of
three reasons. Firstly, liquid funds picked up pace since FY19, putting pressure on equity and debt share. Secondly, debt AUM
saw muted growth compared to others (10-year CAGR 12.9%). Lastly, equity share declined, driven by the pandemic impact
and drop in market share of flows. Equities bounced back partially in FY21, as the equity markets were buoyant.
Exhibit 136: Strong AUM growth; liquid jumped in FY19 Exhibit 137: Debt share contracted; liquid AUM grew
Closing AUM Closing AUM Mix
1750
100%
1500
1250 80%
1000 60%
750 40%
500
20%
250
0 0%
Equity Debt Liquid Others Equity Debt Liquid Others
Overall market share sustained despite lost equity share; SIP share disappointing: Being an early entrant in the AMC business,
HDFC AMC had a solid 20.7% equity market share in FY13, which declined over FY13-21 to 12.8% with the entry of new mutual
funds and flows diverging to other funds. Despite losing market share in equity, the company has maintained overall AUM
share at 13-15% over FY12-20, as strong growth in liquid made up for the lost share in equities. Overall share dipped by 1.7%
to 12.6% in FY21. On the SIP flows side, HDFC AMC saw improving flows and share from FY18-20; however, it lost market share
in FY21. Annualized SIP flows were strong in FY19 and FY20 at Rs140-147bn, though they dropped in FY21 to Rs113bn.
Exhibit 138: Equity share contracted; overall share even Exhibit 139: SIP market share declined over FY18-21
Market share SIP Flows
22.5% 150 21%
20.0% 125 18%
17.5%
15.0% 100 15%
12.5% 75 12%
10.0% 50 9%
7.5%
5.0% 25 6%
2.5% 0 3%
Overall Equity SIP Flows (bn) SIP Flows Share
HDFC AMC 16 September 2021
Exhibit 140: Yields suffered due to higher liquid share in AUM Exhibit 141: Operating leverage played out well
Operating metrics (bps) Opex
100 60 12
10
80 50
8
60 40
6
40 30 4
20 20 2
0 10 0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Revenue yields Opex/AUM Operating yields (RHS) EBE/AUM (bps) Other exp/AUM (bps)
Revenue yields drop though operating yields improve on lower opex: Revenue to AAUM dropped over FY14-17 from 85bp to
75bp, while the contraction in operating yields was not as sharp. Operating yields dropped due to higher distributor
commissions paid over the same time frame, as the industry followed the upfront plus trail mode. Despite the industry shifting
from the upfront to trail model, operating yields increased for HDFC AMC over FY17-21 due to strong control on opex. Employee
expense to AUM ratio fell from 8bp to 6bp over the same time frame while other expenses dropped from 10bp to 5bp, led by
a sharp fall in scheme expenses. The steep revenue yield contraction over FY16-19 was also driven by the rise in the lower-
yielding liquid share in overall AUM.
Exhibit 142: RoE slips on lower payout ratio Exhibit 143: Core RoAUM intact due to lower opex
Core RoE and Payout Ratio RoAAuM
50% 70% 40
35
40% 56%
30
30% 42% 25
20
20% 28% 15
10
10% 14%
5
0% 0% 0
Core ROE ROE Payout Ratio (RHS) Core ROAUM ROAUM
RoE suffers partly due to payout ratio; core RoAUM largely flat: Led by its market dominance, higher equity AUM share and
an attractive payout ratio, HDFC AMC has one of the best return profiles in the AMC space. Core RoE/RoAUM were at 35-40%
and 25-35bp, respectively from FY17-20. Core RoE has consistently declined over FY13-21, despite an increasing payout ratio.
HDFC AMC’s payout is lower than NAM. In contrast, core RoAUM increased over FY17-20 due to the positive impact of lower
operating cost ratios. In line with lower operating yields, core RoAUM declined in FY21.
Exhibit 144: Contribution of Top 5 increased in FY20 Exhibit 145: Direct channels grew due to digital push
Geographic mix Distribution mix
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Overall Equity
Top 5 Next 10 Next 20 Next 75 Others IFAs BND Direct
Share from Top 5 cities rises; investments from direct channels continue to grow: Share from Top 5 geographies continues to
grow, putting additional pressure on yields. FY20 saw Top 5 gaining 600bp share to 69%, while the Next 20, Next 75, and others
lost share during the year. Distribution mix saw robust shift to direct channels, which now have 47% share (compared to 34%
in FY18), mainly driven by digital initiatives and awareness among customers about commission costs associated with
distributors. A similar trend is also visible on the equity side that saw share of direct channel increase. However, equity
distribution saw a shift from BND to IFA and direct over FY18-21.

HDFC AMC 16 September 2021
P&L Balance sheet
YE March (Rs mn) FY19 FY20 FY21 FY22E FY23E YE March (Rs mn) FY19 FY20 FY21 FY22E FY23E
Revenue from Operations 19,152 20,033 18,525 21,359 22,380 Share Capital 1,063 1,064 1,065 1,065 1,065
Investment Management Fees 18,954 19,653 18,174 20,954 21,956 Reserves and Surplus 29,644 39,229 46,697 52,274 57,552
PMS and Advisory Fees 198 380 351 405 424 Net Worth 30,707 40,293 47,762 53,339 58,617
Expenses 6,821 4,904 4,528 5,482 5,187 Trade Payables 474 467 421 360 400
Employees 2,063 2,147 2,268 3,002 2,437 Employee Benefit 649 601 552 1,480 1,202
Others 2,227 2,044 1,649 1,815 2,020 Others 390 1,685 2,168 2,172 2,176
Depreciation 129 504 554 603 662 Total Liabilities and Equity 32,220 43,046 50,904 57,352 62,396
Fees 2,403 209 57 62 67 Cash and Bank 320 271 24 24 24
Core Operating Income 12,331 15,129 13,997 15,877 17,193 Investment 29,350 39,445 47,533 52,841 56,919
Other Income 1,816 1,401 3,492 2,763 2,965 Fixed Asset 429 1,613 1,544 2,280 3,384
Exceptional Item: Impairment of FI 400 0 0 0 0 Receivables 1,029 646 838 1,229 1,288
PBT 13,747 16,530 17,490 18,640 20,158 Others 1,093 1,072 966 1,172 1,195
Tax 4,441 3,906 4,232 4,697 5,080 Total Assets 32,220 43,046 50,904 57,545 62,809
PAT 9,306 12,624 13,258 13,942 15,078
Dividend 6,150 11,300 7,241 8,366 9,801 Closing AuM (Rs bn)
Retained Earnings 3,156 1,323 6,017 5,576 5,277 YE March FY19 FY20 FY21 FY22E FY23E
Closing AuM 3,437 3,191 3,955 4,198 4,511
Growth ratios (%) Equity 1,688 1,269 1,738 1,859 2,045
YE March FY19 FY20 FY21 FY22E FY23E Debt 998 855 1,216 1,301 1,391
Closing AuM 17.8 (7.2) 23.9 6.1 7.5 Liquid 745 1,033 921 948 977
Revenue 9.0 4.6 (7.5) 15.3 4.8 Others 6 34 81 89 98
EBE 10.8 4.1 5.6 32.4 (18.8) Closing AUM Breakup (%)
PAT 30.8 35.7 5.0 5.2 8.1 Overall AuM 100.0 100.0 100.0 100.0 100.0
Profitability Ratios (%) Equity 49.1 39.8 43.9 44.3 45.3
Yield on AUM 0.60 0.60 0.52 0.52 0.51 Debt 29.0 26.8 30.7 31.0 30.8
Yield on Investments 6.35 3.48 7.83 5.30 5.20 Liquid 21.7 32.4 23.3 22.6 21.7
EBE / Core Revenue 10.8 10.7 12.2 14.1 10.9 Others 0.2 1.1 2.0 2.1 2.2
Operating Income/ Core Revenue 62.3 75.5 75.6 74.3 76.8
Other Income / Core Revenue 9.5 7.0 18.9 12.9 13.2 AuM Growth (%)
Effective tax rate 32.3 23.6 24.2 25.2 25.2 YE March FY19 FY20 FY21 FY22E FY23E
PAT Margin 48.6 63.0 71.6 65.3 67.4 Overall 17.8 (7.2) 23.9 6.1 7.5
ROE 35.0 35.6 30.1 27.6 26.9 Equity 12.8 (24.8) 36.9 7.0 10.0
Core ROE 35.9 38.2 28.8 28.9 29.0 Debt (5.4) (14.4) 42.2 7.0 6.9
ROAAUM 0.29 0.38 0.37 0.34 0.35 Liquid 107.0 38.8 (10.9) 3.0 3.0
DuPont analysis (%) Others 15.4 427.2 138.1 10.0 10.0
Revenue from Operations 0.60 0.60 0.52 0.52 0.51
Investment Mgmt. Fees 0.60 0.59 0.51 0.51 0.50 Valuations (per share)
PMS and Advisory Fees 0.01 0.01 0.01 0.01 0.01 YE March FY19 FY20 FY21 FY22E FY23E
Expenses 0.23 0.15 0.13 0.13 0.12 EPS 43.8 59.3 62.3 65.5 70.8
Employee 0.06 0.06 0.06 0.07 0.06 DPS 24.0 44.0 34.0 39.3 46.0
Others 0.07 0.06 0.05 0.04 0.05 BVPS 144 189 224 250 275
Depreciation 0.00 0.02 0.02 0.01 0.02 Dividend Yield 0.8 1.4 1.3 1.2 1.4
Fees 0.08 0.01 0.00 0.00 0.00 P/E 53.6 40.9 39.9 50.2 46.5
Core Operating Income 0.38 0.46 0.39 0.39 0.39 P/B 16.8 11.4 10.4 13.1 11.9
Other Income 0.06 0.04 0.10 0.07 0.07 Source: Company, Centrum Broking
PBT 0.43 0.50 0.49 0.46 0.46
Tax 0.14 0.12 0.12 0.12 0.12
PAT 0.29 0.38 0.37 0.34 0.35

16 September 2021
Gaurav Jani
+91 22 4215 9110
ICICI Bank
ICICI Bank (ICICI) is on a transformation path. Due to its scale and presence, CASA has Market data
remained over 45%, while loan mix materially changed for the better, with the share Current price: Rs727
of higher-yielding retail increasing and the margin-dilutive overseas pool declining. Bloomberg: ICICIBC IN
Although NIM was depressed over FY15-18, led by delinquencies, it improved 52-week H/L: Rs735/334
significantly over FY18-21, driven by better retail share. Fee income declined slightly
over FY12-21 while opex to assets rose, since retail entails higher operating costs. Post
FY19, as credit costs and slippages moderated, NIM started positively impacting the Free float: 89.4%
return ratios. The bank is moving towards RoE profile of 15%. ALM profile was largely Avg. daily vol. 3mth: 11,932,080
balanced, which largely reduces the interest rate risk. Source: Bloomberg
CASA has been 45%+ after FY14; retail share in loans has surged: CASA contributes 46% to total deposits, which is largely in-
line with peers. CASA rose from 46% to 52% over FY15-18, as reliance on term deposits reduced. However, after FY18, the bank
focused on garnering retail term deposits, whose share increased from 47% in FY18 to 54% in FY20. On loan mix, the bank has
consistently increased its retail contribution over the last 10 years from 38% in FY12 to 67% in FY21. This has been largely
contributed by housing growth (CAGR of 20% over FY12-21) since it makes up ~50% of retail loans. The other positive has been
the reduction of overseas loan contribution, which declined from 27% to 5% over FY12-21. This has also partly contributed to
NIM improvement over the same time frame.
Exhibit 146: CASA has been 42%+; more recent reliance on TD Exhibit 147: Retail share improved; overseas share declined
Deposit mix Advances Mix
100% 100%
14% 13% 14% 14% 15% 16% 15% 13% 15%
13%
80% 80%
30% 29% 30% 32% 32% 35% 35% 32% 32%
36%
60% 60%
40% 40%
60% 63% 67%
52% 57%
20% 20% 38% 39% 42% 47%
37%
0% 0%
Term Savings Current Overseas Retail Corporate SME Overseas
Most of the stress recognized over FY14-18: Total stress as defined by NNPA + restructuring + net SR rose over FY13-17 from
1.5% to 5.3%, led by delinquencies in long-term infrastructure loans. This was also reflected by a rise industry GNPA from 4.7%
in FY15 to 22.5% in FY18. Overall stress for ICICI declined over FY18-19 from 4.1% to 1.8%. Underwriting has dramatically improved
over FY17-21, with the share of ‘A & above’ rising from 56% to 75%. Overall provisions reduced from ~2% in FY18 to 1.4% in FY21.
Led by the pandemic-related lockdown, overall stress rose slightly from 1.1% in FY20 to 1.2% in FY21, while overall slippage
ratio increased from 2.3% to 2.5%. FY21 saw personal loan GNPA rise from 1.5% to 2.8%.
5% 52% 24%
21%
4% 42% 18%
3% 32% 15%
12%
2% 22% 9%
1% 12% 6%
3%
0% 2% 0%
xxxxx
ICICI Bank 16 September 2021
Exhibit 150: NIM boost over FY12-21; PPoP rising since FY19 Exhibit 151: Elevated credit cost cycle depressed RoE
3.5 2.2 1.8 17
3.0 1.9 1.6 15
2.5 1.6 1.4 13
2.0 1.3 1.2 11
1.0 9
1.5 1.0
0.8 7
1.0 0.7
0.6 5
0.5 0.4 0.4 3
0.0 0.1 0.2 1
Strong NIM performance over FY12-21 led by increase/decrease in retail/overseas loans: NIM improved over FY12-20 from
2.91% to 3.35%, largely led by increase/decrease in retail/overseas loans. NIM dipped over FY15-18, driven by interest reversals
led by the stressed asset cycle. Fees to average assets has been strong at 1.3% (FY17-20) after declining from ~1.5% (FY12-16),
since corporate share shifted in favor of retail. Opex to assets rose over FY12-20 from 175bp to 210bp since a retail strategy
entails greater utilization of resources. Provisions costs spiked from 35bp in FY12 to 210bp in FY19, which coupled with lower
stake sale gains in FY19 led to RoE decline (peak 14.6% in FY15; bottom 3.2% in FY19).
Exhibit 152: Bank has largely shifted to being deposit-funded Exhibit 153: Balance sheet liquidity declined, supporting NIM
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
The bank has become increasingly deposit funded; lower liquidity supported NIM: ICICI has largely become deposit-funded,
with deposits to total assets rising from 52% in FY12 to 76% in FY21. This was in sync with its retail-focused strategy, as the
proportion of domestic retail assets/deposits has risen over the same time frame. In the last 10 years, the bank raised equity
only once in FY21 that resulted in CET-1 ratio improving from 13.4% to 16.8%. On assets, loans share improved over FY12-15,
post which it remained stable. Balance sheet liquidity declined over FY12-15, which also supported NIM. However, with the
pandemic driving lenders to maintain liquidity buffers, ICICI raised its liquidity share from 30% in FY19 to 34% in FY20.
Asset (A) Liability (L) Maturity Pattern 25 ALM mismatch (%)
100%
15
80%
60% 5
%
40%
-5
20%
0% -15
ALM profile became more balanced from FY14 to FY21: Advances’ tenure has remained largely stable over FY12-21, with the
<1-year bucket seeing the maximum share of 26-33%. Overall loan maturity has increased, as the share of 1-3 year bucket
declined from 40% in FY15 to 28% in FY21, reflecting a shift from corporate lending to longer-tenure housing loans. In tandem
with assets, liabilities have also seen their tenures rise, led by a focus on retail term deposits. Share of >5-year deposits rose
from 16% in FY12 to 28% in FY20. Overall balance sheet maturity pattern indicates a stable ALM profile with <1-year ALM gap
not being material, suggesting that NIM would be more a function of asset-liability mix rather than systemic interest rates.

ICICI Bank 16 September 2021
P&L Balance sheet

Interest earned 634,012 747,983 791,183 848,592 1,006,499 Share capital 12,941 12,983 13,865 13,865 13,865
Interest expended 363,864 415,313 401,288 410,432 507,978 Reserves & surplus 1,070,739 1,152,062 1,461,227 1,625,686 1,828,855
Other income 145,122 164,486 189,685 202,475 230,421 Borrowings 1,653,200 1,628,968 916,310 944,946 1,013,121
Others 112,808 133,432 134,691 159,208 175,154 Balances with banks 424,383 838,718 870,971 926,992 1,002,303
Ratios Ratios
RWA growth 8.3 10.5 3.4 9.0 12.0 CASA 49.6 45.1 46.3 46.1 45.2
Other income (16.7) 13.3 15.3 6.7 13.8 RWA / Total assets (%) 71.3 69.1 63.8 62.2 61.3
PPoP (5.3) 19.9 29.5 7.2 15.8 CET-1 13.6 13.4 16.8 16.9 16.6
Provisions 13.6 (28.5) 15.4 (35.0) (5.1) Tier-1 15.1 14.7 18.1 18.1 17.8
Net profit (50.4) 135.8 104.2 31.9 23.5 Tier-2 1.8 1.4 1.1 0.8 0.7
NIM 3.4 3.7 3.7 3.7 3.8 NNPA (Rs mn) 141,187 103,579 95,015 100,430 115,376
Cost/Income 43.6 43.5 37.2 39.1 38.0 PCR 3.1 2.0 2.1 1.2 1.0
Tax rate 10.9 43.5 19.8 25.0 25.0 BVPS 167.5 179.5 212.8 236.5 265.8
RoE 3.2 7.1 12.3 13.7 15.2 ABVPS 145.7 163.5 199.1 222.0 249.2
RoA 0.4 0.8 1.4 1.6 1.8 Valuation (x)
RoRWA 0.5 1.1 2.1 2.6 2.9 P/E 26.7 19.3 14.2 23.6 19.1
Du-pont (%) P/BV 1.8 2.1 1.9 3.1 2.7
NII 2.9 3.2 3.3 3.4 3.4
Other income 1.6 1.6 1.6 1.6 1.6
Total income 4.5 4.8 5.0 4.9 5.0
Employee 2.0 2.1 1.9 1.9 1.9
Other 0.7 0.8 0.7 0.7 0.7
PPOP 2.5 2.7 3.1 3.0 3.1
Provisions 2.1 1.4 1.4 0.8 0.7
PBT 0.4 1.4 1.7 2.2 2.4
Tax 0.0 0.6 0.3 0.5 0.6
RoA 0.4 0.8 1.4 1.6 1.8

16 September 2021
Gaurav Jani
+91 22 4215 9110
LIC Housing Finance (LICHF)

LICHF saw mixed performance over the last 10 years. Ability to source lower cost Market data
funds due to its sovereign franchise and salaried housing being a major contributor to Current price: Rs417
loans have been its key strengths. Funding mix changed over FY18-21, with greater Bloomberg: LICHF IN
reliance on bank loans due to a favourable interest rate regime. On the loans side, the 52-week H/L: Rs542/260
share of higher-risk LAP/LRD/project increased over FY15-21 to counter the pricing
pressure in housing, which also led to a spike in non-housing stress over FY17-21.
Opex did well over FY12-21, barring FY17 that saw staff cost rise owing to wage Free float: 53.4%
revision. A single product dominating the loan mix exposes LICHF to interest rate risk Avg. daily vol. 3mth: 3,901,891
since ALM profile suggests a negative mismatch in the <1-year bucket. Source: Bloomberg
Borrowing mix in FY21 similar to FY12 levels; LAP/Builder portfolio share rose: Borrowing mix broadly saw two cycles. Over
FY12-17, the share of banks declined from 32% to 9.5%, while the share of NCDs rose from 63% to 81%. As systemic rates eased
post FY17, funding mix shifted back towards banks and CPs. The share of banks increased back to 25% in FY17. This was also
indicated by the cost of funds trajectory, which saw a tighter range of 9-9.5% over FY12-16, after which it materially reduced
to 7.2%. On the loan mix side, the share of individual housing declined over FY15-17 from 93% to 78%, while that of
LAP/LRD/developer loans increased, leading to subsequent asset quality pressures. However, in the recent past, LICHF has
slightly de-risked the portfolio with the share of LAP/LRD/Project declining from 24% to 22% over FY19-21.
Exhibit 156: Lower systemic rates led to rise in bank funding Exhibit 157: Share of LAP/LRD/Project rose over FY15-21
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY15 FY16 FY17 FY18 FY19 FY20 FY21
NCD Banks Deposits CP Others Retail home Retail LAP / LRD Developer
Project loans and LAP a problem area for LICHF: Asset quality was largely controlled over FY12-17, with GNPA below 0.7%
levels. Although non-housing GNPA looks higher over FY13-16, non-housing loan contribution was not material (~5% share);
therefore, overall GNPA was controlled. However, increasing share of LAP/LRD/project loans started affecting asset quality
since FY18, and over FY17-21, GNPA rose from 0.43% to 4.1%. As at Q4FY21, the GNPA split is as follows: individual housing -
1.9%, LAP - 5.8%, and developer loans - 18%. The overall proportion of stage-2 assets also increased over FY17-21 from 3.7%
to 6.2%. Stage 1&2 provisions, indicating a buffer, declined and is lower compared to peers.
Exhibit 158: Non-housing NPA a concern Exhibit 159: Stage 1+2 provision cover lower than peers
Segment-wise GNPA
5.0% Stress
7% 42
4.0% 6% 35
5% 28
3.0%
4% 21
2.0%
3% 14
1.0% 2% 7
0.0% 1% 0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21
Stage 2 assets Stage 1+2 provisions (bps)
Housing Non-Housing Overall
xxxxx
LIC Housing Finance (LICHF) 16 September 2021
Exhibit 160: Rise in balance sheet stress over FY18-21 Exhibit 161: Leverage near 10x from FY17 to FY21
Balance sheet stress Debt/Equity
4% 40% 12
10
3% 30%
8
2% 20%
6
1% 10% 4
0% 0% 2
0
Stress to AuM Stress to Equity FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Overall stress saw a significant rise over FY18-21: As the share of LAP/developer loans increased, stress to assets increased to
3.3% of AUM in FY21 from 0.1% in FY17. Stress to equity also rose from 1.7% in FY17 to 37% in FY21. FY17-19 saw rise in stress,
led by developer loans. Over FY19-21, delinquencies rose in housing and LAP. LICHF has consistently maintained a leverage of
10-10.5x over FY17-21. Leverage rose in FY15, but declined in FY17 due to deferred tax adjustment.
Exhibit 162: Lower NIM coupled with higher provisions Exhibit 163: Credit costs led to lower RoEs
2.8 1.0 1.6 20
2.3 0.8 1.3 16

0.6
1.8 1.0 12
0.4
1.3 0.6 8
0.2
0.8 0.0 0.3 4
0.3 -0.2 0.0 0
Credit quality led to decreasing return ratios: NIM grew over FY13-17 from 2.2% to 2.7% due to a favourable ALM profile that
led to a faster reduction in funding cost compared to yields. However, FY18 saw sharp reduction in NIM to 2.2%, led by
competitive pressures and rate hardening. As the share of the non-housing portfolio rose, coupled with a favourable soft
interest rate environment, NIM improved to 2.3% in FY21. From FY16 to FY21, as credit costs rose from 12bp to 58bp, RoE
dipped from 20% to 14%. Opex declined from 40bp to 30bp over FY12-21, which provided tailwinds to the PPoP, though FY17
saw a spike in employee cost due to wage revision.
Exhibit 164: Housing loans have led to longer asset duration Exhibit 165: ALM mismatch has largely been negative
100% 0
80%
-5
60%
40% -10
20%
-15
0%
ALM profile unbalanced, as most of the portfolio is longer duration: Over FY12-21, 70-80% of assets had a maturity of three
years and above, since housing loans are generally longer term. Hence, the ALM profile for an HFC is generally negative in the
less than 1-year bucket. This also exposes HFCs to interest rate risk in case of a rising rate environment, as liabilities would
mature faster than assets. Currently, as systemic rates are at historic lows, HFCs are exposed to interest rate risk, which coupled
with competition from banks may result in NIM pressure.

LIC Housing Finance (LICHF) 16 September 2021
P&L Balance sheet

Interest income 172,668 196,112 197,066 206,742 238,556 Financial assets 1,996,422 2,155,652 2,342,082 2,627,913 2,938,462
Interest expense 131,593 148,314 144,800 150,973 176,620 Cash 28,018 13,657 13,292 12,907 14,460
NII 41,075 47,799 52,266 55,769 61,936 Bank balance 2,117 6,132 176 2,581 2,892
Other income 978 586 1,411 1,025 1,064 Loans 1,929,927 2,079,880 2,281,143 2,559,560 2,867,677
Total income 42,053 48,384 53,677 56,794 63,000 Investment 35,951 54,964 46,356 51,652 52,073
Operating expenses 4,754 6,167 7,015 9,462 8,645 Other financial assets 409 1,019 1,116 1,213 1,359
Employee 2,479 2,991 2,932 5,015 3,771 Non-financial assets 9,413 12,404 14,174 15,488 16,195
Others 2,275 3,176 4,083 4,447 4,874 Current tax assets 1,781 3,541 (78) (85) (89)
PPOP 37,299 42,217 46,662 47,332 54,355 Deferred tax assets 5,534 5,200 9,129 9,976 10,431
Provisions 3,504 9,527 13,176 17,055 12,033 Fixed Assets 1,359 2,544 2,470 2,699 2,822
PBT 33,796 32,690 33,486 30,277 42,322 Other Non-fin. assets 740 1,119 2,652 2,898 3,030
Tax 9,486 8,672 6,142 7,630 10,665 Total Assets 2,005,835 2,168,056 2,356,256 2,643,401 2,954,657
PAT 24,310 24,018 27,343 22,647 31,657 Financial liabilities 1,840,622 1,982,435 2,146,767 2,391,609 2,676,013
Debt securities 1,346,157 1,320,823 1,255,980 1,381,938 1,455,562
Ratios Borrowings 340,513 577,494 804,684 915,025 1,113,526
Subordinated Debt 20,000 15,000 17,951 19,556 20,507
Growth (%) Other financial liabilities 133,952 69,118 68,152 75,090 86,418
AUM 16.2 8.2 10.2 11.3 12.0 Non-financial liabilities 2,620 3,690 4,276 4,401 4,661
Borrowings 17.5 12.1 8.6 11.4 11.8 Provisions 1,134 1,453 1,425 1,467 1,553
NII 14.6 16.4 9.3 6.7 11.1
Other Non-fin liabilities 1,487 2,237 2,851 2,935 3,108
Other income 8.6 (40.1) 141.0 (27.4) 3.8
Total equity 162,593 181,931 205,213 247,391 273,983
Opex 8.2 29.7 13.8 34.9 (8.6)
Share capital 1,010 1,010 1,010 1,101 1,101
PPoP 15.3 13.2 10.5 1.4 14.8 Other equity 161,583 180,921 204,203 246,290 272,882
Provisions (25.2) 171.9 38.3 29.4 (29.4) Total Liabilities 2,005,835 2,168,056 2,356,256 2,643,401 2,954,657
PAT 21.4 (1.2) 13.8 (17.2) 39.8 Balance Sheet ratios (%)
Cost of funds 8.3 8.2 7.3 6.9 7.2
Cash / Borrowings 1.8 1.0 0.6 0.7 0.7
NIM (on AuM) 2.3 2.3 2.3 2.3 2.2
CRAR 14.4 13.9 14.1 15.3 15.3
Cost/Income 11.3 12.7 13.1 16.7 13.7 Tier-2 2.1 1.7 1.4 1.2 1.2
Others 5.4 6.6 7.6 7.8 7.7 GNPA (Rs mn) 29,717 59,679 95,585 129,916 121,808
Opex/ Avg AuM 0.3 0.3 0.3 0.4 0.3 NNPA (Rs mn) 20,812 41,201 64,788 89,508 82,812
Provisions 0.2 0.5 0.6 0.7 0.4
GNPA 1.5 2.8 4.1 5.0 4.2
Tax Rate 28.1 26.5 18.3 25.2 25.2
NNPA 1.1 2.0 2.8 3.5 2.9
RoA 1.3 1.2 1.2 0.9 1.1
PCR 30.0 31.0 32.2 31.1 32.0
RoE 15.9 13.9 14.1 10.0 12.1 NNPA / Equity 12.8 22.6 31.6 36.2 30.2
Per share (Rs)
EPS 48.1 47.6 54.2 41.2 57.5
BVPS 322.0 360.3 406.4 449.5 497.8
Interest income 9.3 9.4 8.7 8.3 8.5
ABVPS 280.8 278.7 278.1 286.9 347.4
NII 2.2 2.3 2.3 2.2 2.2 P/E 10.2 8.2 7.8 10.1 7.2
Other income 0.1 0.0 0.1 0.0 0.0 P/BV 1.3 1.1 0.7 0.9 0.8
Employee 0.1 0.1 0.1 0.2 0.1
Others 0.1 0.2 0.2 0.2 0.2
PPOP 2.0 2.0 2.1 1.9 1.9
Provisions 0.2 0.5 0.6 0.7 0.4
PBT 1.8 1.6 1.5 1.2 1.5
Tax 0.5 0.4 0.3 0.3 0.4
PAT 1.3 1.2 1.2 0.9 1.1

16 September 2021
Gaurav Jani
+91 22 4215 9110
M&M Financial Services (MMFS)

The last 10-year cycle for MMFS has been tough on asset quality, leading to declining Market data
return ratios. GNPA rose from 2.7% in FY12 to 9% in FY21, while PCR dropped from Current price: Rs174
78% in FY12 to 31% in FY20. Focus on earn-and-pay customers, whose cash flows are Bloomberg: MMFS IN
usually stretched and volatile, impacted asset quality. Ability to source funds was 52-week H/L: Rs224/113
never a challenge owing to its strong parentage. Funding mix shifted from banks to
NCDs over FY12-21 while AUM mix was stable. Opex performance has been variable,
although the recent past (FY19-21) saw controlled employee and overhead costs, Free float: 40.4%
leading to a decline in cost to average assets from 3.1% to 2.2%. A slight positive ALM Avg. daily vol. 3mth: 8,071,719
bodes well from an NIM standpoint since interest rates may have hit a trough. Source: Bloomberg
Share of NCD has gone up in borrowings; AUM mix largely stable: Borrowing mix for MMFS was largely dominated by NCDs
and banks, though share of banks tilted in favor on NCDs over FY12-21, as asset quality pressures rose. Reliance on CPs was
not material at ~10% over FY15-18, which declined to negligible levels after the credit crises in FY19. Over FY18-21, share of
NCDs and CPs reduced in favor of deposits and ECB. The AUM mix has broadly been stable, with the auto segment contributing
72%. Share of CV/CE was relatively volatile, since it would have been more dependent on new auto volumes.
Exhibit 166: NCD share rose while bank funding reduced Exhibit 167: AUM mix largely stable, dominated by auto
Borrowings mix Advances Mix
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
NCD Banks Deposits CP ECB Auto / UV Tractors Cars CV / CE Pre-owned Others
Source: Company, Centrum Broking. *Incl. Securitisation Source: Company, Centrum Broking
Asset quality a problem area for MMFS: Asset quality pressure has remained a challenge for MMFS. Over FY12-18, GNPA
spiked from 2.7% to 9.8% and remained elevated thereafter (though FY19 was a slight improvement). The MSME segment was
relatively better-performing, followed by auto; agriculture remains a pain point. As with other lenders, personal loans
(unsecured) saw a sharp spike in FY21 owing to the pandemic impact. Owing to greater reliance on earn-and-pay customers,
stage-2 assets have remained elevated at 9-12% over the last five years, indicating that customers generate cash flows with a
lag. Stage 1+2 provisions as a percentage of assets have remained a bit lower at 2%.
Exhibit 168: GNPA has remained elevated Exhibit 169: Stage 1+2 provision cover not adequate
Segment-wise GNPA Stress
14.0% 14% 4.0%
12.0% 12% 3.5%
10.0% 10% 3.0%
8.0% 2.5%
8%
2.0%
6.0% 6%
1.5%
4.0% 4% 1.0%
2.0% 2% 0.5%
0.0% 0% 0.0%
Agri Auto MSME Corporate PL Overall FY17 FY18 FY19 FY20 FY21
FY17 FY18 FY19 FY20 FY21 Stage 2 Assets Stage 1+2 provisions (RHS)
xxxx
M&M Financial Services (MMFS) 16 September 2021
Exhibit 170: Stress rose; fall in FY21 due to higher PCR Exhibit 171: Leverage is at comfortable levels
Balance sheet stress Debt/Equity (x)
8% 40% 5.4
6% 30% 4.4
3.4
4% 20%
2.4
2% 10%
1.4
0% 0%
Balance sheet stress rose over the last decade: Owing to its ‘earn and pay’ customer profile, stress (defined as NNPA +
restructuring to AUM) consistently rose for MMFS. In FY18 and FY20, stress to overall equity reached as high as 35%. Stress in
FY21 seems optically lower since the management raised provisions in Q4FY21 to provide for stress that could emanate from
the effects of the second wave. This led to a significant improvement in PCR in FY21 over FY20. Stress to equity in Q1FY22
spiked to 51%. On leverage, debt to equity has stayed near 5x, barring FY18 and FY21, when MMFS raised capital.
Exhibit 172: Lower NIM coupled with higher provisions Exhibit 173: Credit costs led to lower RoEs
Du pont (to avg. assets) Return ratios (%)
12.0 6.0 4.0 25
10.0 5.0
3.2 20
8.0 4.0
2.4 15
6.0 3.0
1.6 10
4.0 2.0
2.0 1.0 0.8 5
0.0 0.0 0.0 0

Rise in credit costs impacted returns; cost control was good recently: NIM has consistently declined over the last 10 years,
mainly led by interest reversals and to some extent due to a positive ALM mix. Performance on opex was unstable, with some
periods seeing improvements with spikes in between. However, over FY19-21, the company has done well to control its
operating expenses, led by both lower employee cost and reduced overheads cost. Provisions have risen, impacting
profitability. Provision costs declined in FY18 and FY19, which only seems optically lower, since PCR also dropped sharply in
both these years, implying underprovided stress. Hence, RoA/RoE has consistently weakened.
Exhibit 174: Asset liability profile largely balanced Exhibit 175: ALM mismatch has largely been positive
100% 10
80% 8
60%
6
40%
20% 4
0% 2
A L A L A L A L A L A L A L
FY15 FY16 FY17 FY18 FY19 FY20 FY21 0
<1yr 1-3yr 3-5yr >5yr FY15 FY16 FY17 FY18 FY19 FY20 FY21
ALM mismatch with a positive tilt, as vehicle loans have a 1-3 year tenure: Over FY12-21, 80-90% of assets had a maturity of
less than three years, as vehicle loans generally have a maturity of 1-3 years. Hence, MMFS’ ALM profile was positive in the
less than 1-year bucket. The positive mismatch reduced materially in FY18, as the share of deposits, which have a longer
maturity, dropped by 5% over FY17-18. MMFS has a slight advantage in a rising interest rate environment, as assets would
mature faster than liabilities. Currently, as systemic rates are at historic lows, there is a higher likelihood of rates rising.

M&M Financial Services (MMFS) 16 September 2021
P&L Balance sheet

Interest expense 39,446 48,287 47,332 41,534 47,094 Cash 5,017 6,768 5,706 6,329 6,985
NII 46,768 51,391 55,742 50,634 51,024 Bank balance 4,568 7,490 26,991 18,988 13,969
Other income 1,884 2,773 2,095 2,263 2,297 Loans 612,496 649,935 599,474 624,566 689,249
Operating expenses 18,476 20,182 16,325 17,868 19,423 Other financial assets 1,842 5,782 5,482 2,025 2,235
Others 7,575 8,697 6,172 6,675 7,436 Current tax assets 3,021 2,400 4,017 2,444 2,698
PPOP 30,177 33,982 41,512 35,028 33,898 Deferred tax assets 3,717 4,896 8,624 5,248 5,792
Tax 8,254 4,374 873 431 4,111 Total Assets 670,780 740,712 770,365 737,986 793,460
Debt securities 223,194 177,449 168,346 152,083 158,730
AUM 22.5 7.9 (5.1) (2.0) 10.4 Non-financial liabilities 3,057 2,552 3,277 3,323 3,577
Borrowings 31.8 12.5 (1.5) (5.5) 7.6 Provisions 2,065 1,432 2,149 2,179 2,345
NII 33.5 9.9 8.5 (9.2) 0.8
Other Non-fin liabilities 853 980 989 1,144 1,231
Other income 86.8 47.2 (24.5) 8.0 1.5
Total equity 109,080 113,639 147,115 148,204 158,588
Opex 28.9 9.2 (19.1) 9.5 8.7
Share capital 1,230 1,231 2,464 2,464 2,464
PPoP 39.1 12.6 22.2 (15.6) (3.2) Other equity 107,850 112,408 144,651 145,740 156,124
Provisions 11.8 223.4 81.8 (10.8) (47.2) Total Liabilities 670,780 740,712 770,365 737,986 793,460
PAT 54.0 (41.8) (63.7) (61.1) NM Balance Sheet ratios (%)
Cost of funds 8.5 8.6 8.0 7.5 7.9
Cash / Borrowings 1.8 2.4 5.6 4.6 3.5
NIM (on AuM) 7.9 7.6 8.1 7.6 7.4
CRAR 20.3 19.6 26.0 26.2 24.3
Cost/Income 38.0 37.3 28.2 33.8 36.4 Tier-2 4.8 4.2 3.8 4.4 4.3
Others 15.6 16.1 10.7 12.6 13.9 GNPA (Rs mn) 40,706 57,467 57,859 69,606 66,198
Provisions 1.1 3.1 5.6 5.2 2.6
GNPA 6.4 8.4 9.0 11.0 9.5
Tax Rate 34.6 32.5 21.0 25.2 25.2
NNPA 5.2 5.8 3.8 5.5 5.2
RoA 2.3 1.2 0.4 0.2 1.5
PCR 19.2 31.0 57.9 50.0 45.0
RoE 15.2 8.1 2.5 0.9 8.0 NNPA / Equity 30.2 34.9 16.5 23.5 23.0
Per share (Rs)
EPS 12.7 7.4 2.7 1.0 9.9
BVPS 88.7 92.3 119.4 120.3 128.7
Interest income 14.4 14.1 13.6 12.2 12.8
ABVPS 61.9 60.1 99.7 92.1 99.2
NII 7.8 7.3 7.4 6.7 6.7 P/E 34.0 79.6 137.9 167.1 17.5
Other income 0.3 0.4 0.3 0.3 0.3 P/BV 2.7 1.8 1.2 1.2 1.1
Employee 1.8 1.6 1.3 1.5 1.6
Others 1.3 1.2 0.8 0.9 1.0
PPOP 5.0 4.8 5.5 4.6 4.4
Provisions 1.1 2.9 4.9 4.4 2.3
PBT 4.0 1.9 0.6 0.2 2.1
Tax 1.4 0.6 0.1 0.1 0.5
PAT 2.6 1.3 0.4 0.2 1.6

16 September 2021
Gaurav Jani
+91 22 4215 9110
Nippon Life AMC (NAM)

After a challenging phase, NAM improved its operating metrics over FY19-21. AUM Market data
performance was mixed over FY12-21, as equity saw a steady CAGR over FY12-19 and Current price: Rs441
debt too grew strongly over FY12-17. However, debt saw significant outflows over Bloomberg: NAM IN
FY17-20 as a fallout of the problems faced by its then promoter. Hence, market share 52-week H/L: Rs451/249
that was stable till FY17, declined thereafter. Moreover, declining debt share was
replaced by lower-yielding ETF, which led to softer operating yields over FY14-19.
However, after Nippon Life gained controlling stake, debt outflows have been Free float: 22.1%
arrested and market share has stabilized. NAM also focused on opex control, which Avg. daily vol. 3mth: 1,785,405
propelled core RoE over FY19-21. Source: Bloomberg
Debt declined post FY17; equity and ETFs saw steady growth: Debt AUM saw strong growth over FY12-17 (CAGR of 28%) and
reached an all-time high of ~Rs1trn. However, post FY17, debt AUM dropped to Rs383bn in FY20 owing to the credit crises
coinciding with leverage challenges at Reliance Capital on a consolidated level. Contrary to this, equity saw steady growth over
FY12-19 also supported by NAM’s distribution network. FY20 saw a sharp decline in equity, led by the pandemic, but rebounded
in FY21. ETFs also saw a healthy 41% CAGR over FY12-19 with a decline in FY20. AUM mix changed drastically after FY16. Debt
mix contracted from 52% in FY16 to 19% in FY21 in favour of equity (from 33% in FY16 to 42% FY21) and ETF (1% in FY16 to
17% in FY21). Liquid contribution also increased from 14% to 22% over the same time frame.
Exhibit 176: Debt declined from FY17; ETFs growth strong Exhibit 177: Debt share lost to ETFs; equity mix increasing
1000 100%
800 80%
600 60%
400 40%
200 20%
0 0%
Equity Debt Liquid ETF Equity Debt Liquid Others
Market share drop in overall and equity AUM, as well as in SIP: NAM was able to maintain overall market share over FY13-17
despite equity share falling from 14.3% to 9.7%. This was because lost equity share was offset by a strong uptick in debt AUM
over FY12-17. Post FY17, NAM lost overall and equity market share, as debt AUM contracted while equity market share was
also lost due to diverging flows resulting from increasing competition with the onset of new mutual funds. SIP flows dropped
in FY21 to ~Rs78bn from Rs101bn in FY20, and NAM lost market share from 11% to 8% over the period.
Exhibit 178: Overall share tumbling down from FY17 Exhibit 179: SIP share saw sharp drop over FY19-21
Market share SIP Flows and market share
15.0% 102 12%
12.0% 82 10%
9.0% 62 8%
6.0% 42 6%
3.0% 22 4%
0.0% 2 2%
Overall share Equity share SIP flows (Rs bn) SIP market share
Nippon Life AMC (NAM) 16 September 2021
Exhibit 180: Softer yield contraction; stable operating yields Exhibit 181: EBE marginally lower; other opex in check
Operating metrics (bps) Opex
100 36 25
80 30 20
24 15
60
18
40 10
12
20 5
6
0 0 0
Revenue yields Opex/AUM (RHS) Operating yields EBE/AUM (bps) Other exp/AUM (bps)
Operating yields dipped over FY14-18 due to lower yields and improved again due to opex control: Revenue yield to AAUM
dropped over FY13-15 from 78bp to 73bp due to share of equity being replaced by debt over FY12-14. Despite yields dropping
over FY13-14, operating yields improved due to lower fee expenses led by the full upfront model for AMCs. Yields increased in
FY16, led by rise in equity share in FY15, though operating yields dropped as distributor commissions rose. Yields dropped over
FY16-18, translating to lower operating yields, as share of equity was replaced by lower-yielding ETF. As AMCs transitioned to
the full trail model since FY19, yields and opex to AUM shrank. However, NAM controlled opex to AUM, which declined over
FY19-21, leading to better operating yields.
Exhibit 182: Core RoE was volatile Exhibit 183: Movement in core RoAuM in-line with core RoE
ROE and Payout RoAAuM
25% 113% 40
20% 93%
30
15% 73%
20
10% 53%
5% 33% 10
0% 13% 0
Core ROE ROE Payout Ratio (RHS) Core ROAUM (bps) ROAUM (bps)
Strong payout ratio helped to sustain core RoE; core RoAUM improved over FY19-21: Core RoE saw a strong surge over FY13-
15 in tandem with a sharp decline in opex to assets and increase in payout ratio. FY15-19 saw a decline in core RoE from 24%
to 21% since the share of debt was replaced by lower-yielding ETF. Payout ratio consistently remained high in line with its
dividend policy of paying 60-90% of PAT. Due to transition to Ind-AS, variation between core RoE and RoE increased since FY19,
as unrealized gains are also included in other income under Ind-AS. NAM did well to control opex over FY19-21 which saw its
core RoE/core RoAUM improve over the same time frame.
Exhibit 184: Share of Next 10 reduced over time Exhibit 185: High share from IFA/MFDs
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY20 FY21
Top 5 Next 10 Next 20 Next 75 Others IFA/MFD Banks NDs
Incremental focus on locations other than top-15; distribution skewed towards IFA/MFDs: Share of the Top 15 geographical
locations increased over FY12-16 from 80% to 85%; FY17 onwards, the company started focusing on smaller cities, which would
explain the rise in its retail flows. Share of Top 15 declined from 81% in FY17 to 77% in FY21. On distribution mix, the share of
banks fell from 28% to 22%, while that of MFD/NDs increased from 54/18% in FY20 to 57/21% in FY21. NAM is clearly increasing
reliance on IFA/MFDs.

Nippon Life AMC (NAM) 16 September 2021
P&L Balance sheet
YE March (Rs mn) FY19 FY20 FY21 FY22E FY23E YE March (Rs mn) FY19 FY20 FY21 FY22E FY23E
Employees 2,935 3,024 2,713 2,875 3,049 Employee Benefit 435 393 234 299 317
Others 3,878 2,271 1,945 2,127 2,319 Others 1,150 1,808 1,655 1,490 1,341
Fees 2,583 705 432 485 513 Cash and Bank 5,428 4,633 3,606 3,640 3,675
Core Operating Income 5,290 5,698 5,198 6,104 6,594 Investment 12,900 18,846 25,500 26,363 27,434
Other Income 1,713 (98) 3,572 1,801 2,137 Fixed Asset 2,568 3,256 3,021 3,172 3,330
Exceptional Item 0 0 0 0 0 Loans 3,696 9 7 7 7
PBT 7,002 5,600 8,770 7,905 8,731 Receivables 1,026 593 459 424 458
Tax 2,132 1,441 1,976 1,992 2,200 Others 2,141 1,472 934 1,457 1,596
PAT 4,871 4,160 6,794 5,913 6,531 Total Assets 27,758 28,808 33,527 34,634 36,035
Dividend 5,165 3,690 4,932 4,435 5,029
Retained Earnings (294) 470 1,862 1,478 1,502 Closing AuM (Rs bn)
YE March FY19 FY20 FY21 FY22E FY23E
Growth ratios (%) Closing AuM 2,278 1,635 2,118 2,405 2,636
Equity 945 625 933 1,017 1,139
AAUM 5.6 (13.8) (1.5) 20.0 9.0
Debt 752 383 423 473 529
Revenue (7.1) (18.6) (11.7) 12.1 8.0
Liquid 280 384 479 493 503
EBE 14.1 3.0 (10.3) 6.0 6.1
Others 301 244 384 422 464
PAT 6.5 (14.6) 63.3 (13.0) 10.4
Profitability Ratios (%) Closing AUM Breakup (%)
Yield on AUM 0.65 0.61 0.55 0.52 0.51 YE March FY19 FY20 FY21 FY22E FY23E
Yield on Investments 8.15 (0.49) 14.47 6.10 7.00 Overall AuM 100.0 100.0 100.0 100.0 100.0
EBE / Core Revenue 19.8 25.1 25.5 24.1 23.7 Equity 41.5 38.2 42.1 42.3 43.2
Operating Income/ Core Revenue 35.8 47.4 48.9 51.3 51.3 Debt 33.0 23.4 19.0 19.7 20.1
Other Income / Core Revenue 11.6 (0.8) 33.6 15.1 16.6 Liquid 12.3 23.5 21.6 20.5 19.1
Effective tax rate 30.4 25.7 22.5 25.2 25.2 Others 13.2 14.9 17.3 17.5 17.6
PAT Margin 32.9 34.6 64.0 49.7 50.8
ROE 19.5 16.1 23.9 18.6 19.6 AUM Growth (%)
Core RoE 21.1 23.9 21.2 22.6 24.3 YE March FY19 FY20 FY21 FY22E FY23E
ROAAUM 0.21 0.21 0.35 0.26 0.26 Overall 0.8 (28.2) 35.6 8.4 9.6
DuPont analysis (%) Equity 12.3 (33.9) 49.2 9.0 12.0
Revenue from Operations 0.65 0.61 0.55 0.52 0.51 Debt (21.8) (49.1) 10.5 11.9 11.9
Investment Mgmt. Fees 0.64 0.59 0.53 0.50 0.50 Liquid (15.3) 37.3 24.7 3.0 2.0
PMS and Advisory Fees 0.01 0.02 0.02 0.01 0.01 Others 135.9 (19.0) 57.4 10.0 10.0
Expenses 0.42 0.32 0.28 0.25 0.25
Employee 0.13 0.15 0.14 0.12 0.12
Valuations (per share)
Others 0.17 0.12 0.10 0.09 0.09
Depreciation 0.00 0.02 0.02 0.01 0.02
EPS 8.0 6.8 11.0 9.6 10.6
Fees 0.11 0.04 0.02 0.02 0.02
DPS 8.4 6.0 8.0 7.2 8.2
Core Operating Income 0.23 0.29 0.27 0.26 0.26
BVPS 42.0 42.4 50.3 52.7 55.1
Other Income 0.08 0.00 0.19 0.08 0.08
Dividend Yield 4.2 2.1 2.8 1.6 1.8
PBT 0.31 0.29 0.46 0.34 0.35
P/E 29.3 25.6 30.2 46.0 41.6
Tax 0.09 0.07 0.10 0.09 0.09
P/B 4.7 5.6 5.5 8.4 8.0
PAT 0.21 0.21 0.35 0.26 0.26
Source: Company, Centrum Research estimates
Source: Company, Centrum Research

16 September 2021
Gaurav Jani
+91 22 4215 9110
State Bank of India (SBIN)

After weakening overall performance over FY12-18, SBIN entered a new chapter post Market data
FY18. Liability mix was fairly stable over FY12-21, though the share of retail increased Current price: Rs464
and that of corporate/overseas declined. NIM compressed over FY12-18, largely led by Bloomberg: SBIN IN
rise in corporate stress, despite a favorable ALM profile. Stress was exacerbated by the 52-week H/L: Rs467/176
consolidation of regional subsidiaries in FY17. Spike in credit costs led to a significant
decline in RoE over FY12-18. However, the bank has transformed since, as stress peaked
in FY18, leading to a significant improvement in credit costs and return ratios over Free float: 33.4%
FY18-21. Being a government entity, fee income franchise remains weak. Negative Avg. daily vol. 3mth: 23,733,650
ALM profile poses a risk in a rising interest rate environment. Source: Bloomberg
Stable deposit mix; retail advances gaining share: Deposit mix has largely remained stable over the last 10 years. CASA share
has remained in a healthy range of 43-45%, while term deposits have remained near 52% over the last four years. Strong
outreach with a dominant presence pan India has led to a robust deposit franchise. Corporate/SME share in advances clearly
decreased from FY17/FY18, as industrial GNPA spiked. Corporate/SME loans dropped to 32.2/11% in FY21 from 36.2/13.3% in
FY17. As SBIN focused more on retail loans after FY17, retail share increased from 24.5% in FY17 to 34.3% in FY21. Overseas
portfolio saw a slight drop in share from 18% in FY15 to 14.1% in FY21.
Exhibit 186: Stable deposit mix; CASA healthy Exhibit 187: Clear shift to retail after high industrial stress
100% 100%
80% 80%
60% 60%
20% 21% 22% 25% 27% 28% 31% 34%
21% 20%
40% 40%
20% 20% 34% 34% 38% 38% 38% 36% 37% 37% 35% 32%
0% 0%
Term Savings Current Overseas Corporate Retail SME Agri Overseas
Significant reduction in stress after FY17: FY17 and FY18 were a double whammy for SBIN, as it faced asset quality issues on
its standalone balance sheet and was also grappling with its subsidiaries’ delinquent pool since its regional subsidiaries were
merged into it. Consequently, stressed pool to average assets rose from ~6% over FY13-16 to a peak of ~7.8% in FY21. However,
after FY17, SBIN saw a consistent decrease in stress levels to 3.3% in FY21, with bulk of the delinquent pool already provided
for. Stress to equity also reduced from 109% in FY18 to 54% in FY21. High GNPA levels (17.8%) in industries as at FY17 triggered
a shift in portfolio mix towards retail loans. Personal loans for SBIN have performed better than peers (GNPA consistently below
1%). Agri loans also remain a pain point, with GNPA rising from 8.8% in FY15 to 15.2% in FY21.
Exhibit 188: Stress peaked in FY17; fared better thereafter Exhibit 189: Agri stress around 15%; personal has been low
8% 110% 18%
15%
6% 90%
12%
4% 70% 9%
6%
2% 50%
3%
0% 30%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0%
Agri Industry Services Personal Overall
xxxxx
State Bank of India (SBIN) 16 September 2021
Exhibit 190: NIM and provision trend improving since FY18 Exhibit 191: Strong rebound in returns as provisions reduce
3.5 2.4 1.0 21
0.8 17
3.0 2.0
0.6 13
2.5 1.6
0.4 9
2.0 1.2
0.2 5
1.5 0.8 0.0 1
1.0 0.4 -0.2 -4
Strong rebound after negative returns; provisions back to normal: In tandem with asset quality pressures the bank faced over
FY12-18 that led to higher slippages and interest reversals, NIM consistently shrank from 3.4% to 2.2%. Provisions rose from
1% to 2.2% over the same time frame. This had a direct bearing on RoE that declined from 15.7% to -3.5%. However, over FY18-
21, NIM and credit costs saw an improving trajectory, as slippage ratio was controlled with most of the stress provided for.
NIM improved from 2.2% to 2.6% while provisions declined from 2.2% to 1%. Hence, RoE improved from -3.5% to 8.4%. Opex
and fee income were largely stable, with opex to assets being near 2% and fees being near 70bp.
Exhibit 192: Deposit share in liabilities increasing Exhibit 193: Advances share lost to investments over time
Liability Mix Asset Mix
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Deposits share improving; loan share decreased after FY14: Deposits share declined over FY12-16 in favor of borrowings.
While the share of deposits declined from 78% to 73%, that of borrowings increased from 9.5% to 13.7%. As its subsidiaries
were largely deposit-funded, overall deposit share post consolidation rose to 78% in FY17 and gradually to 81.2% in FY21.
Borrowing share over FY18-21 declined from 11% to 9%. Capital contribution to liabilities has broadly remained in the 6%
range. On asset mix, contrary to private banks that saw liquidity decline over a 10-year cycle, SBIN saw its share of investments
rise from 23% in FY12 to 30% FY21. Share of advances decreased to 54% in FY21 after peak of 67.6% in FY14.
Exhibit 194: Steady ALM profile; higher short-term liabilities Exhibit 195: Mismatch in <1-year bucket in 15-25% range
100% 0
80% -5
60%
-10
40%
-15
20%
-20
0%
A L A L A L A L A L A L A L A L A L A L -25
<1yr 1-3yr 3-5yr >5yr
ALM profile suggests longer-term lending and short-term borrowing: SBIN’s ALM profile has mainly remained negative in the
<1-year bucket, with higher share of short-term liabilities compared to assets. Liabilities in the <1-year bucket remain at 40-
45% levels compared to assets at 17-28%, creating negative ALM gap. The <1-year gap has been in the 20-30% range over FY16-
21. This gap poses interest rate risk to SBIN, if systemic rates are on a rising trend, as liabilities would get repriced faster than
assets. Bulk of the liabilities are concentrated in the <1-year bucket, while bulk of the assets are in the >5-year bucket, also
driven by a higher share of investments in the form of government securities.

State Bank of India (SBIN) 16 September 2021
P&L Balance sheet

Interest earned 2,428,687 2,573,236 2,651,506 2,744,291 3,116,947 Share capital 8,925 8,925 8,925 8,925 8,925
Interest expended 1,545,198 1,592,388 1,544,406 1,584,959 1,894,694 Reserves & surplus 2,200,214 2,311,150 2,529,827 2,732,377 2,972,159
Net Interest Income 883,489 980,848 1,107,100 1,159,332 1,222,253 Deposits 29,113,860 32,416,208 36,812,772 39,872,096 43,237,184
Other income 367,749 452,214 434,964 461,342 495,136 Borrowings 4,030,171 3,146,557 4,172,977 3,873,945 4,201,661
Total Income 1,251,238 1,433,063 1,542,064 1,620,674 1,717,389 Other Liabilities 1,455,973 1,631,101 1,819,797 1,936,973 2,100,830
Employees 410,547 457,150 509,360 550,109 588,616 Cash balances with RBI 1,769,325 1,667,358 2,132,016 2,437,495 2,639,729
Others 286,330 294,587 317,162 342,535 366,513 Balances with banks 455,576 843,612 1,298,372 1,117,185 1,099,887
Taxes 7,452 105,747 71,307 84,144 98,870 Other Assets 2,663,277 2,896,136 3,517,687 3,859,368 4,399,548
Ratios Ratios
RWA growth 2.0 8.9 7.2 12.2 9.4 CASA 0.0 0.0 0.0 0.0 0.0
Other income (17.5) 23.0 (3.8) 6.1 7.3 RWA / Total assets 52.4 53.1 49.6 52.1 52.6
PPoP (6.8) 22.9 5.0 1.7 4.7 CET-1 9.6 9.8 10.0 9.8 9.8
Provisions (28.3) (20.0) 2.2 (7.8) (5.5) Tier-1 10.6 11.0 11.4 11.2 11.2
Net profit nm nm 40.9 16.7 17.5 Tier-2 2.1 2.1 2.3 2.2 2.1
Cost of funds 4.8 4.6 4.0 3.7 4.2 GNPA (Rs mn) 1,727,505 1,490,925 1,263,890 1,315,786 1,359,275
NIM 2.8 2.9 3.0 2.9 2.8 NNPA (Rs mn) 658,947 518,713 368,097 421,052 462,154
Cost/Income 55.7 52.5 53.6 55.1 55.6 PCR 61.9 65.2 70.9 68.0 66.0
Tax rate 46.4 42.2 25.9 26.1 26.1 BVPS 247.5 260.0 284.5 307.2 334.0
RoE 0.4 6.4 8.4 9.0 9.8 ABVPS 0.0 0.0 0.0 0.0 0.0
RoA 0.0 0.4 0.5 0.5 0.6 Valuation (x)
RoRWA 0.0 0.7 0.9 1.0 1.1 P/E 286.7 19.1 10.4 17.4 14.8
Du-pont (%) P/BV 1.1 1.2 0.8 1.5 1.4
NII 2.5 2.6 2.6 2.5 2.4
Other income 1.0 1.2 1.0 1.0 1.0
Total income 3.5 3.8 3.6 3.5 3.4
Employee 1.2 1.2 1.2 1.2 1.2
Other 0.8 0.8 0.7 0.7 0.7
PPOP 1.6 1.8 1.7 1.6 1.5
Provisions 1.5 1.1 1.0 0.9 0.8
PBT 0.0 0.7 0.6 0.7 0.8
Tax 0.0 0.3 0.2 0.2 0.2
RoA 0.0 0.4 0.5 0.5 0.6

16 September 2021
Gaurav Jani
+91 22 4215 9110
Sundaram Finance (SUF)

SUF has been a conservative vehicle financier as suggested by its controlled asset Market data
quality and consistency in delivering returns. The funding mix has been dominated by Current price: Rs2,554
NCDs, while on the lending side, CV has been the mainstay. As the share of CP has Bloomberg: SUF IN
reduced, ALM profile has become more balanced, reducing interest rate risk. Focus 52-week H/L: Rs2,884/1,270
on asset quality control, leading to tighter credit costs, was the key highlight for SUF Market cap: Rs283.8bn
over FY12-19, although the Covid-impacted FY20 and FY21 witnessed a surge in stress.
Free float: 60.4%
Over FY15-19, as growth was a priority, NIM compressed, leading to RoE declining
Avg. daily vol. 3mth: 38,174
from 17% to 13%. Despite higher NIM in FY20/21, RoE could not improve due to
Source: Bloomberg
elevated credit costs. Opex to assets improved over FY12-21.
Share of NCD has gone up over FY17-21; share of CV declined in FY21: SUF’s funding mix was evenly divided between banks
and NCDs in FY12 at ~40%. However, FY13 saw the mix materially shifting from banks to NCDs and CPs. Bank funding was
volatile over the last 10 years. Contribution of CP reduced over FY17-21 from 26% to 3% while that of NCDs increased from
47.5% to 59%. On the lending side, CV has the maximum share, which was 52-53% over FY16-20. However, FY21 saw a sharp
decline in CV share owing to the CV slowdown over FY19-20. Contribution of cars consistently declined over FY15-21 from 37%
to 25% while that of CE improved from 6.6% to 11.2% and that of tractors enhanced over FY18-21 from 5% to 7.5%.
Exhibit 196: NCD the main funding source; bank share rises Exhibit 197: CV share at 52%; saw a decline in FY21
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY15 FY16 FY17 FY18 FY19 FY20 FY21
NCD Banks Deposits CP CV Cars CE Tractor Others
Source: Company, Centrum Broking. *Incl. Securitisation Source: Company, Centrum Broking
Best-in-class asset quality, led by solid underwriting practices: SUF’s asset quality has remained the best-in-class owing to its
conservative underwriting practices. Overall GNPA was controlled at 1.3-2% over FY15-19. FY20 saw a surge to 2.8% owing to
the sudden lockdown in March 2020, severely affecting vehicle movement. The trucking and CE segments were most impacted,
with GNPA surging ~3x. FY21 saw a reduction in GNPA to 1.8% as part of the stress was recovered while part was restructured.
Stage-2 assets rose over FY17-19 while GNPA were largely under control, indicating higher recoveries. The stage-2 pool spiked
in FY20 to 5.3% in line with GNPA. However, SUF also increased its provisions on stage 1+2 assets.
Exhibit 198: GNPA controlled, barring FY20 Exhibit 199: Stage 2 assets rose more in FY20 due to Covid
Segment-wise GNPA Stress
9.0% 6% 90
7.5% 5% 75
6.0% 4% 60
4.5% 3% 45
3.0% 2% 30
1.5% 1% 15
0.0% 0% 0
Truck Auto Infra Agri Others Overall FY17 FY18 FY19 FY20 FY21
FY15 FY16 FY17 FY18 FY19 FY20 FY21 Stage 2 Stage 1+2 provisions bps (RHS)
xxxxx
Sundaram Finance (SUF) 16 September 2021
Exhibit 200: Stress spiked in FY21 due to restructuring Exhibit 201: Debt/Equity at comfortable levels
Balance sheet stress Debt to Equity (x)
6% 30% 6.0
5% 25% 5.0
4% 20% 4.0
3% 15% 3.0
2% 10% 2.0
1% 5%
1.0
0% 0%
Balance sheet stress surged in FY21; leverage reduced over FY12-16: Overall balance sheet stress as defined by NNPA +
restructuring was consistently under control for SUF over FY12-19 below 1%. It surged to 1.9% in FY20 owing to GNPA rise and
further to 5.2% in FY21 due to increase in restructuring to 4.4%. The dispensation was targeted towards segments severely
impacted by the Covid-19 pandemic: education (school bus operators), transportation (staff and route bus operators),
travel/tourism (tour operators, taxi operators) and market-load operators hit by lack of demand for their services as well as
rising fuel prices. Debt to equity consistently declined over FY12-16 from 6x to 4x, and has remained near 4x since.
Exhibit 202: NIM contracted over FY15-19 led by CV share Exhibit 203: Though NIM dropped, consistency was the key
6.0 3.0 2.5 25
5.0 2.5 2.0 20
4.0 2.0
1.5 15
3.0 1.5
2.0 1.0 1.0 10
1.0 0.5 0.5 5

0.0 0.0 0.0 0
NIM PPoP Opex (RHS) Provisions (RHS) RoA RoE (RHS)
Rise in credit costs impacted returns; cost control was good recently: NIM consistently declined over FY15-19, as the share of
CV rose and focus was more on growth than pricing. This also led to a dip in RoE from 17% to 13% over the same time frame.
Being a conservative auto financier, credit cost was well under control at 20-60bp over FY12-19. NIM uptick in FY20 and FY21,
led by incremental credit flow to the higher-yielding segments, could not translate to better RoE, as credit cost rose from 40bp
in FY19 to 100bp in FY20 and remained elevated in FY21. SUF did well on opex to assets, which improved from 2.5% in FY16 to
1.7% in FY21, led by slower branch/employee accretion while cost per employee also reduced.
Exhibit 204: ~85% of assets in <3-year bucket Exhibit 205: ALM profile has turned more balanced
100% 8
80% 4
0
60%
-4
40%
-8
20%
-12
0%
A L A L A L A L A L A L A L -16
FY15 FY16 FY17 FY18 FY19 FY20 FY21 -20
<1yr 1-3yr 3-5yr >5yr FY15 FY16 FY17 FY18 FY19 FY20 FY21
ALM mismatch became more balanced over FY16-20: The <1-year bucket saw a surge over FY15-16 owing to rise in shorter
term bank funding. However, over FY16-19, as shorter maturity CP funding reduced, ALM became more balanced. Shift to a
more balanced ALM profile reduces the interest rate risk on the balance sheet and NIM would depend more on product mix.
80-90% of assets had a maturity of less than three years, as vehicle loans generally have a tenure of 1-3 years.

Sundaram Finance (SUF) 16 September 2021
P&L Balance sheet

Interest expense 17,665 20,720 20,307 20,238 22,705 Cash 1,298 190 1,024 1,011 1,153
NII 13,040 15,025 16,702 17,515 19,021 Bank balance 7,088 6,108 5,908 6,740 7,684
Other income 2,716 2,924 3,133 3,760 4,112 Loans 272,715 280,447 294,039 316,343 360,681
Operating expenses 5,730 6,234 6,111 6,672 7,432 Other financial assets 1,050 1,135 331 1,085 1,151
Others 2,506 2,648 2,289 2,499 2,754 Current tax assets 1,183 1,598 2,230 2,343 2,560
PPOP 10,026 11,715 13,724 14,603 15,701 Deferred tax assets 801 1,231 1,589 1,669 1,824
Tax 2,912 2,071 2,473 2,871 3,450 Total Assets 306,492 334,195 349,525 370,086 416,788
Debt securities 104,795 147,395 146,929 163,176 185,215
AUM 16.1 3.3 3.2 9.1 14.0 Non-financial liabilities 745 475 488 536 590
Borrowings 18.5 9.3 3.2 5.0 13.0 Provisions 514 307 241 265 292
NII 5.2 15.2 11.2 4.9 8.6
Other Non-fin liabilities 231 168 247 271 298
Other income 0.5 7.6 7.2 20.0 9.4
Total equity 50,438 55,474 61,795 68,015 75,491
Opex (0.2) 8.8 (2.0) 9.2 11.4
Share capital 1,111 1,111 1,111 1,111 1,111
PPoP 7.2 16.8 17.1 6.4 7.5 Other equity 49,327 54,363 60,683 66,904 74,380
Provisions 25.5 166.8 10.4 1.6 (37.4) Total Liabilities 306,492 334,195 349,525 370,086 416,788
PAT 7.2 12.2 19.3 5.3 20.2 Balance Sheet ratios (%)
Cost of funds 7.7 7.9 7.3 7.0 7.2
Cash / Borrowings 3.4 2.3 2.5 2.6 2.6
NIM (on AuM) 4.6 4.9 5.3 5.2 5.1
CRAR 19.4 18.4 22.1 19.3 18.9
Cost/Income 36.4 34.7 30.8 31.4 32.1 Tier-2 4.8 5.2 6.9 5.4 5.3
Others 15.9 14.8 11.5 11.7 11.9 GNPA (Rs mn) 3,670 7,881 6,831 8,908 7,402
Provisions 0.4 1.0 1.0 1.0 0.6
GNPA 1.3 2.8 2.3 2.8 2.0
Tax Rate 32.5 23.4 23.4 25.2 25.2
NNPA 0.8 1.9 1.3 1.9 1.3
RoA 2.0 2.1 2.3 2.3 2.5
PCR 37.7 31.3 41.3 33.2 33.8
RoE 13.2 12.8 13.8 13.1 14.3 NNPA / Equity 4.5 9.8 6.5 8.7 6.5
Per share (Rs)
EPS 54.4 61.0 72.8 76.7 92.2
BVPS 454.0 499.3 556.2 612.2 679.5
Interest income 10.1 10.6 10.4 10.1 10.1
ABVPS 433.4 450.6 520.1 558.6 635.3
NII 4.3 4.5 4.7 4.7 4.6 P/E 25.3 26.1 22.0 33.2 27.6
Other income 0.9 0.9 0.9 1.0 1.0 P/BV 3.1 3.4 2.9 4.2 3.7
Employee 1.1 1.1 1.1 1.1 1.1
Others 0.8 0.8 0.6 0.7 0.7
PPOP 3.3 3.5 3.9 3.9 3.8
Provisions 0.4 0.9 0.9 0.9 0.5
PBT 2.9 2.6 3.0 3.0 3.3
Tax 1.0 0.6 0.7 0.8 0.8
PAT 2.0 2.0 2.3 2.3 2.5

16 September 2021
Gaurav Jani
+91 22 4215 9110
Ujjivan Small Finance Bank (USFB)

USFB, originally an NBFC-MFI, faced three challenges–deposit accretion after Market data
conversion to an SFB, reduction of unsecured loan share, operating cost control, and Current price: Rs21
stress largely emanating from MFI. FY20 and FY21 saw a substantial improvement in Bloomberg: UJJIVANS IN
performance parameters barring asset quality. Build-up of RTD+CASA (41% of total 52-week H/L: 45/18
funding) was slow initially but gathered steam in the last two years. Operating
leverage and cost control started after FY19. The non-MFI portfolio increased from
2.4% in FY17 to 30% in FY21. However, since unsecured loans account for a large share Free float: 16.7%
of GLP, the bank saw a steep rise in delinquent pool in FY18 and FY21 as a fallout of Avg. daily vol. 3mth: 7,631,983
demonetization and Covid-19, respectively, leading to a surge in provisions. Source: Bloomberg
Deposits gaining traction albeit with a slow start; secured loan share rising: Originally an NBFC-MFI, USFB relied
predominantly on term loans (mainly bank loans) prior to FY18. After conversion to a bank, it began to focus on deposit
accretion and building a secured loan book. Deposit build-up in terms of RTD and CASA was slow initially, contributing 11% to
total deposits in FY18. FY19 saw good traction on CASA+RTD, which contributed 37% to total deposits. Over Q3FY20-Q4FY21,
CASA consistently increased from 11.6% to 20.5%, while RTD stagnated at ~33%. On the loan mix side, USFB had a 100%
unsecured portfolio over FY12-16, being MFI loans. Although the secured portfolio originated in FY15, it started meaningfully
contributing since FY18 (7.3%). This share has risen to 30% in FY21 with Housing & MSE making up for 22%.
Exhibit 206: Deposit build-up while slow picked up in FY20/21 Exhibit 207: Over FY17-21 secured pool rose from 2.4% to 30
Funding mix Advances mix
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Inst TD RTD CASA CD Refinance TL Others GL IL Hsg MSE FIG Rural Others
FY18 and FY21 were challenging for the MFI space: As with other MFI players, USFB is exposed to systemic event risks which
may affect marginal borrowers. The bank witnessed major stress in FY18 due to demonetization, with GNPA spiking from 0.3%
in FY17 to 3.7% in FY18. Rise in net stress (NNPA+restructuring) to average assets is not visible in FY18, since adequate
provisions were created (PCR at 81%), while there was no restructuring. The Covid-related asset quality pain was much greater
in FY21 that saw GNPA rise to 7%, while net stress also spiked to 7% of average assets. The strain was more for USFB compared
to peers due to higher MFI exposure, that too in urban areas.
Exhibit 208: Demonetization and Covid the pain points Exhibit 209: GNPA spiked to 3.7%/7% in FY18/21
Balance sheet stress GNPA
7.5% 50% 10.5%
9.0%
6.0% 40%
7.5%
4.5% 30%
6.0%
3.0% 20% 4.5%
1.5% 10% 3.0%
1.5%
0.0% 0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0.0%
Agri Industry Services Personal Overall
Stress to avg. assets Stress to equity (RHS) FY17 FY18 FY19 FY20 FY21
xxxxx
Ujjivan Small Finance Bank (USFB) 16 September 2021
Exhibit 210: Bank conversion led to opex rise Exhibit 211: Return ratios marred in demon and Covid years
Du pont (to avg. assets) Return ratios (%)
12.0 4.8 4.0 20
10.0 4.0 3.2 16

8.0 3.2 2.4 12
6.0 2.4
1.6 8
4.0 1.6
0.8 4
2.0 0.8
0.0 0.0 0.0 0
Operating metrics saw an improving trend in FY20: Opex is a key monitorable, especially in case of NBFC-MFIs, which require
a higher customer interface. Operating leverage and asset sweating over FY12-16 led to improvement in opex to assets ratio
from 11.2% to 6.3%. However, after conversion to a bank, opex surged to 8.6% in FY19 due to branch conversion and IT spends.
Over FY19-21, opex has been well controlled from 8.6% to 6.3%. NIM was 10%+ over FY12-17; however, due to SLR
requirements post conversion to a bank and lower loan growth led by demonetization, NIM declined in FY18 and FY19. Elevated
opex levels in FY12 and provision surge in FY18 and FY21 wiped out the return ratios for those years.
Exhibit 212: Deposit share increasing since FY19 Exhibit 213: SLR needs led to lower loan share post FY16
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Deposits gaining traction; loan share reduced due to bank conversion: Initially an NBFC, USFB mainly relied on external
borrowings as a source of funding; its share in total liabilities was 75-80% over FY12-17. Post SFB conversion, deposits started
gaining traction in FY18 that saw deposit share increase to 40% from 2.4%. Over FY18-21, the share of deposits rose from 40%
to 64.5% while that of borrowings declined from 41% to 16%. Within deposits, the share of RTD+CASA improved over the same
time frame. On assets, the share of loans has largely been 77-90% over FY12-21, barring FY17 and FY21 that were characterized
by systemic shocks. Due to SLR requirements, investment share rose post FY16.
Exhibit 214: As secured share rose, asset tenure increased Exhibit 215: Higher secured+RTD share led to balanced ALM
100% 40
80% 30
60% 20
40% 10
20% 0
0% -10
ALM profile more balanced post SFB conversion: Over FY12-17, USFB’s ALM profile suggested a positive difference in the >1-
year bucket, since MFI loans are generally shorter term. After bank conversion, share of longer maturity assets and liabilities
increased, since share of secured assets/G-Secs on the asset side and share of RTD in deposits increased. This translated to a
more balanced ALM profile after FY17, which decreases the interest rate risk for USFB. In terms of maturity profile, bulk of the
assets and liabilities are concentrated in the less than 1-year bucket.

Ujjivan Small Finance Bank (USFB) 16 September 2021
P&L Balance sheet

Provisions 406 1,710 7,991 7,103 4,127 Advances 105,525 140,436 144,940 166,686 208,415
Profit before tax 2,684 4,662 102 1,173 6,833 Fixed Assets 2,844 3,005 2,807 3,182 3,940
Taxes 692 1,163 19 296 1,722 Other Assets 2,842 3,282 5,118 6,365 7,141
Net Profit 1,992 3,499 83 877 5,111 Total assets 137,422 184,113 203,805 230,488 276,103
Ratios Ratios
RWA growth 35.3 19.9 6.0 14.0 24.0 CASA 10.6 13.5 20.5 23.0 26.1
NII 28.5 47.6 5.8 (1.5) 20.1 Assets/equity (x) 7.6 5.8 6.3 7.0 7.3
Other income 84.8 56.4 (3.5) 15.8 25.0 RWA / Total assets 65.4 58.5 56.0 56.5 58.5
PPoP (3.3) 106.2 27.0 2.3 32.4 Tier-1 18.4 28.0 25.1 22.2 20.6
Provisions (86.9) 321.2 367.3 (11.1) (41.9) Tier-2 0.6 0.8 1.4 1.0 1.0
Net profit 2,802.9 75.6 (97.6) 957.1 482.5 CRAR 18.9 28.8 26.4 23.2 21.6
Profitability (%) Asset quality ratios (%)
Yield on assets 16.5 18.1 15.9 14.5 15.3 GNPA (Rs mn) 979 1,371 10,706 15,990 13,238
Cost of funds 7.6 8.1 6.9 6.4 7.0 NNPA (Rs mn) 275 275 4,246 6,398 4,888
NIM 9.9 10.9 9.8 8.7 8.9 GNPA 0.9 1.0 7.1 9.1 6.1
Other income / Total inc. 15.7 16.5 15.2 17.5 18.0 NNPA 0.3 0.2 2.9 3.8 2.3
Other inc. / avg assets 1.8 2.0 1.6 1.7 1.8 PCR 71.8 80.0 60.3 60.0 63.1
Cost/Income 76.5 67.4 60.3 59.9 56.1 Slippage 1.1 1.4 7.4 11.0 4.1
Employee 39.5 36.7 36.7 35.3 33.4 NNPA / Equity 1.5 0.9 13.2 19.5 13.0
Other 36.9 30.7 23.6 24.6 22.7 Per share
Opex/ Avg assets 8.6 8.2 6.3 5.7 5.5 EPS 1.4 2.0 0.0 0.5 3.0
Provisioning cost 0.5 1.4 5.6 4.6 2.2 BVPS 11.2 17.2 17.2 17.6 20.4
Tax rate 25.8 24.9 18.6 25.2 25.2 ABVPS 11.1 17.0 14.8 13.9 17.6
RoE 11.5 14.0 0.3 2.7 14.5 Valuation (x)
RoA 1.7 2.2 0.0 0.4 2.0 P/E 18.3 NM NM 40.6 7.0
RoRWA 2.5 3.5 0.1 0.7 3.5 P/BV 2.2 2.8 2.0 1.2 1.0
Du-pont (%) P/ABV 2.2 3.3 2.4 1.5 1.2
Interest income 15.8 16.8 14.5 13.1 13.9 Source: Company, Centrum Broking
Interest expenses 6.2 6.7 5.6 5.2 5.8
NII 9.5 10.2 8.9 7.8 8.1
Other income 1.8 2.0 1.6 1.7 1.8
Total income 11.3 12.2 10.5 9.5 9.9
Employee 4.5 4.5 3.9 3.4 3.3
Other 4.2 3.7 2.5 2.3 2.2
PPOP 2.7 4.0 4.2 3.8 4.3
Provisions 0.3 1.1 4.1 3.3 1.6
PBT 2.3 2.9 0.1 0.5 2.7
Tax 0.6 0.7 0.0 0.1 0.7
RoA 1.7 2.2 0.0 0.4 2.0

16 September 2021
Gaurav Jani
+91 22 4215 9110
UTI AMC
The past decade was a tad challenging for UTI AMC. It witnessed a fall in market share, Market data
with equity flows being impacted over FY15-19 resulting from vacuum created after Current price: Rs1,175
senior management changes in FY15. Debt also saw sharp contraction after FY18, as Bloomberg: UTIAM IN
a fallout of the NBFC credit crisis. Consequently, equity and debt share was affected, 52-week H/L: Rs1,217/471
translating to higher share of ETFs/liquid. Revenue yields contracted sharply over
FY14-20. Core returns were further impacted, as opex to AUM could not reduce, as
seen with other peers, due to elevated employee expense while payout ratio was sub- Free float: 54.8%
optimal. However, UTI is on the mend, with market share improving in FY21 due to Avg. daily vol. 3mth: 505,264
better performance. Payout ratio would be better henceforth. Source: Bloomberg
Equity and ETFs saw strong growth; debt contracted: Debt AUM grew consistently from FY13 at a CAGR of 14.6% to reach a
peak of Rs609bn in FY18, but contracted thereafter to Rs350bn in FY21 due to the credit crises that spooked the NBFC space.
Equity grew steadily at a CAGR of 15.7%, except for FY20 on account of the pandemic. ETFs registered strong growth from FY17
at 84.3% CAGR to Rs425bn, surpassing debt and liquid AUM in FY21. Closing AUM mix changed dramatically from FY19, as debt
AUM started contracting and lost share to growing ETFs and equities. Debt mix contracted from 53% in FY13 to 20% in FY21
while Equity/Liquid/ETFs grew from 36%/10%/1% in FY13 to 38%/18%/24% in FY21.
Exhibit 216: Debt AUM down; upswing in equity and ETFs Exhibit 217: ETFs capture debt’s share in the mix from FY18
700 100%
600
80%
500
400 60%
300 40%
200
20%
100
0 0%
Equity Debt Liquid ETF Equity Debt Liquid ETF
Market share reduced over FY13-19, though improved marginally in FY21 due to better performance: Overall market share
stabilized at sub-6% levels from FY18 after a drop in share from 8.3% in FY13. UTI was able to sustain market share after FY18
despite lost debt AUM on account of strong uptick in ETFs and equities for the same period. Equity market share dropped from
11% in FY13 to 4.9% in FY18 and stabilized thereafter at similar levels on account of better equity fund performance in recent
years when compared to the peers. Share in SIP flows dropped to 1.3% in FY21 from 3.4% in FY20 despite increase in flows
from Rs29.5bn in FY20 to ~Rs32bn in FY21.
Exhibit 218: Market share stabilized from FY18 Exhibit 219: FY21 saw a reversal in SIP flow trends
Market Share SIP flows and market share
12% 35.0 4.0%
10% 30.0 3.5%
8% 25.0 3.0%
20.0 2.5%
6%
15.0 2.0%
4% 10.0 1.5%
2% 5.0 1.0%
0% 0.0 0.5%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY18 FY19 FY20 FY21
Overall share Equity share SIP flows (Rs bn) SIP market share
UTI AMC 16 September 2021
Exhibit 220: Operating margins declining Exhibit 221: Overall opex drops but remains higher than peers
Revenue and opex yields (bps) Opex
91 40 35
81 36 30
71 32
25
61 28
51 24 20
41 20 15
31 16 10
21 12
5
11 8
1 4 0
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Revenue yields Opex/AUM (RHS) Operating yields EBE/AUM (bps) Other exp/AUM (bps)
Revenue yields saw a sharper decline than opex, affecting operating margins: Operating yields increased over FY14-16 since
the share of higher yielding equity rose over FY13-15 from 36% to 41%. As the industry shifted to a combination of upfront and
trail commissions after FY15, yields also contracted, though for UTI, the share of equity declined over FY15-18 led by top
management changes in FY15, which also contributed to contraction in revenue yields. Over FY18-21, operating yields fell
further due to shift to full trail model, drastic decline in debt share in favour of ETF and liquid, and a less sharp reduction in
opex to AUM compared to peers led by higher employee cost.
Exhibit 222: Core RoE depressed also led by lower payout Exhibit 223: Core RoAUM contracting, led by operating yields
RoE and pay-out ROAUM (bps)
20% 50% 35
16% 40% 30
25
12% 30% 20
8% 20% 15
10
4% 10%
5
0% 0% 0
Core ROE ROE Payout Ratio (RHS) ROAUM Core ROAUM
Operating yield contraction with lower payout ratio impacted core RoE: Core RoE moved in tandem with a decline in revenue
yields that could not be offset by a sharp decline in opex to AUM as seen with other AMCs. However, core RoE was also affected
by a lower payout ratio compared to peers over FY14-20 averaging 20%. The company has partly rectified this by introducing
a dividend policy at the time of its listing, which states that the company would declare dividend equivalent to 50% or more of
the standalone PAT. Hence, this ratio improved considerably in FY21. There is a significant difference between core and overall
returns, especially in FY21 due to the unrealized gains included in other income.
Exhibit 224: Market-leading share from low-tier cities Exhibit 225: Direct channels dominate in equity
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Overall Equity
Top 5 Next 10 Next 20 Next 75 Others IFAs Direct BND
UTI continues to see high share from low tier-cities; direct channels have clear preference: Share from Top 5 cities bottomed
out in FY15 at 44% and increased thereafter to 60% in FY21. However, it remains low when compared to peers, which is positive
for UTI, as expense ratios and fees that can be charged are higher in lower-tier cities. Share of Next 10 also reduced from 15%
in FY13 to 10% in FY21. Other cities’ share averaged at about 13%, which is higher than peers. Share of Next 75 remained
relatively flat. Direct channels clearly dominate the distribution mix, with 59/62% share in FY20/21. Banks/MFD share in
distribution mix continues to be low compared to its peers.

UTI AMC 16 September 2021
P&L Balance sheet
YE March (Rs bn) FY19A FY20A FY21A FY22E FY23E YE March (Rs bn) FY19A FY20A FY21A FY22E FY23E
Employee benefit 3,067 3,399 3,795 3,867 3,645 Employee Benefit 590 1,726 1,715 1,324 1,248
Other Expenses 2,596 1,723 1,774 2,031 2,163 Others 1,470 1,433 1,631 1,655 1,680
Fees and Commission 21 29 30 37 40 Cash and Bank 1,242 1,193 2,060 2,060 2,060
Operating Income 3,061 2,392 2,110 4,408 5,493 Investment 22,614 23,558 27,469 29,005 31,609
Other Income 1,905 1,021 3,921 2,109 1,784 Fixed Asset 2,687 3,737 3,647 3,824 4,010
PBT 4,966 3,413 6,030 6,518 7,281 Receivables 929 933 748 1,169 1,279
Tax 1,447 664 1,087 1,369 1,528 Others 1,833 2,233 2,725 2,974 3,124
PAT 3,519 2,749 4,943 5,148 5,749 Total Assets 29,304 31,654 36,649 39,031 42,083
Dividend 764 692 2,155 2,317 2,702 Closing AUM (Rs bn)
Retained Earnings 2,755 2,057 2,788 2,832 3,047 Overall 1,423 1,178 1768 1,915 2,090
Growth ratios (%) Equity 499 413 667 667 739
AAuM 5.4 (6.5) 13.3 25.0 8.7 Debt 486 308 350 350 364
Revenue from Operations (7.9) (11.5) 2.4 32.2 9.5 Liquid 265 240 326 326 333
EBE (4.6) 10.8 11.7 1.9 (5.8) Others 174 217 425 425 479
PAT (11.3) (21.9) 79.8 4.2 11.7 Closing AUM Breakup (%)
Profitability Ratios (%) Overall 100.0 100.0 100.0 100.0 100.0
Yield on AUM 0.64 0.61 0.55 0.58 0.58 Equity 35.0 35.1 37.7 38.6 39.6
Yield on Investments 6.9 2.48 13.8 6.0 4.5 Debt 34.2 26.1 19.8 19.0 18.8
EBE / Core Revenue 34.4 43.1 47.0 36.3 31.2 Liquid 18.6 20.4 18.5 17.4 16.1
Operating Income/ Core Revenue 34.4 30.4 26.2 41.3 47.0 Others 12.2 18.4 24.0 25.0 25.5
Other Income / Core Revenue 21.4 13.0 48.6 19.8 15.3 Closing AUM Growth (%)
Effective tax rate 29.1 19.5 18.0 21.0 21.0 AuM 4.7 (17.2) 50.1 8.3 9.1
PAT Margin 39.5 34.9 61.3 48.3 49.3 Equity 11.2 (17.1) 61.4 10.8 12.0
ROE 13.9 10.1 16.4 15.2 15.7 Debt (20.2) (36.7) 13.6 4.1 8.1
Core RoE 8.6 7.1 7.8 14.9 17.5 Liquid 28.7 (9.4) 36.2 2.0 1.0
ROAAAUM 0.25 0.21 0.34 0.28 0.29 Others 80.5 24.8 95.5 12.9 11.1
Core RoAAuM 0.16 0.15 0.12 0.19 0.22 Valuations
DuPont analysis (%) EPS 27.8 21.7 39.0 40.6 45.3
Revenue from Operations 0.64 0.61 0.55 0.58 0.58 DPS 6.0 5.5 17.0 18.3 21.3
Investment Management Fees 0.63 0.60 0.55 0.58 0.58 BVPS 209 220 255 278 302
PMS and Advisory Fees 0.01 0.00 0.00 0.00 0.00 Dividend Yield - 1.0 3.1 2.1 2.5
Expenses 0.42 0.42 0.40 0.34 0.31 P/E 0.0 14.0 13.5 28.9 25.9
Fees and Commission 0.00 0.00 0.00 0.00 0.00 P/B 0.0 2.1 2.0 4.2 3.9
Employees 0.22 0.26 0.26 0.21 0.18 Source: Company, Centrum Broking
Depreciation 0.01 0.03 0.02 0.02 0.02
Other Expenses 0.19 0.13 0.12 0.11 0.11
Operating Income 0.22 0.18 0.14 0.24 0.27
Other Income 0.14 0.08 0.27 0.11 0.09
PBT 0.36 0.26 0.41 0.35 0.36
Tax 0.10 0.05 0.07 0.07 0.08
PAT 0.25 0.21 0.34 0.28 0.29
Core PAT 0.16 0.15 0.12 0.19 0.22

16 September 2021
Milind Raginwar
Research Analyst, Cement
+91 22 4215 9201
[email protected]
SECTOR: CEMENT & BUILDING MATERIALS
ACC
ACC’s operating profits have remained steady over the decade. Of the cumulative Market data
OCF of Rs143bn, ACC incurred Rs66bn on capex, largely on improving operating Current price: Rs2,430
efficiencies. New capacity addition was limited. With stable working capital, Bloomberg: ACC IN
operating cash flows followed a trend similar to operating profits. Additionally, 52-week H/L: Rs2,509/1,294
limited capex funded through internal accruals helped the company to maintain
negative debt. With less focus on adding capacities (organic or inorganic), balance
sheet strengthened consistently, but reflected in limited momentum in return ratios Free float: 43.3%
over the decade. Avg. daily vol. 3mth: 632,645
Source: Bloomberg
Volatile cash flows from operations: Operating profit began and ended the decade almost at the same level after being
subdued over CY13-17 due to macroeconomic conditions. OCF followed an almost similar path, but with higher volatility.
Working capital remained stable and range-bound, with negligible volatility.
Exhibit 226: Cash flows from operations have followed the trend in operating profit, but with higher volatility
30
25
20
15
Rs bn
10
5
-
-5
-10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Operating profit Wcap changes CFO
Analysis of working capital movement: With capacity maintained over the decade, ACC has managed its working capital
efficiently, as evidenced by its consistently negative NWC. Gradual increase in payable days coupled with marginal fall in
inventory and debtor days has led to a further fall in NWC in the recent years. Inventory management has been prudent,
driven by reliance on a judicious mix of fuels procured from domestic and overseas sources.
Exhibit 227: No working capital stress
150
100
In days of revenue
50
0
-50
-100
Receivable Inventory Payable NWC
xxxxx
ACC 16 September 2021
300% 140%
250% 120%
100%
200%
80%
150%
60%
100%
40%
50% 20%
0% 0%
CY17
CY11
CY12
CY13
CY14
CY15
CY16
CY18
CY19
CY20
CY11
CY12
CY13
CY14
CY15
CY16
CY17
CY18
CY19
CY20
Minimal capacity expansions and negligible acquisitions led to free cash proportionate with operating cash: Apart from
expansions of 1.1mtpa at Jamul and 1.4mtpa at Sindri (both commissioned in CY16), ACC has incurred marginal capex,
especially towards waste heat recovery system (WHRS), with focus on cost reduction. Net FCF (excluding marketable
securities) has remained in proportion to operating cash flows. Positive cash flows helped to fund capex internally, with no
requirement of leverage. Against the cumulative OCF of Rs143bn, capex of Rs66bn was incurred.
Exhibit 230: Low capex intensity aids free cash flows
30 Expansion at Jamul (Chhattisgarh) and
Sindri (Jharkhand)
20
10
Rs bn
-10
-20
CFO Capex Acquisitions and Investments Net FCF
Exhibit 231: Asset turn

Asset turn (x) 0.8 0.9 0.9 0.9 0.9 0.8 0.9 1.0 1.0 0.8
Negative net debt; no equity raised in 10 years: Cash accruals funded capex, leading to no debt requirement over the
decade. In fact, there was marginal repayment of debt, leading to negative net debt.
Exhibit 232: Balance sheet concerns minimal due to strong cash balances
Leverage ratios (x) CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Net Debt/Equity -0.3 -0.4 -0.3 -0.2 -0.2 -0.3 -0.3 -0.3 -0.4 -0.5
Net Debt/EBITDA -1.3 -1.4 -1.7 -1.1 -1.3 -1.7 -1.4 -1.5 -1.9 -2.5
Profitability has declined over the last decade: Return ratios have deteriorated over the decade, with some signs of
improvement in the last two years. With increased focus on cost rationalization in the recent years, especially considering its
Par vat project, we might see some improvement in return ratios in the coming years.
Exhibit 233: Profitability impacted after starting the decade well
RoE 16.1 17.7 10.9 14.0 8.9 7.6 9.3 15.2 11.1 14.2
RoCE 21.0 23.4 15.0 10.1 9.3 7.7 9.6 10.4 11.3 12.2
Exhibit 234: Net FCF has stayed strong as capacity expansion was limited
Rsbn CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Net FCF 11.7 9.6 0.1 -3.6 7.5 10.1 7.1 1.9 19.0 13.5
Equity raised 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.0
Increase / (decrease) in debt -0.1 -3.5 -1.3 -0.4 0.4 0.1 0.1 -0.6 0.0 0.0

ACC 16 September 2021
P&L Balance sheet

Operating Expense 99,952 1,05,807 89,913 1,10,197 1,26,053 Reserves & surplus 1,03,397 1,13,333 1,24,735 1,39,455 1,56,923
Employee cost 8,811 8,640 8,391 8,632 8,891 Shareholders fund 1,05,277 1,15,213 1,26,614 1,41,335 1,58,803
EBITDA 20,446 24,095 24,811 31,745 36,813 Total debt 0 0 0 1,300 1,950
Interest expenses 892 862 570 544 545 Total liabilities 1,11,908 1,21,635 1,30,376 1,46,397 1,64,515
Other income 1,021 1,276 1,824 0 0 Gross block 88,292 93,484 95,891 1,01,961 1,23,671
Taxes 4,883 6,726 5,422 8,892 10,185 Net block 70,013 69,426 64,384 64,839 79,734
Minority/Associates 5,006 0 2,694 0 0 Non Current Assets 0 0 0 0 0
Revenue 12.0 6.0 (12.1) 24.6 14.2 Other current liab. 11,826 14,331 14,949 17,003 17,538
EBITDA 12.0 17.8 3.0 28.0 16.0 Provisions 1,668 2,575 2,294 1,616 1,670
Margins (%) Total assets 1,11,908 1,21,635 1,30,376 1,46,397 1,64,515
Gross 86.1 84.3 83.6 85.0 84.7
EBITDA 13.8 15.4 18.0 18.5 18.8 Cashflow
ROE 15.2 11.1 14.2 14.1 14.4 Net Interest 0 0 0 0 0
ROCE 10.4 11.3 12.2 12.8 13.5 Net Change – WC (7,085) 3,898 2,493 10,117 2,986
Inventory 42 27 24 22 23 Investments 0 0 0 0 0
Net working capital (36) (47) (71) (77) (79) Net cash from investing (5,279) (5,630) (5,220) (14,553) (10,345)
Solvency (x) FCF 1,948 19,031 13,489 20,245 21,278
Interest coverage ratio 22.9 27.9 43.5 58.4 67.5 Increase/(decrease) in debt (592) 0 0 1,300 650
Adjusted EPS 80.2 65.0 91.5 100.6 115.2 Others 5,089 (483) 2,670 0 0
BVPS 560.3 613.2 673.8 752.2 845.1 Net cash from financing 1,102 (3,652) 41 (1,337) (3,525)
CEPS 112.0 97.0 125.3 134.9 151.2 Net change in Cash 3,049 15,378 13,530 18,908 17,753
Dividend payout (%) 18.7 19.3 15.3 18.9 16.5
Valuation (x)
P/E 30.3 37.4 26.5 24.2 21.1
P/BV 4.3 4.0 3.6 3.2 2.9
EV/EBITDA 20.8 17.1 16.0 12.0 9.9
Dividend yield (%) 0.6 0.6 0.6 0.8 0.8

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Ambuja Cement (ACEM)

ACEM funded the acquisition of majority stake (50.05%) in ACC in 2016 through Market data
internal cash accruals (~Rs35bn). It did not weaken the balance sheet by adding Current price: Rs430
debt. Over CY11-20, ACEM generated cumulative OCF of Rs196bn and its capex was Bloomberg: ACEM IN
Rs63bn, including the ~Rs35bn for ACC’s acquisition. Post-acquisition synergies are 52-week H/L: Rs443/197
not yet fully evident – ACEM’s performance has been impacted. Additionally, while
equity-backed acquisition has expanded the base, it has not supported earnings,
impacting ACEM’s return ratios post 2016 (following the acquisition). Free float: 29.3%
Avg. daily vol. 3mth: 4,204,744
Source: Bloomberg
Stable cash flows from operations: Operating profits, which lost strength post CY12 due to adverse macroeconomic
conditions, have begun to show some improvement at the end of the decade in CY19 and CY20, and have once again reached
CY12 levels. Operating cash flows have been consistent, except for CY18, impacted by working capital. Working capital turned
volatile from CY16, following the investment in ACC.
Exhibit 235: Steady and healthy cash flows from operations
40
30
20
Rs bn
10
-10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
-20
Analysis of working capital movement: Net working capital (NWC) days remained stable in the middle years after worsening
at start of the decade in CY12 due to fall in creditor days. NWC days have improved towards the end of the decade, once
again entering the negative zone with the help of simultaneous fall in inventory and receivable days in CY20. Well controlled
receivable days due to higher exposure to the trade segment (80-85%) and pan-India presence enabling better inventory
management (synergies post ACC acquisition) have aided working capital improvement in the second half of the decade.
Exhibit 236: Working capital cycle has improved towards the end of the decade
80
60
In days of revenue
40
20
0
-20
-40 Receivable Inventory Payable NWC

xxxxx
Ambuja Cement (ACEM) 16 September 2021
250% 160%
140%
200%
120%
150% 100%
80%
100% 60%
40%
50%
20%
0% 0%
CY11
CY12
CY13
CY14
CY15
CY16
CY17
CY18
CY19
CY20
CY11
CY12
CY13
CY14
CY15
CY16
CY17
CY18
CY19
CY20
Limited capacity expansions, one major acquisition funded by accumulated free cash: The major highlight of the decade on
the expansion front was the acquisition of 50.05% stake in ACC (indirectly via Holcim India), along with some minor
expansions of 2.6mtpa at Pali and 0.75mtpa at Sankrail. Operating and free cash flows showed good stability, with FCF
following the direction of OCF, with limited capex. Effectively, against OCF of Rs196bn, ACEM incurred capex of Rs63bn.
Exhibit 239: Capex intensity and free cash flows
50 50.05% stake acquired in ACC
-
Rs bn
-50
-100
-150
Exhibit 240: Asset turn impacted following ACC’s acquisition

Asset turn (x) 0.8 0.8 0.7 0.7 0.7 0.5 0.5 0.5 0.5 0.5
No leverage requirement; negative net debt: Internal cash flows funded ACEM’s limited capex requirements and the ACC
deal involving a Rs35bn outflow. ACEM is a net cash company. Net Debt/Equity has decreased since CY16 post the increase in
equity as a consequence of the ACC acquisition.
Exhibit 241: Leverage ratios stay in comfort zone
Leverage ratios (x) CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Net Debt/Equity -0.3 -0.4 -0.4 -0.4 -0.5 -0.1 -0.2 -0.2 -0.2 -0.1
Net Debt/EBITDA -1.4 -1.5 -2.4 -2.3 -3.2 -1.4 -1.8 -1.7 -2.2 -1.1
Exhibit 242: No major concerns on FCF except in the year of ACC’s acquisition
Rs bn CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Net FCF 9.6 12.1 8.9 12.7 12.2 -100.5 17.0 2.4 17.3 23.0
Equity raised 0.8 0.8 0.2 0.5 0.3 110.5 -0.5 0.4 0.1 0.0
Increase / (decrease) in debt -0.2 0.0 0.0 -0.2 0.0 0.0 -0.1 0.1 0.0 0.1
Profitability has been impacted, with return ratios declining after a good start to the decade: Synergies from the ACC
acquisition are still not fully evident. With a higher value of equity (denominator) post the acquisition and stable profits
(numerator), return ratios have been impacted after a good start to the decade. In the recent years of CY19/CY20, there is
some improvement, but return ratios are still far from the levels seen at the start of the decade.
Exhibit 243: Profitability on a downtrend after stellar start to the decade
RoE 15.4% 18.7% 11.3% 12.7% 8.5% 6.7% 6.3% 6.8% 9.0% 10.9%
RoCE 21.3% 24.8% 15.9% 12.6% 8.2% 8.2% 8.1% 8.7% 9.9% 11.3%

Ambuja Cement (ACEM) 16 September 2021
P&L Balance sheet

Operating Expense 1,68,312 1,73,705 1,47,156 1,90,108 2,15,953 Reserves & surplus 2,19,734 2,36,808 2,23,605 2,32,091 2,62,199
Others 36,782 35,738 32,767 38,019 42,050 Minority Interest 52,312 57,368 63,409 72,857 83,678
EBITDA 40,108 45,970 50,056 66,811 77,929 Total debt 480 775 4,644 4,689 4,735
Interest expenses 1,705 1,699 1,402 1,291 1,330 Total liabilities 2,87,562 3,08,290 3,01,889 3,19,993 3,61,097
Other income 2,899 5,281 4,096 3,574 3,591 Gross block 1,61,559 1,72,448 1,77,061 1,95,869 1,98,683
Taxes 8,185 10,922 8,848 16,581 20,852 Net block 1,23,653 1,23,481 1,15,565 1,22,527 1,12,999
Effective tax rate (%) 26.8 28.3 21.3 28.8 30.6 Capital WIP 91,253 96,716 1,10,996 91,438 98,060
PAT 22,393 27,632 32,684 40,909 47,218 Net fixed assets 2,16,441 2,22,558 2,29,078 2,16,481 2,13,574
Minority/Associates (7,828) (6,682) (7,270) (9,232) (10,597) Non Current Assets 0 0 0 0 0
Extraordinary items (1,518) 0 (1,760) 0 0 Inventories 29,579 20,965 16,486 21,354 24,717
Cash & Cash Equivalents 64,393 93,546 89,356 1,28,110 1,83,990
Adj. EPS (3.9) 43.8 21.3 24.6 15.6 Net current assets 68,904 83,576 70,182 1,02,270 1,46,281
Gross 86.1 85.1 85.8 86.3 85.5
EBITDA 15.4 17.0 20.4 21.5 22.1 Cashflow
ROE 6.8 9.0 10.9 13.7 14.6 Net Interest 0 0 0 0 0
Gross block turnover ratio (x) 1.6 1.5 1.4 1.6 1.7 Capital expenditure (12,006) (17,177) (19,050) 750 (9,434)
Inventory 42 31 24 22 24 Investments (227) 62 (473) 1,387 (1)
Net working capital 15 11 (6) (11) (9) Net cash from investing (12,233) (17,116) (19,522) 2,137 (9,435)
Solvency (x) FCF (1,064) 34,272 30,029 61,685 62,122
Interest coverage ratio 23.5 27.1 35.7 51.8 58.6 Increase/(decrease) in debt (1,446) (1,331) 2,641 261 271
Adjusted EPS 7.3 10.6 12.8 16.0 18.4 Others 10,449 2,637 4,811 (16,679) 0
BVPS 112.6 121.3 114.6 118.9 134.0 Net cash from financing 3,141 (5,119) (34,217) (22,931) (6,242)
CEPS 13.1 16.4 18.6 21.9 24.7 Net change in Cash 2,077 29,152 (4,189) 38,754 55,880
Dividend payout (%) 42.6 26.5 151.1 17.6 15.2
Valuation (x)
P/E 58.9 40.8 33.6 27.0 23.3
P/BV 3.8 3.5 3.8 3.6 3.2
EV/EBITDA 19.7 16.6 15.4 10.9 8.7
Dividend yield (%) 0.7 0.7 4.2 0.7 0.7

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Cera Sanitaryware (CRS)

CRS has tread a balanced path over the decade – expansion has aided growth without Market data
impacting its balance sheet strength. Working capital stress has been higher due to the Current price: Rs4,394
unorganized segment’s extended credit period. A level playing field was created only Bloomberg: CRS IN
towards the fag end of the decade with the introduction of GST and ban of coal usage. 52-week H/L: Rs4,895/2,214
Working capital stress has been moderating in the last couple of years, though this has
been negated by slow growth (demonetization + GST impact). CRS has maintained
balance sheet health; however, the challenging business environment, diversification Free float: 41.9%
into tiles, and fierce competition have impacted its growth. Avg. daily vol. 3mth: 25,592
Source: Bloomberg
Improved cash flows from operations: CRS has shown consistent growth in its operating profits over the decade, multiplying
nearly four times with the help of expansions. However, the Covid pandemic led to a decline in FY20 operating profits. CRS
has faced working capital challenges throughout the decade with increased capex intensity. This also led to a proportionate
lowering of operating cash conversion, though cash flows remained positive and improved over the decade.
Exhibit 244: Cash flows from operations have improved over the decade
3,000
2,500
2,000
1,500
1,000
Rs mn
500
-
-500
-1,000
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-1,500
Analysis of working capital movement: The overall working capital strength had been poor, contributed by rising debtors
and lower payable days. Facing some impact of a growth company, debtors have been rising whereas creditors have
remained stable but lower (after falling from an unstainable high level at decade initiation), not allowing any improvement in
the high NWC line. Inventory days have also remained stable but high comparatively (to fuel growth and retain market share)
after some improvement at the start of the decade, all of which are impacting NWC days.
Exhibit 245: Extended receivable days/higher inventory have led to higher working capital days
140
120
In days of revenue
100
80
60
40
20
0
xxxxx
Cera Sanitaryware (CRS) 16 September 2021
300% 180%
160%
250%
140%
200% 120%
100%
150%
80%
100% 60%
50% 40%
20%
0% 0%
FY16
FY11
FY12
FY13
FY14
FY15
FY17
FY18
FY19
FY20
FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Expansions aided growth without too much impact on FCF conversion: CRS expanded its sanitaryware capacity to 3.2mn
pieces per year (2mn pieces in FY11) and doubled its faucet ware capacity to 2.34mn pieces per year. As capex was incurred
in the mid-decade period, when profits were stronger, FCF remained positive. Being a growth company, CRS has had to rely
marginally on debt and equity to fund its expansions, though improved cash flows helped it to repay debt during periods of
lower capex. Effectively, against cumulative OCF of Rs7.4bn, gross debt raising of Rs843mn, and equity raising of Rs717mn
during the decade, CRS incurred cumulative capex of Rs5.2bn.
3,000
2,500
2,000
1,500
Rs mn
1,000
500
-
-500
-1,000
-1,500

Exhibit 249: Healthy asset turn

Asset turn (x) 1.1 1.2 1.4 1.6 1.5 1.3 1.1 1.2 1.2 1.0 1.0
Exhibit 250: Conservative balance sheet approach helps maintain decent free cash; could be detrimental to growth
Rs mn FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net FCF 50 -168 31 238 -433 507 185 191 91 204 187
Equity raised 5 0 0 0 706 0 0 0 0 6 -3
Increase / (decrease) in debt 107 97 135 -128 199 -15 171 -83 -56 135 -149
Negligible leverage requirement helps keep leverage ratios stable and lower: Healthy profits and cash flows implied lower
debt requirement. Net Debt/Equity hovered around 0.1x, helping to maintain a healthy balance sheet.
Exhibit 251: Consistently maintained healthy leverage ratios, with capex backed by internal accruals
Leverage ratios (x) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity -0.1 0.1 0.1 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1
Net Debt/EBITDA -0.1 0.3 0.3 0.1 -0.1 0.0 0.2 0.3 0.3 0.5 0.4
Profitability and balance sheet consistently strong, supporting growth: Return ratios have remained strong. With profits
and balance sheet moving in tandem, there has been negligible impact on return ratios (FY20 being an outlier). Timely
expansions have supported growth.
Exhibit 252: Healthy return ratios sustained throughout the decade
Return Ratios (%) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
RoE 26.5 25.6 29.0 25.7 23.5 21.6 21.1 18.3 17.6 15.4 12.3
RoCE 30.3 28.9 32.8 21.8 21.1 18.8 18.1 16.8 15.6 13.3 10.5

Cera Sanitaryware (CRS) 16 September 2021
P&L Balance sheet

Others 887 918 800 910 1,046 Minority Interest 103 77 117 109 140
Taxes 652 243 340 404 542 Net block 3,801 4,147 3,952 3,889 3,722
PAT 1,151 1,105 999 1,244 1,584 Net fixed assets 4,049 4,391 4,168 4,272 4,039
Minority/Associates 0 27 8 (30) (30) Non Current Assets 0 0 0 0 0
Recurring PAT 1,151 1,132 1,007 1,215 1,555 Investments 127 306 320 157 157
Cash & Cash Equivalents 110 21 104 252 906
Growth (%) Trade payables 1,109 953 1,554 1,264 1,519
EBITDA 11.8 (16.5) (4.5) 14.0 25.0 Provisions 95 132 127 102 141
Gross 55.4 55.6 49.1 54.5 54.2
EBITDA 14.7 13.5 12.9 13.2 13.7 Cashflow
ROE 17.6 15.4 12.3 13.1 14.9 Net Interest 0 0 0 0 0
ROCE 15.6 13.3 10.5 11.6 13.3 Net Change – WC (53) (53) 1,462 (739) (581)
ROIC 13.7 12.1 9.6 10.8 13.0 Direct taxes (649) (246) (378) (497) (403)
Turnover (days) Net cash from operations 1,323 1,367 2,744 668 1,402
Inventory 55 68 66 56 53 Investments (612) (504) (2,459) 33 (447)
Net working capital 89 99 75 58 61 Net cash from investing (1,232) (1,163) (2,557) (326) (473)
Solvency (x) FCF 91 204 187 341 929
Net debt-equity 0.1 0.1 0.1 0.0 0.0 Issue of share capital 0 6 (6) 0 0
Interest coverage ratio 23.2 16.5 16.2 23.9 30.8 Increase/(decrease) in debt (56) 135 (149) 1 (75)
Net debt/EBITDA 0.3 0.5 0.4 0.2 (0.1) Dividend paid (188) (408) 0 (201) (201)
Adjusted EPS 88.5 87.0 77.4 93.4 119.5 Others 26 (26) 51 7 1
BVPS 538.9 593.1 670.3 751.6 855.7 Net cash from financing (218) (293) (104) (194) (275)
CEPS 110.0 116.8 107.9 120.6 146.2 Net change in Cash (127) (89) 82 147 654
Dividend payout (%) 13.6 29.9 0.0 13.9 10.9
Valuation (x)
P/E 49.7 50.6 56.8 47.1 36.8
P/BV 8.2 7.4 6.6 5.9 5.1
EV/EBITDA 29.2 35.1 36.6 32.0 25.3
Dividend yield (%) 29.2 35.1 36.6 32.0 25.3

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Heidelberg Cement India (HEIM)

HEIM’s capacity expansion in the initial years helped improve working capital due to Market data
better economies of scale. This aided prudent use of inventory after the initial Current price: Rs276
challenging years due to capex. As HEIM gets over 80% of its revenue from the trade Bloomberg: HEIM IN
segment, receivables have been under control. Capacity expansion took a back seat 52-week H/L: Rs285/174
in the latter part of the decade, and in the absence of major capex, the company
generated free cash flows equivalent to operating cash flows. However, this has
capped growth, and increasing competition and minimal cost levers will add to Free float: 27.5%
HEIM’s challenges. Avg. daily vol. 3mth: 405,254
Source: Bloomberg
Cash flows from operations improved after capacity expansion in CY13: Operating profits have improved over the last 5-6
years post capacity expansion of ~3mtpa in CY13. However, the halt in capex has limited further growth. Working capital has
stabilized in recent years along with operating profits. Effectively, HEIM has been able to maintain its operating cash flow.
The company faced constraints in the initial phase of the decade largely due to lower economies of scale, but capacity
addition helped stabilize OCF in the years following the capex.
Exhibit 253: Cash flows from operations
10
8
6
4
Rs bn
2
-
-2
-4 CY11 CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Analysis of working capital movement: NWC, which was stable in the first half of the decade, strengthened in the second
half, post capacity expansion. As operating capacity nearly doubled and economies of scale improved, NWC showed a
declining trend, aided by a decline in inventory days. Additionally, focus on the trade segment has kept receivable days well
under check. Collectively, this led to an improvement in HEIM’s working capital in the second half of the decade.
Exhibit 254: Net working capital turned negative after new capacity addition in CY13
80
60
In days of revenue
40
20
0
CY11 CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-20
-40
xxxxx
Heidelberg Cement India (HEIM) 16 September 2021
1000% 300%
Growth distorted
due to change in 200%
750%
reporting from
CY to FY 100%
500%
0%
250%
-100%
0%
CY11
CY12
CY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
-200%
-250%
-300%
CY11
CY12
CY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
-500%
Source: Company, Centrum Broking*FY15 includes first three months of CY14, (15 months) Source: Company, Centrum Broking
Limited capacity expansions, no acquisitions – FCF a function of OCF: Its sole capacity expansion of 3mtpa in Central India in
the early part of the decade has enabled HEIM to earn range-bound operating/free cash flows in the later part of the decade.
Effectively, of the Rs18bn OCF generated during the decade, Rs8.2bn was incurred on capex and residual was used for debt
repayment (Rs9.6bn repayment since FY15).
20
15 Sold 0.6mtpa
3mtpa
grinding unit
10 expansion in
to JSW Steel
Central India
5
Rs bn
-
-5
-10

Source: Company, Centrum Broking *FY15 includes first three months of CY14, (15 months)
Exhibit 258: Asset turn steady

Asset turn (x) 0.6 0.5 0.5 0.7 0.9 0.8 0.8 0.8 0.8 0.8
Exhibit 259: Improvement in FCF as capex takes a back seat towards the end of the decade
Rs bn CY11 CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net FCF -6.8 -4.8 -3.1 15.7 1.0 -1.0 3.3 1.6 3.9 3.2
Equity raised 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Increase / (decrease) in debt 7.8 2.5 3.3 -4.3 -2.4 -0.8 -0.8 0.7 -1.3 -0.4
Source: Company, Centrum Broking *FY15 includes first three months of CY14,(15 months)
Leverage has declined to nil due to improved operating performance and no capex: With no capex post CY13, cash flows
helped reduce leverage. HEIM’s Net Debt/Equity and Net Debt/EBITDA stands at nil as at FY20. However, with no further
capacity expansion, further growth could be restrained for HEIM.
Exhibit 260: Strong balance sheet aids healthy leverage ratios
Leverage ratios (x) CY11 CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity 0.6 1.1 1.5 0.9 0.8 0.6 0.3 0.2 0.0 -0.1
Net Debt/EBITDA 6.9 12.3 13.8 2.5 2.9 2.1 0.9 0.5 0.0 -0.2
Improved profitability reflected in return ratios, though muted growth concerns remain: HEIM is utilizing its limited
capacity effectively, leading to above par improvement in overall performance, reflecting in increasing EBITDA and return
ratios. HEIM is also benefiting from higher realizations prevalent in its region. However, growth concerns coupled with entry
of new big players (Ultratech, JK Cement, Birla Corporation) may lead to loss in market share and affect future profitability.
Exhibit 261: Profitability has improved, resulting in strong return ratios
Return Ratios (%) CY11 CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
RoE 3.6 3.7 -5.4 -0.1 4.0 8.2 12.1 19.9 21.6 17.7
RoCE 3.9 3.2 0.0 0.0 7.1 8.4 10.6 16.1 17.9 17.2

Heidelberg Cement India (HEIM) 16 September 2021
P&L Balance sheet

Taxes 1,210 1,300 1,304 1,411 1,732 Net block 17,368 16,811 16,438 15,710 15,106
Effective tax rate (%) 35.4 32.7 34.3 33.0 33.0 Capital WIP 172 279 266 4,000 3,250
Reported PAT 2,203 2,681 3,148 2,864 3,516 Sundry debtors 253 257 333 375 474
EBITDA 37.3 9.2 (2.6) 0.2 19.5 Provisions 2,540 2,839 2,372 3,133 3,224
Adj. EPS 81.0 21.7 (6.7) 14.5 22.8 Net current assets 1,438 2,659 2,022 267 4,315
Gross 83.0 82.7 83.3 81.8 82.7
EBITDA 22.7 24.3 24.1 22.4 22.9 Cashflow
ROE 19.9 21.6 17.8 18.6 20.8 Net Interest 0 0 0 0 0
ROCE 16.1 17.9 17.2 18.0 19.8 Net Change – WC (1,720) 108 248 1,204 (441)
ROIC 17.6 20.6 20.7 20.8 25.3 Direct taxes (741) (701) (1,269) (1,217) (1,519)
Gross block turnover ratio (x) 1.0 1.0 0.9 1.0 1.1 Capital expenditure (399) (527) (725) (4,031) 308
Net working capital (29) (29) (22) (34) (29) Net cash from investing (399) (527) (725) (4,031) 308
Solvency (x) FCF 1,554 3,838 3,276 1,256 4,642
Net debt-equity 0.2 0.0 (0.2) (0.1) (0.3) Issue of share capital 0 0 632 (632) 0
Interest coverage ratio 6.5 7.1 10.1 13.9 15.7 Increase/(decrease) in debt 657 (1,263) (2,834) 184 325
Net debt/EBITDA 0.5 0.0 (0.5) (0.3) (0.8) Dividend paid (793) (1,020) (1,813) (1,360) (1,360)
Adjusted EPS 9.7 11.8 11.0 12.6 15.5 Others (165) (226) 350 0 0
BVPS 51.7 58.0 65.9 69.7 79.2 Net cash from financing (302) (2,509) (3,665) (1,808) (1,035)
CEPS 14.2 16.6 15.9 17.2 20.1 Net change in Cash 1,253 1,330 (389) (552) 3,607
Dividend payout (%) 36.0 38.0 57.6 47.5 38.7
Valuation (x)
P/E 28.4 23.3 25.0 21.8 17.8
P/BV 5.3 4.8 4.2 4.0 3.5
EV/EBITDA 12.2 10.9 11.7 11.8 9.3
Dividend yield (%) 1.3 1.6 2.9 2.2 2.2

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
JK Cement (JKCE)
JKCE’s free cash flow conversion from operating cash flow has been impacted, but Market data
this is typical of capex-heavy industries. Higher capex intensity impacted OCF Current price: Rs710
conversion to FCF in the mid-decade years and towards the end of the decade post Bloomberg: JKLC IN
the capacity expansion in the northern region. However, capacity expansion has 52-week H/L: Rs816/244
helped improve profitability and return ratios. With strong operating performance
and prudent working capital management, JKCE has been able to restrict the impact
on operating cash flows. Its cash flow management has also improved following the Free float: 51.7%
stability of newly-added capacities. Avg. daily vol. 3mth: 736,859
Source: Bloomberg
Consistent cash flows from operations: JKCE’s operating profits have been following the growth trend consistently over the
decade except for a hit in FY14. Cash flows have also been consistent and profits have strengthened. Working capital has
been range-bound with minimal volatility.
Exhibit 262: Consistent growth in cash flows from operations
15
10
Rs bn
-5
Analysis of working capital movement: Along with operating profits, net working capital (NWC) has shown strong
improvement in the later part of the decade. This is evident from the sustained fall in NWC since FY15 and its entry into
negative territory by FY20, aided by lower inventory days, higher payable days and flat debt or days. The more cautious
receivables approach has kept debtor days under check while a judicious mix of multiple fuels helped to improve inventory
days. Collectively, this has helped to improve WC management.
Exhibit 263: Working capital cycle has improved over the decade
100
80
In days of revenue
60
40
20
0
-20
-40
xxxxx
JK Cement (JKCE) 16 September 2021

350% 90%
300% 80%
70%
250%
60%
200% 50%
150% 40%
100% 30%
20%
50%
10%
0% 0%
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY11
FY12
FY13
FY14
FY15
FY16
FY20
FY21
Doubling of capacity impacted OCF to FCF conversion: Expansions at Mangrol (2.5mtpa), Jhajjar (1.5mtpa), Aligarh (1.5mtpa)
and Nimbahera (1mtpa) in the gray cement segment doubled JKCE’s capacity to 14mtpa by the end of the decade. JKCE also
doubled its white cement capacity and expanded its product portfolio by adding wall putty (both having capacity of 1.2mtpa
by FY20). These expansions impacted FCF in the capex-intensive years. The expansions were funded by debt, marginal equity
raise, and internal accruals. There was no major acquisition during the decade. Against cumulative OCF of Rs38bn, net debt
of Rs17bn, and additional equity of Rs5bn, JKCE incurred capex of Rs40bn.
15 Mangrol and Jhajjar Aligarh, Nimbahera and
expansion, wall putty entry, Mangrol expansion
10 white cement expansion
5
Rs bn
-5
-10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-15

Asset turn (x) 0.7 0.7 0.8 0.6 0.6 0.7 0.7 0.8 0.8 0.7 0.7
Exhibit 268: Capex mode kept net FCF subdued

Rs bn FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net FCF -0.9 3.4 -1.0 -9.5 0.8 -0.6 0.8 4.6 (4.2) 0.1 2.2
Equity raised 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.5
Increase / (decrease) in debt 3.2 -2.1 0.7 10.7 2.5 1.1 0.2 -2.2 -0.4 3.3 4.0
Moderate leverage: Rapid expansions necessitated leverage (partial capex funded by debt), as indicated by the rise in
leverage ratios during the capex period. However, with consistent improvement in operating performance, leverage ratios
declined towards the end of the decade.
Exhibit 269: Leverage declined in the second half of the last decade
Net Debt/Equity 0.7 0.4 0.5 1.1 1.3 1.3 1.1 0.8 0.6 0.7 0.5
Net Debt/EBITDA 3.7 1.3 1.5 5.3 4.7 4.6 3.4 2.6 2.5 1.8 1.4
Exhibit 270: Profitability has improved, resulting in strong return ratios

RoE 4.7 12.7 14.5 5.6 9.4 6.2 15.4 17.4 12.7 19.1 22.3
RoCE 6.7 13.8 14.5 5.2 8.3 7.2 11.2 12.0 9.6 13.2 14.4

JK Cement (JKCE) 16 September 2021
P&L Balance sheet

YE Mar (Rs mn) FY19A FY20A FY21A FY22A FY23A YE Mar (Rs mn) FY19A FY20A FY21A FY22A FY23A
Interest expenses 2,221 2,229 2,232 2,615 2,874 Total liabilities 56,470 63,216 75,124 85,771 1,00,694
Taxes 1,487 2,516 3,897 4,372 5,518 Net block 36,260 43,056 46,469 45,985 64,573
Extraordinary items 0 (1,782) 0 0 0 Inventories 5,705 6,272 6,867 8,048 10,377
YE Mar FY19A FY20A FY21A FY22A FY23A
Revenue 8.3 9.7 15.5 12.2 20.4 Other current liab. 3,197 5,924 7,866 6,572 6,638
EBITDA 5.1 49.0 27.3 18.0 24.5 Provisions 449 1,511 1,266 1,346 1,391
Adj. EPS (18.0) 78.0 33.0 18.0 29.1 Net current assets 4,632 7,781 14,079 12,863 14,929
Margins (%) Total assets 56,470 63,216 75,124 85,771 1,00,694
Gross 83.0 84.1 83.1 83.0 82.1
EBITDA 15.2 20.7 22.8 23.9 24.8 Cashflow
EBIT 11.3 16.7 18.8 20.2 21.5 YE Mar (Rs mn) FY19A FY20A FY21A FY22A FY23A
ROE 12.7 19.1 22.2 21.8 23.1 Net Interest 0 0 0 0 0
ROCE 9.6 13.2 14.4 14.4 15.4 Net Change – WC 765 (1,379) (1,660) 2,848 (3,189)
Inventory 42 42 40 39 40 Investments (3,702) 4,385 (2,408) (728) (266)
Net working capital -25 -10 2 (3) (1) Net cash from investing (10,514) (4,823) (7,501) (13,550) (14,442)
Solvency (x) FCF (4,180) 83 2,186 (1,993) (4,708)
Net debt-equity 0.6 0.7 0.5 0.5 0.5 Issue of share capital 4,520 0 729 (657) 7
Interest coverage ratio 3.4 5.0 6.4 6.4 7.3 Increase/(decrease) in debt (388) 3,324 4,046 4,927 4,575
Net debt/EBITDA 2.5 1.8 1.4 1.4 1.4 Dividend paid (407) (1,630) 0 (1,085) (904)
Adjusted EPS 42.1 74.9 99.6 117.5 151.7 Others (123) (322) (1,654) 7 7
BVPS 378.4 404.9 492.6 587.6 727.9 Net cash from financing 3,601 1,372 3,121 3,192 3,685
CEPS 70.6 102.6 131.3 151.1 187.7 Net change in Cash (579) 1,455 5,307 1,198 (1,023)
Dividend payout (%) 10.7 33.8 0.0 10.2 6.6
Valuation (x)
P/E 81.8 46.0 34.5 29.3 22.7
P/BV 9.1 8.5 7.0 5.9 4.7
EV/EBITDA 38.0 25.7 20.1 17.3 14.1
Dividend yield (%) 0.1 0.5 0.0 0.3 0.3

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
JK Lakshmi Cement (JKLC)

Market data
JK Lakshmi Cement (JKLC) stayed in the expansionary phase in the initial part of the
Current price: Rs3,441
decade, when it added grinding/integrated units with a focus on spreading across
regions. This put stress on its cash flows. JKLC relied more on pet-coke (proportion Bloomberg: JKCE IN
was dominant/fully-reliant, 100%); hence, inventory holding period was longer and 52-week H/L: Rs3,863/1,460
that kept working capital on a positive trajectory. Despite better fuel mix, JKLC’s Market cap: Rs265.9bn
realization continued to be weak, impacting overall financial performance. This also Free float: 40.5%
impacted D/E in the mid-decade years. This should be corrected in the near future, Avg. daily vol. 3mth: 93,108
with incremental cash flows generated in FY20/FY21. Source: Bloomberg
Steady cash flows from operations: Operating profits have been improving since FY17, post capacity enhancement and with
supportive macroeconomic factors. Working capital has remained healthy for most part of the decade and the temporary
surge in FY17 and FY19 was caused by sudden hike in other current liabilities. Operating cash flows have remained a function
of operating profits and working capital.
Exhibit 271: Operating profit consistently improving since FY17
12
10
8
6
Rs bn
4
2
-
-2
Analysis of working capital movement: Except in the last three years, net working capital (NWC) days were in the positive
range due to higher inventory holding period. JKLC was ~100% reliant on pet coke as fuel, resulting in higher inventory days.
Exhibit 272: Contrary to industry trend, JKLC’s NWC days have been positive for most of the decade
80
60
In days of revenue
40
20
0
-20
-40
xxxxx
JK Lakshmi Cement (JKLC) 16 September 2021
1000% 160%
140%
800% 120%
100%
600%
80%
400% 60%
40%
200%
20%
0% 0%
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Capacity trebled during last decade, temporarily impacting FCF conversion: Multiple expansions were commissioned during
the decade, including Durg (2.7mtpa), Jharli (1.3mtpa) and Surat (1.4mtpa), which trebled JKLC’s capacity to 13.3mtpa. FCF
was impacted during the periods when capex was being incurred. For most of the period, the company struggled to generate
positive free cash flows. The marginal movement in investments can be majorly attributed to commissioning of 1.6mtpa
capacity by its subsidiary, Udaipur Cement Works Ltd (UCWL), with no acquisition executed during the decade. Effectively,
against Rs31bn OCF generation and Rs12bn debt raised, capex incurred was Rs33bn and debt repaid was Rs5bn.
15
Commissioned
expansions at Jharli,
10
Durg, Sirohi, Kalol
5
Rs bn
-5
-10

Asset turn (x) 0.5 0.6 0.7 0.6 0.6 0.6 0.7 0.8 0.9 0.9 0.9
Exhibit 277: FCF a mixed bag

Net FCF -1.6 -2.3 -3.0 -2.4 -3.7 -1.3 1.5 1.1 3.5 2.8 8.4
Equity raised 0.0 0.0 -0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Increase/(decrease) in debt 1.0 0.8 2.7 3.0 2.9 1.1 0.9 -1.5 -4.1 -1.5 0.2
Capex payoff helps to bring down leverage in the latter half of the decade: Partial funding for expansions via debt led
leverage ratios to increase in the middle of the decade. Net Debt to EBITDA also soured to ~6x. However, leverage ratios
improved during the latter half of the decade, as new capacities (particularly in the eastern region) helped generate higher
profits and cash flows, which in turn helped repay debt partially.
Exhibit 278: Leverage ratios improved in the second half of the last decade
Net Debt/Equity 0.4 0.5 0.8 1.0 1.3 1.4 1.2 1.1 0.8 0.6 0.1
Net Debt/EBITDA 2.2 1.7 2.3 4.3 5.6 6.8 4.5 3.8 3.0 1.5 0.2
Exhibit 279: Profitability impacted for several years, though improvement has begun
RoE 5.7 13.3 15.8 8.7 8.3 1.3 6.0 5.9 5.2 16.4 20.8
RoCE 6.2 11.5 13.0 7.2 6.6 4.8 7.5 8.5 8.8 16.9 19.6

JK Lakshmi Cement (JKLC) 16 September 2021
P&L Balance sheet

Taxes 272 1,042 1,328 1,136 1,284 Net block 26,318 27,845 27,397 27,099 27,045
PAT 772 2,655 3,946 3,596 4,066 Net fixed assets 30,501 29,556 28,895 28,171 33,117
Recurring PAT 772 2,655 3,946 3,596 4,066 Investments 3,573 3,673 3,673 3,673 3,673
Extraordinary items 0 (302) (309) 0 0 Inventories 3,117 4,128 3,155 4,932 5,538
Reported PAT 772 2,352 3,637 3,596 4,066 Sundry debtors 1,066 882 537 1,557 1,963
EBITDA 0.9 62.0 17.5 (2.2) 8.3 Provisions 286 151 186 675 696
Adj. EPS (8.0) 243.7 48.7 (8.9) 13.1 Net current assets (2,718) (1,231) 3,755 7,736 7,211
Gross 75.0 78.9 75.3 75.4 75.3
EBITDA 10.7 16.6 18.0 16.3 16.3 Cashflow
ROE 5.2 16.4 20.8 16.1 15.9 Net Interest 0 0 0 0 0
ROCE 6.5 12.1 14.9 13.1 13.1 Net Change – WC 2,994 (789) 3,690 (3,860) (2,090)
ROIC 6.9 14.5 20.6 21.0 18.7 Direct taxes (272) (838) (891) (1,627) (1,284)
Gross block turnover ratio (x) 1.2 1.1 1.2 1.2 1.2 Capital expenditure (2,065) (782) (1,266) (1,173) (6,875)
Net working capital (9) (23) (29) (36) (28) Net cash from investing (2,065) (782) (1,266) (1,173) (6,875)
Solvency (x) FCF 3,496 2,870 8,425 (32) (2,969)
Net debt-equity 0.8 0.6 0.1 0.1 0.2 Issue of share capital 0 0 0 0 0
Interest coverage ratio 2.2 4.1 5.5 4.5 4.6 Increase/(decrease) in debt (4,076) (1,462) 225 703 905
Net debt/EBITDA 3.0 1.5 0.2 0.3 0.7 Dividend paid (106) (461) (441) (471) (471)
Adjusted EPS 6.6 22.6 33.5 30.6 34.5 Others (19) (249) 467 (79) (79)
BVPS 129.4 145.5 176.6 202.5 232.4 Net cash from financing (4,201) (2,171) 250 153 355
CEPS 21.8 38.6 50.0 46.7 50.9 Net change in Cash (705) 699 8,676 120 (2,614)
Dividend payout (%) 13.8 19.6 12.1 13.1 11.6
Valuation (x)
P/E 108.2 31.5 21.2 23.2 20.5
P/BV 5.5 4.9 4.0 3.5 3.1
EV/EBITDA 23.1 13.9 10.8 11.1 10.7
Dividend yield (%) 0.1 0.6 0.5 0.6 0.6

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Kajaria Ceramics (KJC)

KJC has been above par, with strong operating cash flows, healthy capacity expansion, Market data
and well-maintained balance sheet health. Extended credit periods by the unorganized Current price: Rs1,180
segment (Morbi manufacturers) had stretched the receivable days of organized players Bloomberg: KJC IN
like KJC. Also, demonetization and the introduction GST towards the end of the decade 52-week H/L: Rs1,229/485
impacted industry growth. KJC’s capex intensity has stayed higher, affecting its free
cash flows, but aiding growth. Increasing operating cash flows together with some
equity raising have enabled KJC to repay outstanding debt and become debt-free. Free float: 94.3%
Source: Bloomberg
Moderate conversion of operating profits to OCF: In the initial part of the decade, KJC’s operating profits saw consistent
growth, trebling over FY11-17. However, growth has taken a pause since then, hit by demonetization, GST, and capacity
expansion. Being in the growth phase, KJC’s working capital has been unfavorable for most part of the decade (FY11 being an
outlier due to temporary surge in current liabilities). Consequently, operating cash flow conversion has been slow.
Exhibit 280: Healthy cash flows from operations
6
5
4
3
Rs bn
2
1
-
-1
-2
Analysis of working capital movement: Net working capital (NWC) days have been rising, led by increasing debtors, as KJC
has been focusing on establishing its position in the industry. Elevated inventory days have also contributed to the high NWC
level. A temporary surge in payable days in the initial phase had helped to lower NWC days, but this did not sustain, as the
industry structure kept receivable days higher and elevated inventory added further stress.
Exhibit 281: Higher working capital days can largely be attributed to increasing receivable days
100
80
In days of revenue
60
40
20
0

xxxxx
Kajaria Ceramics (KJC) 16 September 2021

350% 140%
300% 120%
250% 100%
200% 80%
150% 60%
100% 40%
50% 20%
0% 0%
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Rapid expansions have aided growth with minimal impact on FCF conversion: KJC’s capacity tripled to 73msm (of which
18.8msm is through JV) over FY11-21, paving its growth path. It focused on expanding its vitrified tiles capacity, which
increased from 11msm to 45msm. KJC also expanded into the bathware segment (1mn pieces for faucets and 0.75mn pieces
for sanitaryware by FY20). Increasing profits and cash flows during the capex period minimized the impact on FCF and led to
lower debt requirement. KJC was also able to repay outstanding debt, though marginal equity was raised. Effectively, against
Rs20bn of OCF generation and Rs2bn of equity raising, KJC incurred a capex of Rs14bn and became debt-free.
6 Commissioned
expansions at Jharli, Durg,
4 Sirohi, Kalol
2
Rs bn
-2
-4

Asset turn (x) 1.3 1.5 1.7 1.6 1.6 1.4 1.3 1.3 1.3 1.2 1.1
Exhibit 286: Free cash flows on an improving trend in the latter part of the decade
Net FCF 0.0 0.3 -0.3 0.5 -0.5 -0.1 1.8 1.6 2.7 0.7 4.1
Equity raised 0.0 0.0 0.0 0.5 1.0 0.0 0.0 0.0 0.0 0.0 0.0
Increase / (decrease) in debt 0.3 -0.1 0.4 -0.8 0.1 0.5 -0.8 -0.4 -0.5 0.5 -0.4
Negligible leverage requirement; capex payoff helps repay debt: KJC’s capex aided healthy growth in profits and cash flows,
helping to bring leverage ratios down and eventually turning the company debt-free.
Exhibit 287: Healthy leverage ratios despite near tripling of tiles capacity
Net Debt/Equity 1.3 0.9 0.8 0.4 0.3 0.3 0.1 0.1 -0.1 0.0 -0.2
Net Debt/EBITDA 1.9 1.3 1.3 0.8 0.7 0.6 0.3 0.2 -0.3 -0.1 -0.6
Healthy profitability growth; muted towards the end: KJC has witnessed marginal decline in return ratios since FY18 due to
increased equity. However, return ratios should improve in the medium term, as business normalizes.
Exhibit 288: Strong ratios, reflecting profitability growth
RoE 29.3 31.5 30.8 27.9 28.5 27.1 23.6 18.6 15.9 15.6 17.2
RoCE 22.1 28.0 28.9 21.0 22.4 21.7 19.6 16.0 14.6 14.5 15.8

Kajaria Ceramics (KJC) 16 September 2021
P&L Balance sheet

EBITDA 4,495 4,159 5,088 6,121 8,076 Total debt 1,203 1,660 1,243 1,287 964
Depreciation & Amortisation 884 1,074 1,067 1,117 1,134 Non Current Liabilities 0 0 0 0 0
EBIT 3,611 3,085 4,022 5,005 6,942 Def tax liab. (net) 1,073 731 687 687 687
Taxes 1,293 589 1,038 1,279 1,708 Net block 10,624 11,355 10,695 11,233 11,398
Effective tax rate (%) 35.6 18.8 25.2 24.7 23.8 Capital WIP 934 677 1,196 2,500 2,000
Minority/Associates (22) 18 (9) (11) (15) Non Current Assets 0 0 0 0 0
Gross 61.3 61.0 55.3 60.4 61.5
EBITDA 15.2 14.8 18.3 19.4 20.7 Cashflow
ROE 15.9 15.6 17.2 19.5 23.5 Net Interest 0 0 0 0 0
ROCE 14.6 14.5 15.8 18.3 22.2 Net Change – WC 86 (1,158) 888 (384) (1,472)
ROIC 14.4 14.7 17.4 21.0 27.0 Direct taxes (1,331) (949) (1,080) (1,280) (1,709)
Gross block turnover ratio (x) 1.8 1.5 1.5 1.6 1.8 Capital expenditure (569) (1,333) (885) (2,961) (800)
Inventory 50 67 49 47 47 Investments 0 (98) 52 50 0
Net working capital 64 82 71 65 69 Net cash from investing (569) (1,431) (834) (2,912) (800)
Solvency (x) FCF 2,250 435 4,128 1,657 4,269
Net debt-equity (0.1) 0.0 (0.2) (0.2) (0.2) Issue of share capital 0 4 0 0 0
Interest coverage ratio 28.8 21.3 47.5 37.9 66.7 Increase/(decrease) in debt (500) 457 (418) 44 (323)
Net debt/EBITDA (0.3) (0.1) (0.6) (0.6) (0.8) Dividend paid (575) (1,150) (1,908) (1,336) (1,336)
BVPS 99.1 107.8 117.5 133.2 158.7 Net cash from financing (551) (707) (1,952) (1,291) (1,659)
CEPS 20.2 22.9 26.1 31.5 41.5 Net change in Cash 1,699 (272) 2,176 366 2,610
Dividend payout (%) 21.0 37.3 51.6 28.6 20.4
Valuation (x)
P/E 80.8 73.3 60.9 48.3 34.4
P/BV 11.9 10.9 10.0 8.9 7.4
EV/EBITDA 41.5 45.0 36.3 30.1 22.4
Dividend yield (%) 0.3 0.5 0.8 0.6 0.6

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Orient Cement (ORCMNT)

For ORCMNT, the initial years post demerger were challenging, as cash flows stayed Market data
volatile. Following the 3mtpa capacity addition in Karnataka, free cash flows were Current price: Rs161
impacted briefly, but improved in the second half of the decade. Inventory days Bloomberg: ORCMNT IN
increased due to the Karnataka capacity addition, as fuel is sourced from multiple 52-week H/L: Rs174/56
sources including imports (its Devapur, Telangana facility enjoys the advantage of
locational proximity to fuel sources). Also, shift towards the non-trade segment
(focus on infrastructure segment in Maharashtra) impacted receivable days. As a Free float: 57.2%
result, the working capital cycle has weakened. Lower capex and better profitability Avg. daily vol. 3mth: 1,150,738
have helped improve free cash flows in the recent past. Source: Bloomberg
Volatile cash flows from operations: Being a relatively new company formed from demerger, there have been disturbances
in operations, though operating profits have started to stabilize, with growth since FY16. However, operating cash flows
remain volatile, as operational efficiencies are still developing. Working capital volatility has reduced since FY18.
Exhibit 289: Cash flows from operations remain volatile
6
5
4
3
Rs bn
2
1
-
-1
-2 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Analysis of working capital movement: Net working capital (NWC) days started off moderately. An unsustainable surge in
creditors during FY16-18 led to a temporary improvement, post which NWC days have increased until FY20. Higher inventory
(maintaining fuel stocks at Karnataka) and debtors (more non-trade sales to boost volumes) continue to impact NWC. Except
for the surge in the mid period, payable days have remained consistent.
Exhibit 290: Demerger and Karnataka expansion increased working capital requirement
60
50
In days of revenue
40
30
20
10
0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-10
xxxxx
Orient Cement (ORCMNT) 16 September 2021
1000% 180%
160%
800% 140%
120%
600%
100%
80%
400%
60%
200% 40%
20%
0% 0%
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Initial capex impacted FCF: Post demerger, ORCMNT implemented a 3mtpa expansion at Gulbarga (Karnataka). However,
since FY17, capacity has been capped at 8mtpa and expansions have been slow. ORCMNT has a presence mainly in the South
and in Maharashtra. Its initial capex towards the 3mtpa expansion in Karnataka impacted FCF, and lacking accumulated cash
to fund the expansion, ORCMNT had to take debt. Effectively, against cumulative OCF of Rs178bn, net debt raising of Rs18bn,
and additional equity of Rs24bn over FY13-21, ORCMNT incurred a capex of Rs131bn.
10
-
Rs bn
-5
-10 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
3mtpa expansion at
-15 Gulbarga, Karnataka
Exhibit 294: Asset turn improving in the recent past

Asset turn (x) 0.9 1.0 0.8 0.6 0.7 0.8 0.9 0.9 0.8
Exhibit 295: Free cash flow shows mixed trend

Rs bn FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net FCF 2.9 -2.7 -7.4 -1.5 1.6 0.0 0.5 1.3 4.1
Equity raised 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Increase / (decrease) in debt 0.0 3.0 7.8 2.0 -0.6 -0.3 -0.3 -0.9 -3.2
Debt-funded capex results in higher leverage: Post demerger, accumulated cash was limited. Hence, ORCMT took debt to
fund the capex, which led its Net Debt/Equity to above 1x and Net Debt/EBITDA to over 3x, on an average.
Exhibit 296: Capex was debt-funded, leading to higher leverage
Leverage ratios (x) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity 0.0 0.4 1.1 1.3 1.2 1.2 1.1 1.0 0.7
Net Debt/EBITDA 0.0 1.4 3.6 7.2 6.8 4.0 3.9 2.9 1.7
Debt-aided capex impacts profitability: ORCMNT began the decade with strong return ratios, which were impacted by the
debt-funded capacity expansion. The fall in its return ratios indicates that ORCMNT has not utilized its additional capacity
efficiently. Marginal improvement is seen towards the end of the decade, indicating positive signs for the medium term.
Exhibit 297: Profitability lost its way in mid-decade as new capacity kicked in; has reversed in the recent past
Return Ratios (%) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
RoE 19.8 12.7 21.6 6.3 -3.2 4.4 4.6 8.0 13.2
RoCE 21.4 10.8 12.9 4.9 1.4 5.4 5.4 7.2 12.6

Orient Cement (ORCMNT) 16 September 2021
P&L Balance sheet

EBIT 1,793 2,420 4,088 4,574 5,176 Def tax liab. (net) 961 1,219 1,811 1,838 1,866
Interest expenses 1,185 1,223 936 649 759 Total liabilities 23,804 23,773 22,708 23,188 27,870
PBT 748 1,374 3,336 4,030 4,526 Less: acc. Depreciation (4,546) (5,932) (7,345) (8,768) (10,326)
Taxes 272 508 1,194 1,470 1,644 Net block 22,773 21,893 21,157 20,774 20,538
PAT 476 866 2,142 2,559 2,882 Net fixed assets 24,023 23,383 22,486 22,718 26,020
Recurring PAT 476 866 2,142 2,559 2,882 Investments 0 0 0 0 0
Reported PAT 476 866 2,142 2,559 2,882 Sundry debtors 1,795 1,618 1,102 1,927 2,142
Cash & Cash Equivalents 288 360 1,512 550 1,844
EBITDA 2.2 22.7 43.8 8.9 12.3 Provisions 771 818 903 917 931
Adj. EPS 7.5 82.1 147.3 19.5 12.6 Net current assets (220) 390 223 470 1,850
Gross 88.9 92.3 87.4 86.5 85.9
EBITDA 11.7 14.8 21.5 21.3 21.5 Cashflow
Adjusted PAT 1.8 3.3 8.3 9.1 9.2 Profit Before Tax 748 1,374 3,336 4,030 4,526
ROE 4.6 8.0 17.7 18.0 17.4 Net Interest 0 0 0 0 0
ROCE 5.4 7.2 12.6 14.1 14.2 Net Change – WC (147) (537) 1,319 (1,209) (87)
Gross block turnover ratio (x) 1.0 0.9 0.9 1.0 1.0 Capital expenditure (1,245) (745) (517) (1,655) (4,860)
Net working capital 21 27 -3 6 10 Net cash from investing (1,245) (745) (517) (1,655) (4,860)
Solvency (x) FCF 501 1,228 4,950 1,145 (479)
Interest coverage ratio 2.6 3.1 5.9 9.2 8.9 Increase/(decrease) in debt (321) (938) (3,532) (1,800) 2,080
Net debt/EBITDA 3.9 2.9 1.1 0.9 0.9 Dividend paid (185) (154) (256) (307) (307)
Adjusted EPS 2.3 4.2 10.5 12.5 14.1 Others (38) (64) (10) 0 0
BVPS 51.4 54.6 63.7 74.7 87.3 Net cash from financing (544) (1,155) (3,798) (2,107) 1,773
CEPS 8.8 11.1 17.4 19.4 21.7 Net change in Cash (43) 72 1,152 (962) 1,293
Dividend payout (%) 39.0 17.7 12.0 12.0 10.7
Valuation (x)
P/E 69.5 38.1 15.4 12.9 11.5
P/BV 3.1 3.0 2.5 2.2 1.8
EV/EBITDA 14.4 11.5 7.2 6.4 5.8
Dividend yield (%) 0.6 0.5 0.8 0.9 0.9

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
The Ramco Cements (TRCL)

TRCL’s operating profits have been healthy due to better operating regions and cost Market data
control. However, working capital has been stressed due to conservative inventory Current price: Rs1,033
management, as fuel (coal and pet-coke) is from imported sources. With diversification Bloomberg: TRCL IN
in the eastern region, receivable days were higher, particularly in the latter part (post- 52-week H/L: Rs1,133/688
FY15) of the decade. Healthy operating efficiencies (aided by prudent fuel mix) and
presence in relatively better regions helped TRCL’s profitability, leading to better
return ratios and healthy balance sheet. Debt increased towards the end of the decade Free float: 45.7%
to finance the clinkerization expansion at Kurnool and Jayantipuram. Avg. daily vol. 3mth: 505,287
Source: Bloomberg
Stable cash flows from operations: Except for the rough patch of FY14 and FY15 (macroeconomic factors and higher costs a
contributor), operating profits have remained stable throughout the decade, with marginal growth in the second half of
decade, as expanded capacity stabilized and macroeconomic conditions improved. With low volatility in working capital for
most of the decade (except for sudden surge in FY15 due to rise in current liabilities), operating cash flows also moved in
tandem with operating profits.
Exhibit 298: Cash flows from operations have been healthy
20
16
12
Rs bn
Analysis of working capital movement: Net working capital (NWC) days have remained high throughout the decade, with
high inventory days the key contributor. TRCL has been conservative on inventory management due to reliance on imported
sources. There was some improvement in inventory days towards the end of the decade, leading to marginally lower NWC.
With its entry into the newer eastern region, TRCL’s debtors surged in the mid-decade years and gradually declined towards
the end, supporting the improvement in NWC. Payable days stayed low and range-bound.
Exhibit 299: Higher fuel inventory to maintain production continuity leads to high working capital days
80
70
In days of revenue
60
50
40
30
20
10
0
xxxxx
The Ramco Cements (TRCL) 16 September 2021
400% 140%
350% 120%
300% 100%
250%
80%
200%
60%
150%
100% 40%
50% 20%
0% 0%
FY13
FY20
FY11
FY12
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY21
Expanded capacity by 7mpta; made no acquisitions during the decade: TRCL expanded its capacity by 7mtpa to 19.1mtpa by
FY20. While it raised debt for its recent capex, it partially repaid outstanding debt during FY15-18, when capex requirement
was lower. TRCL has not made any acquisitions during the decade. Against cumulative OCF of Rs72bn and gross debt raising
of Rs21bn, TRCL has incurred capex of Rs63bn. Debt was added towards the end of the decade for the clinkerization
expansion at Kurnool and Jayantipuram.
Expansions at Expansions at Vishakapatnam and Kolaghat
20 Ariyalur and Salem
10
-
Rs bn
-10
-30 CFO Capex Acquisitions and Investments Net FCF


Asset turn (x) 0.5 0.6 0.6 0.5 0.5 0.5 0.6 0.6 0.7 0.6 0.5
Exhibit 304: FCF impacted in the capex period

Net FCF -1.8 1.7 1.2 -1.3 3.7 6.6 6.7 3.3 -2.8 -9.9 -3.6
Equity raised -0.1 0.3 0.0 0.0 0.0 0.0 0.0 -0.1 0.1 0.0 0.0
Increase / (decrease) in debt 2.2 -0.8 -0.4 2.6 -7.2 -5.2 -5.4 -1.4 4.2 12.2 4.7
Leverage ratios under control with minimal debt requirement: Asset turnover has been limited due to weak utilization
rates, as focus has been on profitability (supply > demand). Leverage ratios have been under control due to healthy internal
accruals, leading to minimal debt requirement and ability to repay debt during periods of low capex.
Exhibit 305: Leverage ratios improving
Net Debt/Equity 1.6 1.3 1.1 1.2 0.8 0.5 0.3 0.2 0.3 0.5 0.5
Net Debt/EBITDA 4.5 2.9 2.7 5.6 3.2 1.5 0.9 0.8 1.3 2.3 1.9
Stable and strong return ratios: Return ratios have been stable and strong except in FY14 and FY15. One factor that has
contributed to the stable return ratios is staggered capex. When there was a surge in capex in FY19, return ratios were
impacted. Low capacity utilization could be a cause for concern.
Exhibit 306: Return ratios a mixed bag
RoE 13.0 20.5 18.3 5.7 9.4 18.8 19.2 14.4 11.9 12.8 14.4
RoCE 8.9 13.6 13.7 5.8 7.3 14.2 15.2 12.1 9.9 9.7 10.1

The Ramco Cements (TRCL) 16 September 2021
P&L Balance sheet

Depreciation & Amortisation 2,985 3,153 3,553 3,831 4,081 Non Current Liabilities 0 (54) (54) 0 0
Interest expenses 509 714 876 1,272 1,579 Total liabilities 67,583 84,756 98,222 1,07,943 1,17,969
Other income 527 622 580 474 496 Gross block 86,874 95,490 1,07,676 1,35,758 1,46,911
Taxes 2,097 1,861 3,786 3,367 4,849 Net block 53,168 59,510 68,708 91,317 96,640
PAT 5,059 6,011 7,611 8,366 11,041 Net fixed assets 62,284 78,674 93,118 1,00,065 1,05,901
Cash & Cash Equivalents 928 914 1,419 750 873
EBITDA (5.8) 9.8 37.1 7.3 28.7 Provisions 157 240 321 380 380
Margins (%) Total assets 67,583 84,756 98,222 1,07,943 1,17,969
Gross 83.5 83.6 83.5 84.1 83.1
EBITDA 19.8 20.8 29.1 27.1 27.8 Cashflow
ROE 11.9 12.8 14.4 13.9 16.0 Net Interest 0 0 0 0 0
ROCE 9.9 9.7 10.1 10.1 11.9 Net Change – WC (1,788) (802) 1,574 (3,916) (4,017)
ROIC 8.4 8.3 8.8 8.9 10.7 Direct taxes (989) (1,393) (2,082) (3,217) (4,699)
Inventory 40 41 43 41 40 Investments (209) (86) (122) 13 (50)
Solvency (x) FCF (3,384) (10,800) (3,676) (2,335) 1,289
Interest coverage ratio 19.9 15.6 17.4 12.9 13.3 Increase/(decrease) in debt 4,162 12,174 4,679 1,986 (330)
Net debt/EBITDA 1.3 2.3 1.9 2.0 1.5 Dividend paid (1,084) (1,526) (679) (320) (835)
Adjusted EPS 21.5 25.5 32.3 35.5 46.8 Others (12) 138 180 0 0
BVPS 189.3 208.8 238.7 270.4 313.7 Net cash from financing 3,118 10,786 4,181 1,666 (1,165)
CEPS 34.1 38.9 47.4 51.7 64.1 Net change in Cash (266) (14) 505 (668) 123
Dividend payout (%) 14.4 26.0 9.3 8.5 6.5
Valuation (x)
P/E 48.1 40.5 32.0 29.1 22.1
P/BV 5.5 4.9 4.3 3.8 3.3
EV/EBITDA 24.0 21.8 17.9 16.9 13.1
Dividend yield (%) 0.3 0.6 0.3 0.3 0.3

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Shree Cement (SRCM)

Over the last decade, SRCM has funded its capacity additions by strong operating Market data
profits and a judicious mix of debt and equity. Against cumulative OCF of Rs178bn, Current price: Rs30,661
net debt raising of Rs18bn, and additional equity of Rs24bn, SRCM has incurred Bloomberg: SRCM IN
capex of Rs131bn. While maintaining high cost pet coke inventory has adversely 52-week H/L: Rs32,050/18,184
affected working capital, this has been compensated by better operating efficiencies.
SRCM’s debt requirements have been limited, keeping leverage ratios under check.
SRCM started the decade with high return ratios, which declined in the following Free float: 76.7%
years. While return ratios have improved towards the end of the decade, unused Avg. daily vol. 3mth: 52,723
funds raised through equity (QIP) are a dampener. Source: Bloomberg
Strong cash flows from operations: After a stable start in the first half of the decade, operating profits gained good
momentum in the second half, supported by improving macroeconomic conditions. Cash flows followed profits, showing
good strength and consistency throughout the decade. Working capital stayed range-bound, with minimal volatility.
Exhibit 307: Strong cash flows from operations
50
40
30
20
Rs bn
10
-
-10
-20
Analysis of working capital movement: Net working capital (NWC) days have remained high throughout the decade, except
for FY12, when NWC days turned negative due to sudden hike in payable days. In FY13, payable days declined sharply and
have remained range-bound since. The major contributor to the higher NWC days is high inventory days, as SRCM uses high
cost petcoke as its dominant fuel (~100%), though this is compensated by better operating efficiencies. Debtor days have
remained stable, with minimal contribution to NWC movement.
Exhibit 308: Fuel inventory leads to stress on working capital
80
60
In days of revenue
40
20
0
-20
xxxxx
Shree Cement (SRCM) 16 September 2021
500% 160%
140%
400%
120%
300% 100%
80%
200% 60%
40%
100%
20%
0% 0%
FY13
FY20
FY11
FY12
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY21
Expansions multiply capacity by 4x, impact OCF to FCF conversion: SRCM has expanded its capacity from 10mtpa to 40mtpa
over the decade and has benefited from multi-regional presence. Strong operating cash flows have helped partially fund
these expansions, with the balance funding coming from debt and equity. SRCM’s expansions include the acquisition of a
grinding unit from JP Associates and the acquisition of UAE-based Union Cement. Against cumulative OCF of Rs178bn, net
debt raising of Rs18bn, and additional equity of Rs24bn, SRCM incurred capex of Rs131bn over FY11-21.
60
Acquisition of UAE-
40 based Union Cement
20
Rs bn
-20

Asset turn (x) 0.7 0.9 0.9 0.9 0.8 0.9 0.9 0.8 0.8 0.7 0.7
Healthy operational performance leads to minimal debt requirement, negative leverage ratios: Healthy operational
performance has limited the need for debt. Net leverage ratios have remained in the negative range for most of the decade.
Exhibit 313: FCF stays healthy for better part of the decade
Net FCF -2.0 11.5 -0.1 -0.7 4.6 8.5 8.0 -6.0 -4.3 27.5 33.5
Equity raised 0.0 0.0 0.2 -0.2 0.0 0.0 0.0 0.1 0.0 23.8 -0.1
Increase / (decrease) in debt -1.0 0.7 -3.5 0.0 -1.8 -0.4 7.4 22.3 -4.0 -1.9 -11.1
Exhibit 314: Healthy balance sheet helps maintain strong leverage ratios
Net Debt/Equity 0.2 -0.3 -0.2 -0.1 -0.2 -0.3 -0.3 -0.1 -0.1 -0.4 -0.6
Net Debt/EBITDA 0.4 -0.6 -0.5 -0.5 -0.7 -1.4 -0.9 -0.6 -0.3 -1.5 -2.1
Volatile profitability despite stable operational performance: SRCM started the decade with high return ratios, which
declined in the following years, led by higher depreciation provisions. Return ratios have recovered towards the end of the
decade on the back of better efficiencies and new regional capacities. With improving capacity utilization, return ratios
should remain healthy.
Exhibit 315: After a stellar start, profitability lost its momentum, but has begun improving again
RoE 11.0 21.0 30.4 18.4 8.1 9.5 18.4 16.7 12.2 13.9 16.4
RoCE 7.2 17.1 25.7 15.2 7.0 6.7 15.9 12.7 10.0 11.8 14.4

Shree Cement (SRCM) 16 September 2021
P&L Balance sheet

Revenues 1,14,680 1,16,652 1,23,160 1,45,563 1,70,840 Equity share capital 348 361 361 361 361
Operating Expense 79,470 72,007 75,082 88,639 1,06,045 Reserves & surplus 95,626 1,29,003 1,52,140 1,74,397 2,00,573
Employee cost 6,778 7,310 7,597 8,798 9,184 Shareholders fund 96,046 1,29,441 1,52,583 1,74,758 2,00,935
EBIT 10,035 17,340 25,544 32,368 38,138 Def tax liab. (net) (6,126) (7,438) (7,855) (8,702) (9,445)
Other income 5,030 5,127 7,184 4,656 4,491 Gross block 88,132 99,462 1,08,857 1,22,512 1,32,812
Taxes 1,304 3,900 7,138 8,759 9,872 Net block 44,523 39,420 37,702 39,388 36,233
Extraordinary items (1,581) 0 0 0 0 Inventories 15,891 14,279 14,772 17,581 21,018
Cash & Cash Equivalents 47,517 90,236 1,12,604 1,15,767 1,24,411
EBITDA 8.7 43.3 7.6 20.0 16.4 Provisions 20 26 43 (8,500) (9,000)
Adj. EPS (18.4) 34.1 47.2 9.5 15.5 Net current assets 74,641 1,07,984 1,20,664 1,36,123 1,49,781
Gross 92.5 93.4 92.9 90.6 90.5
EBITDA 20.9 29.4 30.0 30.5 30.2 Cashflow
ROE 12.2 13.9 16.4 15.5 15.6 Net Interest 0 0 0 0 0
ROIC 11.7 18.1 30.0 32.1 28.7 Direct taxes (2,300) (5,212) (7,555) (456) (9,502)
Solvency (x) FCF (3,944) 26,925 33,574 (6,422) 10,116
Net debt-equity (0.1) (0.4) (0.6) (0.4) (0.4) Issue of share capital 5 23,839 5 (82) 0
Interest coverage ratio 9.7 12.0 15.0 15.0 14.6 Increase/(decrease) in debt (4,042) (1,899) (11,228) 12,317 1,585
Net debt/EBITDA (0.3) (1.5) (2.3) (1.7) (1.6) Dividend paid (2,310) (6,255) 0 (2,649) (3,057)
BVPS 2,757.0 3,583.9 4,224.7 4,838.6 5,563.4 Net cash from financing (6,547) 15,795 (11,206) 9,585 (1,472)
CEPS 723.6 905.3 955.7 1,032.3 1,181.9 Net change in Cash (10,491) 42,720 22,368 3,163 8,644
Dividend payout (%) 19.7 33.0 0.0 10.3 8.9
Valuation (x)
P/E 94.6 70.5 47.9 43.7 37.9
P/BV 11.1 8.6 7.3 6.3 5.5
EV/EBITDA 45.9 30.7 27.6 23.2 19.8
Dividend yield (%) 0.2 0.5 0.0 0.2 0.2

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Star Cement (STRCEM)

At the beginning of the decade, STRCEM’s higher receivables (share of incentives Market data
from central and state governments) burdened its working capital. This changed with Current price: Rs108
the commissioning of its grinding unit in FY14, steady pick-up in economic activity, Bloomberg: STRCEM IN
and the government settling its dues. STRCEM’s financial performance turned 52-week H/L: Rs120/75
around, with improvement in return ratios and leverage ratios. Its diversification
into East India and energy requirements (coal in particular) put some stress on
financials towards the later years. This should improve, however, as coal availability Free float: 26.4%
normalizes and STRCEM receives greater acceptance in the eastern region. Avg. daily vol. 3mth: 899,044
Source: Bloomberg
Improved cash flows from operations: After a weak start to the decade, STRCEM’s operating profits showed healthy growth
in FY14 and FY15, aided by capacity addition, and remained around those levels for the rest of the decade. With working
capital being weak in first half of the decade, operating cash flows too were impacted. With improvement in working capital
from FY17, operating cash flows have improved and stabilized.
4
Rs bn
-2
-4
Analysis of working capital movement: Having begun the decade at very high levels, net working capital (NWC) days have
shown substantial improvement, declining by more than 50% to 51 days by end of the decade. The major contributor to this
improvement has been lower debtor days, while inventory days stayed high and range-bound with temporary improvement
in the mid-period. Payable days contributed the least and stayed low.
Exhibit 317: Working capital requirement eased after incentive clearances by the government
120
100
In days of revenue
80
60
40
20
0

xxxxx
Star Cement (STRCEM) 16 September 2021

3000% 200%
2500% 150%
100%
2000%
50%
1500%
0%
1000% -50%
500% -100%
0% -150%
FY16
FY20
FY11
FY12
FY13
FY14
FY15
FY17
FY18
FY19
FY21
FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
-500%
Steady FCF except for the capex years at the beginning of the decade: The 1.8mtpa capacity addition at Guwahati
commissioned in FY14 was the only expansion carried out in the decade. Though FCF was temporarily impacted at start of
decade owing to capex, it improved later along with operating profits. STRCEM had to resort to debt, which it repaid, as the
capacity addition and its strength in the NE region boosted profits and cash flows. Against cumulative OCF of Rs23bn and
gross debt raising of Rs9bn over the decade, STRCEM incurred capex of Rs18bn and repaid its entire debt.
10 1.8mtpa expansion at
Guwahati (Assam)
5
Rs bn
-5
-10

Asset turn (x) 0.6 0.5 0.3 0.5 0.7 0.7 0.6 0.6 0.8 0.8 0.7
Temporary leverage requirement: Elevated leverage ratios at the beginning of decade were due to debt-funded capex. As
the capex began paying off and STRCEM repaid its debt, leverage ratios began improving and turned negative.
Exhibit 322: FCF healthy over the latter half of the decade
Net FCF -2.4 -3.2 -4.3 -0.6 1.3 -0.5 2.2 3.6 6.0 2.8 0.0
Equity raised 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7
Increase / (decrease) in debt 2.0 3.2 2.1 0.6 -0.8 0.6 -1.4 -3.7 -3.6 -0.6 0.0
Exhibit 323: Debt-free status boosts leverage ratios

Net Debt/Equity 0.6 1.0 1.0 1.1 0.9 0.8 0.6 0.3 -0.1 -0.1 -0.2
Net Debt/EBITDA 2.4 4.6 7.4 4.1 2.0 2.3 1.9 0.8 -0.3 -0.7 -1.4
Healthy profitability maintained with limited capacity: STRCEM’s profitability was temporarily impacted during the capex
period. As the capex began paying off, and improved efficiencies and its regional strengths began reflecting in profits, return
ratios improved.
Exhibit 324: After being impacted by capex at the beginning of the decade, profitability has improved
RoE 25.0 16.1 5.5 -0.4 12.8 13.0 16.9 24.1 18.7 15.9 12.8
RoCE 16.8 10.3 4.8 4.3 11.5 11.7 14.4 20.4 16.6 15.5 12.8

Star Cement (STRCEM) 16 September 2021
P&L Balance sheet

Depreciation & Amortisation 1,056 930 900 928 999 Non Current Liabilities 0 0 0 0 0
Taxes 296 342 121 454 571 Net block 7,217 6,925 9,695 9,058 9,250
Effective tax rate (%) 8.9 10.6 4.6 11.5 11.5 Capital WIP 743 2,404 420 1,504 4,504
Minority/Associates (62) (18) 0 0 0 Non Current Assets 0 0 0 0 0
Extraordinary items 0 0 (646) 0 0 Inventories 2,772 2,569 2,347 2,647 3,184
EBITDA (13.8) (12.0) (15.8) 37.5 27.2 Provisions 65 88 99 109 120
Adj. EPS (9.6) (4.4) (11.9) 38.7 25.9 Net current assets 7,964 7,159 7,637 8,619 9,077
Gross 76.4 78.3 76.6 79.7 80.3
EBITDA 24.5 21.4 19.3 22.0 23.3 Cashflow
Returns (%) Depreciation & Amortisation 1,029 956 900 928 999
ROE 18.7 15.9 12.8 16.2 18.0 Net Interest 0 0 0 0 0
ROCE 16.6 15.5 12.8 16.2 18.1 Net Change – WC 3,112 1,511 1,590 (2,155) (668)
Gross block turnover ratio (x) 1.7 1.6 1.1 1.3 1.5 Capital expenditure (790) (2,327) (1,687) (1,378) (4,193)
Inventory 57 53 52 44 43 Investments (3) 1 0 0 0
Net working capital 40 48 43 32 34 Net cash from investing (793) (2,325) (1,687) (1,378) (4,193)
Solvency (x) FCF 6,016 2,832 2,456 575 191
Net debt-equity (0.1) (0.1) (0.2) (0.2) (0.1) Issue of share capital 2 (4) 718 (8) 0
Interest coverage ratio 31.2 42.3 47.6 95.0 102.8 Increase/(decrease) in debt (3,586) (605) 14 30 18
Adjusted EPS 7.1 6.8 6.0 8.3 10.5 Others 0 (1,020) (701) (1,350) 0
BVPS 41.1 44.3 49.5 53.6 63.0 Net cash from financing (4,100) (2,125) (388) (1,748) (402)
CEPS 9.6 9.0 8.2 10.5 12.9 Net change in Cash 1,916 707 2,068 (1,173) (211)
Dividend payout (%) 14.0 14.4 22.4 12.0 9.5
Valuation (x)
P/E 15.1 15.8 18.0 12.9 10.3
P/BV 2.6 2.4 2.2 2.0 1.7
EV/EBITDA 9.6 10.6 11.9 8.9 7.1
Dividend yield (%) 0.9 0.9 0.9 0.9 0.9

16 September 2021
Milind Raginwar
+91 22 4215 9201
[email protected]
Ultratech Cement (UTCEM)

Despite UTCEM’s aggressive expansions (both organic and inorganic), the impact on Market data
its cash flows has been manageable. In the initial years of the decade, investments Current price: Rs7,765
were more towards organic growth. In the second half of the decade, it acquired Bloomberg: UTCEM IN
cement assets from Binani and Century, leading to stress on FCF. As the acquired 52-week H/L: Rs8,073/3,754
assets began to contribute to earnings, cash flows improved. There has been no
major impact on the balance sheet – there has been no equity infusion and
Debt/EBITDA did not cross 3x during the expansion period. Though return ratios Free float: 37.6%
were impacted, the recent years indicate an improvement. Avg. daily vol. 3mth: 350,215
Source: Bloomberg
Acquisitions impacted cash flows in the second half of the decade: Operating profits and cash flows have grown steadily
over the last 10 years (except for FY14 and FY15), in tandem with ongoing capacity expansions. However, the acquisition of
cement assets from Binani and Century impacted cash flows in FY18 and FY19.
200
150
100
Rs bn
50
-
-50
Analysis of working capital movement: Conservative inventory management approach impacted UTCEM’s net working
capital (NWC) cycle, which doubled in the second half of the decade, as expansions gained pace and acquisitions kicked off.
While receivable days have been stable through the decade, payable days have been lower in the second half of the decade.
In the last two years, there has been an improvement in the NWC cycle.
Exhibit 326: Working capital stress easing towards the end of the decade
70
60
In days of revenue
50
40
30
20
10
0
xxxxx
Ultratech Cement (UTCEM) 16 September 2021

300%
140%
250% 120%
200% 100%
80%
150%
60%
100%
40%
50% 20%
0% 0%
FY16
FY11
FY12
FY13
FY14
FY15
FY17
FY18
FY19
FY20
FY21
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Ongoing capacity expansions, three acquisitions result in negative free cash: Continuous expansions along with three
acquisitions (Jaypee, Binani and Century) during FY17-19 led UTCEM’s capacity to more than double from 52mtpa at the start
of FY11 to 116.75mtpa in FY20. UTCEM has announced further expansion plans in FY21 to reach 136.25mtpa (by FY23/24).
Ongoing capex impacted FCF (negative on average during the decade). Effectively, against OCF of Rs386bn and borrowings of
Rs167bn during the decade, UTCEM incurred Rs570bn on capex and Rs41bn on acquisitions.
200 Acquisition of Acquisition of
Binani Assets Century Assets
100
Rs bn
-100
-200

Asset turn (x) 0.9 0.8 0.8 0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.6
Exhibit 331: Capex intense years impact FCF

Net FCF -80.1 3.3 1.8 8.9 -31.1 22.9 53.5 -132.8 -110.6 38.5 69.6
Equity raised 1.5 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.0 0.1 0.0
Increase / (decrease) in debt 25.4 0.1 12.6 -2.1 22.1 2.5 -24.1 113.2 40.7 -23.6 -21.3
Leverage in control as cash flows take care of major capex requirement (no equity raised): UTCEM maintained its net debt
free status initially. However, Net Debt/Equity reached 0.5x. Debt raising peaked in FY18. In the last two years, UTCEM repaid
some debt with the help of internal cash flows.
Exhibit 332: Well-managed leverage ratios despite continuing on expansionary path
Net Debt/Equity 0.0 0.0 0.0 0.0 0.1 0.1 -0.1 0.5 0.5 0.3 0.1
Net Debt/EBITDA 0.2 0.1 0.1 0.0 0.7 0.3 -0.6 2.0 2.5 1.5 0.5
Return ratios under pressure due to rapid expansions/acquisitions: Return ratios were healthy initially. However, with
expansions/acquisitions, return ratios were impacted. As new capacities stabilize and are utilized efficiently, UTCEM should
be able to improve its return ratios.
Exhibit 333: Fresh expansions and acquisitions impact profitability
RoE 18.4 20.8 18.9 12.7 10.5 12.0 11.2 9.9 8.6 10.2 13.5
RoCE 17.5 20.5 19.5 9.6 8.3 8.9 9.0 8.4 7.4 8.6 11.2

Ultratech Cement (UTCEM) 16 September 2021
P&L Balance sheet
EBITDA 70,790 86,523 1,15,515 1,31,894 1,54,786 Total debt 2,06,431 1,82,874 1,61,577 1,57,353 1,36,584
EBIT 47,578 61,974 91,172 1,03,944 1,26,350 Def tax liab. (net) 52,465 40,769 52,191 55,341 58,491
PBT 36,063 52,197 80,601 98,285 1,21,516 Less: acc. Depreciation (63,756) (86,327) (1,10,670) (1,38,620) (1,67,056)
Taxes 10,799 15,675 25,540 31,653 40,212 Net block 4,42,080 4,43,260 4,40,061 4,46,596 4,96,681
Recurring PAT 25,263 36,522 55,061 66,632 81,303 Investments 50,788 51,297 1,07,794 51,235 51,235
Ratios Loans & advances 76,065 80,589 79,679 98,774 1,08,499
Revenue 33.6 2.0 7.9 19.5 14.7
Adj. EPS 2.7 37.6 50.8 21.0 22.0 Net current assets 63,606 78,856 69,562 1,39,097 1,68,641
Gross 84.9 84.4 83.9 85.5 85.7
EBITDA 17.7 21.3 26.4 25.3 25.9 Cashflow
Adjusted PAT 6.3 9.0 12.6 12.8 13.6 Profit Before Tax 34,924 52,197 78,961 98,285 1,21,516
ROE 8.6 10.2 13.5 14.4 15.5 Net Interest 0 0 0 0 0
ROIC 7.4 8.5 13.0 13.8 14.4 Direct taxes 9,925 (27,372) (13,530) (29,090) (37,062)
Turnover (days) Net cash from operations 35,768 58,180 1,25,844 35,036 94,459
Gross block turnover ratio (x) 0.8 0.8 0.8 0.9 0.9 Capital expenditure (1,12,940) (21,548) (17,829) (70,401) (51,770)
Inventory 35 35 33 31 30 Investments (34,387) (508) (56,497) 56,559 0
Net working capital 26 12 12 8 5 Net cash from investing (1,47,327) (22,056) (74,326) (13,842) (51,770)
Solvency (x) FCF (1,11,559) 36,124 51,518 21,194 42,689
Interest coverage ratio 4.3 5.1 9.2 12.3 15.7 Increase/(decrease) in debt 40,703 (23,556) (21,297) (4,224) (20,768)
Adjusted EPS 92.0 126.5 190.8 230.9 281.7 Others 57,122 17,273 9,637 0 0
BVPS 1,212.4 1,326.8 1,502.0 1,697.8 1,942.0 Net cash from financing 91,312 (10,089) (24,155) (14,355) (31,574)
CEPS 176.5 211.6 275.1 327.7 380.2 Net change in Cash (20,248) 26,035 27,363 6,839 11,114
Dividend payout (%) 13.8 8.6 19.4 13.0 11.4
Valuation (x)
P/E 84.4 61.4 40.7 33.6 27.6
P/BV 6.4 5.9 5.2 4.6 4.0
EV/EBITDA 34.2 27.4 20.1 17.5 14.7
Dividend yield (%) 0.2 0.1 0.5 0.4 0.2

16 September 2021
Probal Sen
Research Analyst, Chemicals
+91 22 4215 9001
[email protected]
SECTOR: CHEMICALS
Dhanuka Agritech (DAGRI)

DAGRI’s cash flows have grown steadily over the last decade, despite some years of Market data
cyclicality, driven by vagaries of profitability owing to Indian monsoons. Working Current price: Rs851
capital tends to be a drag on OCF owing to higher inventories and receivables in the Bloomberg: DAGRI IN
system due to the nature of consumers (Indian farming community). Cumulative 52-week H/L: Rs10,54/658
OCFof Rs13.4bn over FY12-21 has been utilized in capex of Rs1.7bn and NIL
investments/acquisitions, leaving FCF of Rs9.3bn over the period. Steadily improving
profitability, reflecting in higher cash flows, has reflected in lower leverage (net DER Free float: 26.6%
down to negative 0.3x in FY21 from 0.1x in FY12). Return ratios have also improved Avg. daily vol. 3mth: 112,444
somewhat, owing to gradually rising earnings over FY12-21. Source: Bloomberg
History of robust and consistent cash flows from operations: Operating profits have been robust and have consistently
expanded over the last 10 years. Working capital intensity in the business has been high. However, the impact of WC on
overall cash flows has reduced marginally in the last two years due to better pricing power, with farmers’ income and hence
paying capabilities improving sharply, reducing payables days for DAGRI.
Exhibit 334: Size and scale of operating cash flows have improved over the last 5-6 years
4,000 Given the nature of final customers (Indian farming community), working capital has been volatile
3,000
2,000
Rsmn
1,000
-2,000
Operating Cash flow before WCAP changes WCAP changes CFO
Analysis of working capital movement: Working capital has traditionally been a drag on the business cash flows, with net
working capital (NWC) significantly influencing cash flows due to the relatively unorganized nature of the end consumer
segment and the need to keep significantly high inventory. This trend has remained consistent, despite a marked change in
the scale of operations.
Exhibit 335: NWC settled at ~150 days after hitting a high of 200 days in FY17
250 250
200 200
# of days
# of days
150 150
100 100
50 50
0 0
Inventory Trade receivables Trade payables NWC
xxxxx
Dhanuka Agritech (DAGRI) 16 September 2021
Exhibit 336: OCF/PAT has been volatile… Exhibit 337: …So has OCF/EBITDA
180% 140%
160% 120%
140%
100%
120%
100% 80%
%
80%
%
60%
60%
40%
40%
20% 20%
0% 0%
Conversion of OCF to FCF has been volatile: Conversion of OCF to FCF has been >80% in most years, with limited inorganic
expansion by the company over FY12-21. Since FY16, there has not been any meaningful acquisition or investment in any
subsidiary. Hence, FCF is a direct function of OCF less capex for the period.
Exhibit 338: Capex intensity, acquisitions and free cash flows – FCF mirrors OCF (net of capex) for the most part
3,500 3,000
3,000
2,500
2,500
2,000
2,000
Rsmn
Rsmn
1,500 1,500
1,000
1,000
500
500
0
-500 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0
CFO Capex Acquisition/Investments FCF
Return ratios have improved somewhat; leverage remains a non-issue: Sustained improvement in profitability and no
material impact of working capital-related issues has meant that balance sheet has consistently remained free of leverage
over the last decade. RoE/RoCE have also improved by 140bp/370bp over FY12-21.
Exhibit 339: Return ratios and leverage trends
0.4 35.0%
0.2 30.0%
25.0%
0.0
20.0%
-0.2
15.0%
X
-0.4
10.0%
-0.6 5.0%
-0.8 0.0%
Net Debt/Equity Net Debt/EBITDA ROE ROCE

Dhanuka Agritech (DAGRI) 16 September 2021
P&L Balance sheet

PBT 1,540 1,806 2,849 3,086 3,466 Less: acc. Depreciation (385) (534) (686) (881) (1,131)
Taxes 414 392 744 806 905 Net block 1,169 1,175 1,669 1,630 2,629
Cash & Cash Equivalents 318 860 1,892 2,540 2,635
Other current assets 1,041 566 907 907 907
Growth (%) Trade payables 775 1,132 1,086 1,531 1,741
Revenue 4.5 11.4 23.9 10.6 13.3 Other current liab. 631 761 1,586 1,586 1,586
Gross 38.7 36.5 37.8 37.3 37.0
EBITDA 14.5 15.5 19.4 19.1 19.4 Cashflow
ROE 17.7 21.0 28.0 25.2 22.6 Net Interest (63) (97) (130) (356) (344)
ROCE 17.4 20.7 28.0 24.7 21.7 Net Change – WC (877) 157 169 (903) (683)
Turnover (days) Net cash from operations 133 1,621 2,311 1,217 1,786
Gross block turnover ratio (x) 6.5 6.6 5.9 6.1 4.6 Capital expenditure (47) (104) (123) (1,132) (2,175)
Inventory 122 117 115 120 120 Investments 596 (488) (1,160) (327) (371)
Net working capital 165 155 156 178 174 Net cash from investing 632 (443) (1,266) (1,082) (2,155)
Solvency (x) FCF 86 1,517 2,188 84 (389)
Net debt-equity 0.0 (0.1) (0.2) (0.2) (0.1) Issue of share capital (825) 0 (1,232) 0 0
Interest coverage ratio 163.5 111.4 99.9 137.1 70.3 Increase/(decrease) in debt 175 (192) (31) 366 300
Net debt/EBITDA (0.1) (0.4) (0.7) (0.7) (0.6) Dividend paid (207) (723) 0 (113) (113)
BVPS 137.9 151.9 171.0 217.5 270.1 Net cash from financing (866) (930) (1,291) 232 139
CEPS 26.8 33.9 48.5 53.1 60.4 Net change in Cash (101) 248 (246) 367 (229)
Dividend payout (%) 2.5 40.4 4.4 4.1 3.6
Valuation (x)
P/E 35.2 28.0 18.8 17.4 15.5
P/BV 6.2 5.6 5.0 3.9 3.1
EV/EBITDA 27.1 22.4 14.0 12.8 11.2
Dividend yield (%) 0.1 1.4 0.2 0.2 0.2

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: CHEMICALS
PI Industries (PII)
PII’s cash flows have grown steadily over the last decade, despite relatively lower Market data
profitability in FY17-18 driven by seasonal factors globally and weak agricultural Current price: Rs3,454
environment in India. Working capital impact has been moderate except over FY17- Bloomberg: PI IN
19, when inventory/payables increased due to difficult economic conditions across 52-week H/L: Rs3535/1850
target markets. Cumulative OCF of Rs44bn has been utilized in capex of Rs30bn and
Market cap: Rs524bn
investments/acquisitions of Rs4.5bn, leaving FCF of Rs13.3bn. Steadily improving
profitability, reflecting in higher cash flows, has reflected in lower leverage (Net DER Free float: 50.2%
down to negative 0.4x in FY21 from 0.7x in FY12), but return ratios have moderated Avg. daily vol. 3mth: 408,081
owing to higher investment in the business. Source: Bloomberg
expanded over the last 10 years. Working capital intensity in the business has been high, but the impact of WC on overall
cash flows has reduced marginally in the last two years due to better pricing power and inorganic growth.
Exhibit 340: Consistent growth in OCF over the last 10 years
12000
Rapid scale-up of CSM business has improved cash flows; working capital impact far less than
10000 domestic market dependent agriculture companies
8000
6000
Rsmn
4000
2000
0
-4000 Operating Cash flow before WCAP changes WCAP changes CFO
Analysis of working capital movement: Working capital has traditionally been a drag on the business cash flows with net
working capital (NWC) being a significant influence on cash flows due to the relatively diversified and widespread nature of
PII’s business, and >25% of business having the Indian farmer as the end consumer.
Exhibit 341: NWC steady at 70-80 days for most years in the last decade
200 140
120
150 100
# of days
80
# days
100
60
50 40
20
0 0
xxxxx
PI Industries (PII) 16 September 2021
200% 120%
160% 100%
80%
120%
60%
%
%
80%
40%
40% 20%
0% 0%
Conversion of OCF to FCF has been volatile: Conversion of OCF to FCF has been uneven, with the ISAGRO acquisition in FY20
being the company’s biggest acquisition during the decade. Barring that year, FCF has steadily improved, with rising
profitability, and hence, higher OCF.
10,000 6,000
4,000
5,000
2,000
Rsmn
Rsmn
0
-5,000
-2,000
Except in FY20, the year of ISAGRO acquisition, FCF has steadily
grown over the last decade
-10,000 -4,000
Return ratios have improved somewhat; leverage remains a non-issue: The sustained improvement in profitability and no
over the last decade. Return ratios have, however, reverted to lower levels owing to higher capex and investments over
FY17-21.
2.0 35.0%
30.0%
1.0
25.0%
0.0 20.0%
x
-1.0 15.0%
Leverage has been negligible over the period, but return ratios have taken a hit due to QIP proceeds of 10.0%
-2.0 Rs20bn, which did not get deployed till Q1FY22
5.0%
-3.0 Net Debt/Equity Net Debt/EBITDA ROE ROCE 0.0%

PI Industries (PII) 16 September 2021
P&L Balance sheet

Other income 595 489 1,249 2,275 2,655 Gross block 15,148 22,424 26,286 30,786 35,286
Taxes 1,277 1,572 2,002 2,651 3,016 Net block 12,141 18,083 20,197 22,699 24,887
Adj. EPS 11.6 11.3 61.7 16.5 13.8 Net current assets 8,938 10,345 32,332 37,037 43,367
Gross 45.4 45.1 43.8 43.5 44.0
EBITDA 20.3 21.3 22.1 21.0 21.0 Cashflow
Returns (%) Depreciation & Amortisation 930 1,367 1,748 1,998 2,313
ROE 19.5 18.6 18.5 15.0 14.9 Net Interest 50 170 282 164 164
ROCE 19.1 17.1 17.3 14.4 14.4 Net Change – WC (1,503) 255 (1,303) (1,105) (1,492)
Debtors 76 71 54 60 66 Acquisitions, net (160) 0 15 (41) (50)
Inventory 116 132 131 127 118 Investments 427 1,014 (20,173) (354) (372)
Creditors 104 109 98 107 109 Others 194 175 230 2,275 2,655
Solvency (x) FCF 231 (4,059) 2,874 2,298 3,163
Net debt-equity (0.1) 0.1 (0.4) (0.4) (0.4) Issue of share capital 29 80 19,789 0 0
Interest coverage ratio 115.3 42.2 35.9 67.2 76.3 Increase/(decrease) in debt (399) 4,562 (1,786) 0 0
Net debt/EBITDA (0.3) 0.3 (2.0) (2.2) (2.3) Dividend paid (831) (748) (607) (809) (809)
Adjusted EPS 27.0 30.0 48.6 56.6 64.4 Others 0 (215) (248) 0 0
BVPS 150.4 172.3 351.5 402.7 461.8 Net cash from financing (1,251) 3,500 16,904 (973) (972)
CEPS 33.1 39.0 60.1 69.7 79.6 Net change in Cash (559) 630 (150) 3,205 4,425
Dividend payout (%) 13.5 12.1 10.3 7.1 6.2
Valuation (x)
P/E 128.0 115.0 71.1 61.0 53.7
P/BV 23.0 20.0 9.8 8.6 7.5
EV/EBITDA 90.7 73.4 49.7 45.4 39.6
Dividend yield (%) 0.1 0.1 0.1 0.1 0.1

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: CHEMICALS
UPL
UPL’s cash flows have grown steadily over the last ten years, helped by its penchant Market data
to keep bolstering profitability via acquisitions (Advanta in 2011 and Arysta in 2019 Current price: Rs754
being the key large buys). Overall, net OCF has steadily grown over FY12-21 (CAGR of Bloomberg: UPLL IN
44%), with cumulative working capital impact negligible. Cumulative OCF of Rs348bn 52-week H/L: Rs865/399
has been utilized for capex of Rs115.3bn and investments/acquisitions of Rs306bn, Market cap: Rs575.9bn
leading to negative FCF of Rs73bn over the period. Despite the lower FCF, improving
Free float: 63%
profitability has ensured that Net DER, which touched a high of 1.5x in FY19 (Arysta
acquisition), dipped back to <1x over FY20-21.
Source: Bloomberg
History of steady improvement in cash flows: Operating profits have been robust and have mostly expanded over the last 10
years. Working capital intensity in the business has been low, except for FY12 and FY20, the years following large acquisitions
(Arysta in FY19). The company has generated strong operating cash flows, though the trend has been a bit inconsistent.
Exhibit 346: Consistent improvement in cash flow from operations
120,000 A history of steady improvement in scale and scope of OCF, topped by a sudden jump aided by
100,000 Arysta acquisition in FY19
80,000
60,000
Rsmn
40,000
20,000
0
-20,000
Analysis of working capital movement: Working capital has traditionally not been a drag on business cash flows, with net
working capital (NWC) sustaining at an average of 100 days over most of last decade. However, the years following major
acquisitions (FY20; Arysta acquired in FY19) have seen unusual WC movements, which have impacted net OCF.
Exhibit 347: Net working capital has sustained at an average of 100 days over most of the decade
350 200
Impact of Arysta acquistion – NWC has normalized
300 thereafter
250 150
# of days
# of days
200
100
150
100 50
50
0 0
UPL 16 September 2021

500% 160%
450%
140%
400%
350% 120%
300% 100%
250% 80%
200%
60%
150%
40%
100%
50% 20%
0% 0%
Conversion of operating cash flow to FCF has been volatile: UPL has followed a mix of organic and inorganic expansion to
augment earnings and increase scale. Its biggest acquisition by far happened only recently in FY19, when UPL acquired Arysta
for USD4.2bn (Rs295bn). Other than that, multiple small acquisitions have kept impacting FCF in limited ways over FY12-21.
200,000 200,000
100,000 100,000
0
Rsmn
Rsmn
-100,000
-100,000
-200,000
The Arysta acquisition makes the other
-300,000 -200,000
smaller transactions relatively irrelevant!
-400,000 -300,000

Return ratios have moderated somewhat; leverage improving after a spike over FY19-20: The sustained improvement in
profitability and low working capital impact has meant that leverage remained moderate till FY18. The USD4bn Arysta
acquisition, however, caused Net DER to jump to 1.5x in FY19 (0.4x in FY18). While Net DER has dipped to <1x by FY21, return
ratios remain below historical average over the last three years.
8.0 Some way to go to make the Arysta acquisition return ratio 30.0%
7.0 accretive – as of now, sharply lower trajectory seen over FY19-21 25.0%
6.0
20.0%
5.0
4.0 15.0%
x
3.0
10.0%
2.0
5.0%
1.0
0.0 0.0%


UPL 16 September 2021
P&L Balance sheet

Taxes 1,980 5,860 6,860 10,102 11,984 Net block 162,110 180,940 182,940 178,543 172,958
Minority/Associates (840) (4,020) (6,240) (4,500) (4,500) Non Current Assets 8,430 8,880 6,160 6,160 6,160
Extraordinary items (4,006) (4,909) (1,990) 0 0 Inventories 91,330 78,500 94,220 96,933 104,352
Gross 50.1 47.6 50.6 51.6 51.9
EBITDA 17.5 18.9 21.6 22.9 22.3 Cashflow
ROE 15.8 13.3 15.3 18.4 16.7 Net Interest 8,260 13,950 18,670 15,361 14,853
ROCE 8.9 7.8 10.8 11.7 11.3 Net Change – WC (5,630) 30,500 (2,140) (23,677) (9,442)
Debtors 148 121 118 117 116 Acquisitions, net (309,890) (7,610) (1,540) 0 0
Inventory 229 165 165 173 170 Investments 3,310 540 (280) (581) (639)
Creditors 260 196 217 214 193 Others 2,430 (10) 1,460 2,060 2,122
Solvency (x) FCF 8,030 68,040 51,470 42,099 58,931
Net debt-equity 1.4 1.0 0.8 0.6 0.4 Issue of share capital 83,580 0 0 0 0
Interest coverage ratio 4.0 4.6 4.1 5.5 5.9 Increase/(decrease) in debt 219,660 (28,700) (42,190) 22,250 (35,000)
Adjusted EPS 24.7 29.6 40.1 54.3 56.8 Others 0 27,980 (3,810) 0 0
CEPS 36.2 55.9 68.5 85.8 90.2 Net change in Cash (10,810) 38,980 (19,270) 40,104 (248)
Dividend payout (%) 27.3 25.8 26.6 20.0 20.0
Valuation (x)
P/E 30.5 25.4 18.8 13.9 13.3
P/BV 3.9 3.0 2.8 2.4 2.1
EV/EBITDA 22.0 11.7 9.2 7.8 7.1
Dividend yield (%) 0.7 0.8 1.3 1.4 1.5

16 September 2021
Shirish Pardeshi
Research Analyst, Consumer
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Asian Paints (APNT)

APNT’s revenue grew at a CAGR of 10.9% over FY12-21 and EBITDA grew faster at Market data
13.8%. Operating profits have been robust and consistently expanded over the Current price: Rs3,342
decade. Since the paint industry operates on direct dealer model, it has efficient Bloomberg: APNT IN
inventory management. Over FY12-21, cumulative profit before WC was Rs300.3bn 52-week H/L: Rs3,395/1,908
(tax paid: Rs78.6bn) and OCF was Rs195.5bn. OCF/PAT was at an average of 103% till
FY21 (FY21: 117%) and OCF/EBITDA was at an average of 66% (FY21: 76%). Cumulative
capex was Rs65.2bn and FCF was Rs130.3bn. Average dividend payout has been Free float: 63.4%
46.9%. Every four years, APNT has invested in capacity expansion. Avg. daily vol. 3mth: 1,235,714
Source: Bloomberg
History of steady improvement in cash flow from operations: Operating profits have been strong and have expanded over
the last 10 years, primarily driven by 450bp expansion in gross margin. Due to unique direct dealer business model, working
capital intensity in the business has been low. APNT focused on cutting system inventory by expanding its tinting machine
network and has ensured sufficient liquidity at all times. The company has been consistently generating healthy operating cash
flows over the years. Over FY12-21, cumulative profit before WC has been Rs300.3bn (of which tax paid: Rs78.6bn) and cash
flow from operating activities has been Rs195.5bn.
Exhibit 352: Cash flows from operations have been strong and have consistently expanded
60
50
40
Rs bn
30
20
10
Profit Before Changes In working Capital Net Changes In working Capital Cash From Operating Activities
Analysis of working capital movement: Being the market leader, APNT enjoys bargaining power with both buyers and
suppliers. Its OCF/PAT has improved from 71% in FY12 to 117% in FY21 and OCF/EBITDA has improved from 46% in FY12 to
76% in FY21. This has been driven by 450bp gross margin expansion, despite inventory being in the range of 95-100 days.
OCF/PAT has been at 103% on average till FY21 and OCF/EBITDA at 66% on average till FY21.
Exhibit 353: Cash conversion cycle by-and-large steady over the decade
120 70
100 60
50
80
Days
40
Days
60
30
40
20
20 10
0 -
Debtor days Inventory days Payable days Cash conversion cycle

xxxxx
Please see Appendix for analyst certifications and all other important disclosures. 130
Asian Paints (APNT) 16 September 2021

140 100
120
80
100
80 60
%
%
60 40
40
20
20
0 0
Growing free cash flows: Over FY12-21, cumulative cash from operating activities was Rs195.5bn, capex was Rs65.2bn (~21.7%
of net sales) and FCF generated was Rs130.3bn. APNT doubled capacity in Rohtak in 2016 to 400k KL/annum. Further, it added
500k KL/annum at Vizag, investing Rs17.9bn, and 600k KL/annum in Mysuru for Rs23bn. This helped the company to expand
its profitability, as these plants were opened in high growth southern markets, adding to operating leverage.
Exhibit 356: Generated cumulative FCF of over Rs130bn in 10 years
40
FY16: Expansion at Rohtak plant; FY18 and FY19: Capacity addition at
30 modernization at Ankleshwar and Kasna Visakhapatnam and Mysuru
20
Rs bn
10
0
-10
Cash From Operating Activities CAPEX FCF
Exhibit 357: Return ratios (%)

50
40
30
%
20
10
0
RoE RoCE
Healthy return ratios: Overall return ratios have been healthy, as the company has been investing in capacities ahead of market
demand. Major chunk of its cash outflows has been towards dividend payout and some portion has been towards working
capital needs. Over FY12-21, average dividend payout has been 46.9%.
Exhibit 358: Dividend payout (%)
Dividend Payout (%) 38.7 41.5 44.9 49.8 43.8 48.8 59.7 48.6 77.0 15.9
Exhibit 359: Cash flow summary

Cash From Operating Activities 6,996 11,868 14,020 11,877 22,430 15,273 21,134 24,695 30,382 36,834
Cash Flow from Investing Activities -3,856 -4,993 -6,052 -4,778 -8,663 -6,561 -15,993 -9,445 -5,214 -5,478
Cash from Financing Activities -3,266 -6,010 -6,259 -5,761 -8,490 -7,564 -13,791 -11,175 -28,715 -6,504
Net increase/ (decrease) in Cash and Cash Equivalents -126 864 1,709 1,338 5,277 1,148 -8,650 4,076 -3,547 24,852
Closing Cash & Cash Equivalent 6,137 7,362 9,264 10,669 15,777 16,675 8,457 12,800 9,287 34,212

Asian Paints (APNT) 16 September 2021
P&L Balance sheet

Interest expenses 510 1,023 916 881 823 Total liabilities 112,010 122,529 149,384 170,322 194,555
Taxes 10,988 8,549 10,976 13,919 16,720 Net block 55,299 59,523 55,559 64,801 68,773
Minority/Associates (116) (262) (347) (451) (407) Non Current Assets 5,432 6,389 8,176 9,878 11,298
EBITDA 10.2 18.1 16.7 21.7 18.8 Provisions 762 625 844 1,020 1,167
Gross 41.4 43.7 44.3 44.6 45.1
EBITDA 18.2 20.6 22.4 22.5 23.4 Cashflow
ROE 24.1 27.5 27.4 28.8 29.9 Net Interest (282) 96 165 (3,823) (3,847)
ROCE 22.3 25.4 25.0 26.7 27.9 Net Change – WC (4,274) (7,371) (2,065) (6,026) (4,622)
Inventory 93 105 108 105 108 Investments 1,304 (2,368) (3,679) 0 0
Solvency (x) FCF 12,906 21,105 31,356 25,916 40,644
Net debt-equity (0.1) 0.0 (0.2) (0.2) (0.3) Issue of share capital 0 0 0 0 0
Interest coverage ratio 69.1 40.7 53.0 67.1 85.3 Increase/(decrease) in debt 2,170 (582) 1,412 (645) (500)
Net debt/EBITDA (0.3) 0.0 (0.6) (0.6) (0.7) Dividend paid (10,487) (21,207) (4,994) (19,184) (24,069)
Per share (Rs) Interest paid (512) (2,800) (2,923) (881) (823)
CEPS 27.0 36.3 41.0 50.6 59.4 Net change in Cash 4,076 (3,547) 24,852 5,206 15,252
Dividend payout (%) 48.6 77.0 15.9 48.1 50.1
Valuation (x)
P/E 148.5 118.6 102.0 80.4 66.8
P/BV 33.7 31.6 25.0 21.6 18.6
EV/EBITDA 90.5 76.7 65.4 53.7 44.9
Dividend yield (%) 0.3 0.7 0.2 0.6 0.3

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Bajaj Consumer Care

Bajaj Consumer’s revenue grew at a CAGR of 9.7% over the last decade while Market data
operating profits expanded at 11%. Despite the Nomarks acquisition in FY14 for Current price: Rs256
Rs1.5bn, over FY12-21, cumulative profit before WC has been Rs22.2bn (tax paid: Bloomberg: BAJAJCON IN
Rs4.8bn) and cash flow from operating activities has been Rs17.2bn, driven by gross 52-week H/L: Rs324/168
margin expansion of 730bp. OCF/PAT has been at 85% on an average till FY21 (FY21:
106%) and OCF/EBITDA at 81% till FY21 (FY21: 105%). Over the decade, the company
invested Rs2.7bn in capex and generated FCF of Rs14.5bn. Over FY12-21, average Free float: 60.8%
dividend payout has been 68.7%. Avg. daily vol. 3mth: 808,368
Source: Bloomberg
History of improved cash flows from operations: Operating profits have shown strong growth over the last 10 years. Despite
the dominance of a single brand (ADHO; 95% of revenue), working capital intensity has been moderate due to high gross
margins. The company has been ensuring sufficient liquidity at all times. It has been consistently generating healthy operating
cash flows over the years. Over FY12-21, cumulative profit before WC has been Rs22.2bn (of which tax paid: Rs4.8bn) and cash
flow from operating activities has been Rs17.2bn, driven by healthy expansion in margins.
3
2.5
2
1.5
Rs bn
1
0.5
0
-0.5 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-1
Analysis of working capital cycle: Bajaj Consumer has been able to increase its payable days (+13) over the last decade by
strengthening its network/better negotiations (FY21 being an exception), but there is scope for improvement in terms of debtor
days (up from 4 days to 10 days) and inventory days (~60 days). Cash conversion cycle has improved from -3 days in FY12 to -
15 days in FY21. OCF/PAT has improved from 75% in FY12 to 106% in FY21, and OCF/EBITDA has improved from 78% in FY12
to 105% in FY21. Notably, the company had to increase debtor days to meet operational challenges post GST and
demonetization for sales recovery. Inventory days have remained range-bound. On an average, OCF/PAT has been at 85% till
FY21 and OCF/EBITDA has been at 81%.
Exhibit 361: Working capital cycle – consistent improvement since FY17
120 FY17: Inventory days and 20
debtor days shot up, while 15
100
payable days were flat 10
80
5
Days
Days
60 -
-5
40
-10
20
-15
0 -20
xxxxx
Bajaj Consumer Care 16 September 2021
120 120
100 100
80 80
60 60
%
%
40 40
20 20
0 0
Steady free cash flows: Over FY12-21, cumulative cash from operating activities was Rs17.2bn, while capex was Rs2.7bn and
FCF was Rs14.5bn. Gross margin expanded from 56.3% in FY11 to 63.6% in FY21, reflecting in improved profits.
Exhibit 364: FCF generation has been healthy at Rs14.5bn over the last decade
3000
2000 FY14: Nomarks deal at Rs1.5bn
1000
Rs bn
0
-1000
-2000 Cash From Operating Activities CAPEX FCFF OCF/EBITDA OCF/EBITDA

Healthy return ratios: Overall return ratios have been healthy, as the company has efficiently managed its operations by
controlling debtor days. It has paid back cash to investors through higher dividend except in FY20.
RoE (%) 29.9 36.5 34.3 43.6 50.2 48.5 42.8 46.2 33.0 31.6
RoCE (%) 29.9 36.5 35.3 43.6 50.2 48.7 43.0 46.4 33.6 31.8
High dividend payout: In terms of cash flow from financing activities, major chunk of outflows has been towards dividend and
some portion has been towards export credit facilities availed. The company deploys money in debt funds and tax-free bonds
issued by government bodies, ensuring sufficient liquidity. Over FY12-21, average dividend payout has been 68.7%.
Dividend Pay-out (%) 72.5 57.7 64.4 98.2 86.3 78.1 83.8 93.5 - 52.8

Cash From Operating Activities 896 1,230 1,259 2,067 1,929 2,120 1,801 1,764 1,790 2,371
Cash Flow from Investing Activities -422 -99 35 -195 60 -152 368 686 -1,726 -1,063
Cash from Financing Activities -1,013 -1,114 -1,122 -2,035 -1,943 -2,000 -2,155 -2,384 -91 -1,342
Net increase/ (decrease) in Cash and Cash Equivalents -539 17 173 -164 46 -32 14 65 -26 -34
Closing Cash & Cash Equivalent 275 31 203 42 88 54 67 129 98 65

Bajaj Consumer Care 16 September 2021
P&L Balance sheet

Employee cost 972 869 850 951 945 Shareholders fund 4,674 6,532 7,571 8,705 9,913
PBT 2,831 2,250 2,704 3,171 3,663 Less: acc. Depreciation (226) (284) (347) (398) (452)
Taxes 616 402 472 567 655 Net block 1,114 1,080 1,056 1,101 1,153
Extraordinary items (6) (3) 5 5 5 Inventories 609 630 432 595 659
Growth (%) Trade payables 723 811 689 874 969
Revenue 10.2 (7.2) 9.6 11.9 11.2 Other current liab. 647 802 671 730 793
EBITDA 4.9 (27.4) 26.9 16.1 16.2 Provisions 6 1 5 6 6
Gross 65.9 66.9 63.6 65.9 66.0
EBITDA 27.6 21.6 25.1 26.0 27.2 Cashflow
ROE 46.2 33.0 31.6 32.0 32.3 Net Interest (225) (247) (316) (405) (452)
ROCE 46.4 33.6 31.8 32.1 32.4 Net Change – WC (394) 206 411 (95) 16
Inventory 65 83 59 54 60 Investments 548 (1,956) (1,367) 0 0
Net working capital 118 208 234 248 260 Net cash from investing 686 (1,726) (1,063) 309 345
Solvency (x) FCF 2,449 65 1,308 2,470 2,977
Interest coverage ratio 210.1 42.1 164.9 446.0 698.9 Increase/(decrease) in debt 115 (50) (150) (15) (15)
Net debt/EBITDA (1.1) (2.6) (2.6) (2.6) (2.6) Dividend paid (2,489) 0 (1,180) (1,475) (1,805)
Per share (Rs) Interest paid (10) (41) (12) 0 0
BVPS 31.7 44.3 51.3 59.0 67.2 Net cash from financing (2,384) (91) (1,342) (1,491) (1,820)
CEPS 15.5 12.9 15.5 18.0 20.8 Net change in Cash 65 (26) (34) 980 1,157
Dividend payout (%) 93.5 0.0 52.8 56.5 59.9
Valuation (x)
P/E 17.0 20.4 16.9 14.5 12.5
P/BV 8.1 5.8 5.0 4.3 3.8
EV/EBITDA 14.3 18.5 14.0 11.7 9.7
Dividend yield (%) 5.5 0.0 3.1 3.9 4.8

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Britannia Industries
Britannia has delivered 10.9% revenue CAGR and 29.9% PAT CAGR over the last Market data
decade. Operating profits have expanded consistently, with gross margin increasing Current price: Rs4,073
from 34.8% in FY11 to 42.8% in FY21. Cumulative profit before WC has been Bloomberg: BRIT IN
Rs124.2bn (tax paid: Rs36.6bn) and cash flow from operating activities has been 52-week H/L: Rs4,153/3,305
Rs89.6bn. On an average, OCF/PAT has been at 110% till FY21 (FY21: 101%) and
OCF/EBITDA has been at 75% till FY21 (FY21: 74%). Cumulative capex has been
Rs24.2bn and FCF has been Rs65.5bn, as the company could expand in-house Free float: 16.8%
manufacturing for its premium portfolio. Over FY12-21, the company used bonus Avg. daily vol. 3mth: 472,082
debentures to reward shareholders; average dividend payout has been 46.1%. Source: Bloomberg
History of improved cash flows from operations: Operating profits have grown consistently, driven by 700bp gross margin
expansion over FY12-21. Working capital intensity is low, and the company has been generating healthy OCF. Cumulative profit
before WC has been Rs124.2bn (of which tax paid: Rs36.6bn) and cash flow from operating activities has been Rs89.6bn.
30
25
20 FY17: High inventory and
advances
15
Rs bn
10
5
0
-5
-10
Analysis of working capital cycle: Significant improvement in payable days from 34 days in FY12 to 58 days in FY21 has led to
cash conversion cycle improving from 13 days in FY12 to -6 days in FY21. OCF/PAT has been ~110% till FY21 and OCF/EBITDA
~75%. In FY17, these ratios were abnormally low due to low OCF (following increase in inventory, and loans and advances).
Exhibit 369: Cash conversion cycle has improved from 13 days in FY12 to -6 days in FY21
70 15
60 10
50 5
40 -
Days
Days
30 -5
20 -10
10 -15
0 -20
xxxxx
Britannia Industries 16 September 2021

200 120
100
150
80
100
%
60
%
40
50
20
0 0
Steady free cash flows: Over FY12-21, cumulative OCF was Rs89.6bn, while capex was Rs24.2bn, translating into cumulative
FCF of Rs65.5bn. In line with its strategy to expand in-house production, over FY12-19, Britannia added a series of greenfield
capacities to expand its premium biscuits and value-added segment, including one in Nepal.
Exhibit 372: Britannia generated cumulative FCF of Rs65.5bn in the last 10 years
20 FY17: Banglore and FY19: Ranjangaon
FY16: Tamil Nadu Madurai greenfield and Nepal greenfield
15 FY13: Rudrapur and
Hyderabad greenfield
FY12: Bihar
10 greenfield
and Orissa
Rs bn
5 greenfield
-5
-10

80
60
40
%
20
0
RoE RoCE
Healthy return ratios: Overall return ratios have been healthy. Over FY17-19, PAT growth was lower than in previous years,
resulting in lower return ratios. However, return ratios improved post FY20. Cash flows from financing activities majorly include
ICD issues, which have been at Rs700mn on an average. Over FY12-21, average dividend payout has been 46.1%.
Dividend Payout (%) 45.1 45.4 30.1 24.4 28.0 32.6 31.6 30.8 31.1 162.2

Cash Flow from Investing Activities -648 282 -2,456 -4,503 -7,052 -1,499 -9,563 -8,555 -15,316 4,613
Cash from Financing Activities -1,684 -3,782 -3,573 -1,814 -2,462 -2,951 -2,318 -3,527 579 -22,437
Net increase/ (decrease) in Cash and Cash Equivalents 129 -302 685 -472 78 -37 608 -524 109 686
Closing Cash & Cash Equivalent 520 219 904 431 510 473 1,078 587 753 1,427

Britannia Industries 16 September 2021
P&L Balance sheet

Interest expenses 91 769 1,109 1,270 1,672 Total liabilities 44,528 60,054 57,242 68,622 81,867
Taxes 6,125 4,507 6,630 7,084 8,203 Net block 15,432 17,247 16,428 15,614 15,469
Effective tax rate (%) 34.6 24.2 27.4 26.2 26.3 Capital WIP 1,012 396 1,165 1,165 1,165
Gross 40.9 40.8 42.8 42.0 42.2
EBITDA 15.7 15.9 18.4 18.3 18.5 Cashflow
ROE 30.1 32.4 43.8 48.2 42.8 Net Interest (1,277) (999) (1,238) (1,737) (2,532)
ROCE 29.0 28.3 31.5 33.4 32.4 Net Change – WC (25) 1,274 (562) 681 (1,786)
Inventory 40 40 44 40 39 Investments (5,730) (14,158) 4,677 (9,000) 0
Creditors 59 59 58 59 59 Others 1,169 1,276 2,334 3,006 4,204
Net working capital 58 59 61 86 106 Net cash from investing (8,555) (15,316) 4,613 (7,163) 2,134
Solvency (x) FCF 3,003 (471) 23,123 14,890 24,215
Net debt-equity (0.2) 0.1 0.1 (0.2) (0.3) Issue of share capital 530 360 1,172 0 0
Interest coverage ratio 190.7 24.0 21.8 20.9 18.0 Increase/(decrease) in debt (419) 4,925 5,678 (150) (150)
Net debt/EBITDA (0.4) 0.2 0.2 (0.3) (0.7) Dividend paid (3,544) (4,325) (28,238) (9,636) (10,841)
Per share (Rs) Interest paid (94) (380) (1,049) (1,270) (1,672)
BVPS 177.0 183.1 147.3 194.6 249.6 Net cash from financing (3,527) 579 (22,437) (11,056) (12,663)
CEPS 54.7 66.0 80.5 90.6 104.2 Net change in Cash (524) 109 686 3,835 11,552
Dividend payout (%) 30.8 31.1 162.2 48.6 47.4
Valuation (x)
P/E 85.0 69.9 56.3 49.5 42.9
P/BV 23.0 22.2 27.7 20.9 16.3
EV/EBITDA 56.2 53.4 40.8 36.7 31.9
Dividend yield (%) 0.4 0.4 2.9 1.0 1.1

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Colgate Palmolive India (CLGT)

Over the last 10 years, CLGT has recorded 9.3% revenue CAGR and 9.9% PAT CAGR. Market data
Operating profits have been robust and gross margin has expanded by 700bp. Over Current price: Rs1,716
FY12-21, cumulative profit before WC has been Rs97.7bn (of which tax paid: Bloomberg: CLGT IN
Rs26.6bn) and cash flow from operating activities has been Rs68.8bn. On an average, 52-week H/L: Rs1,823/1,322
OCF/PAT has been 111% till FY20 (FY21: 76%) and OCF/EBITDA has been 75% till FY20 Market cap: Rs466.8bn
(FY21: 52%). Against cumulative OCF of Rs68.8bn, capex has been Rs19bn, translating
Free float: 44.5%
into cumulative FCF generation of Rs50bn. Over FY12-21, average dividend payout has
been 74.5%, resulting in healthy RoE/RoCE.
Source: Bloomberg
Strong cash flows from operations: Operating profits have been healthy and have consistently expanded over the last 10 years.
As CLGT is in a single category, working capital intensity in the business has been moderate. In FY21, there was an increase in
other financial assets, resulting in high cash outflows. The company has been ensuring sufficient liquidity at all times. CLGT has
been consistently generating strong operating cash flows. Over FY12-21 cumulative profit before WC has been Rs97.7bn (of
which tax paid: Rs26.6bn) and cash flow from operating activities has been Rs68.8bn.
Exhibit 376: Consistently generating strong cash flows from operations
20.00
15.00
10.00
Rs bn
5.00
0.00
-5.00
Analysis of working capital cycle: The FMCG sector has inherently enjoyed negative working capital cycle. FMCG companies
enjoy credit period but most sales are conducted on cash/NEFT terms, which is highly beneficial for them. CLGT has been able
to increase its payable days over the years by strengthening its network/better negotiations and has maintained tight control
over its inventory days as well. Its cash conversion cycle improved considerably from -44 days in FY12 to -78 days in FY21. While
OCF/PAT has improved from 90% in FY12 to 114% in FY20, OCF/EBITDA has improved from 70% in FY12 to 77% in FY20. On an
average, OCF/PAT has been 111% till FY20 (FY21: 76%) and OCF/EBITDA has been 75% till FY20 (FY21: 52%).
Exhibit 377: Significant improvement in cash conversion cycle over FY12-21
200.00
150.00
100.00
Days
50.00
-
(50.00)
(100.00)
xxxxx
Colgate Palmolive India (CLGT) 16 September 2021

140.00 100.00
120.00 90.00
80.00
100.00 70.00
80.00 60.00
50.00
%
%
60.00 40.00
40.00 30.00
20.00
20.00 10.00
- -
FY14
FY12
FY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY14
FY12
FY13
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Steady free cash flows: Over FY12-21, CLGT generated cumulative OCF of Rs68.8bn, while it incurred capex of Rs19bn.
Cumulative FCF was Rs50bn, mainly due to expansion of in-house manufacturing. CLGT invested in new capacities – a
toothpaste plant in 2014 at Sanand (~Rs6.3bn) and a toothbrush plant in 2016 at Sricity (~Rs3.4bn).
Exhibit 380: Generated cumulative FCF of Rs50bn over FY12-21, driven by expansion of in-house manufacturing
12.00
10.00 2014: Sanand toothpaste plant 2016: Sricity toothbrush plant
8.00
6.00
Rs bn
4.00
2.00
0.00
-2.00
-4.00

RoE (%) 109.0 107.4 87.3 81.6 68.0 50.1 49.0 50.1 53.7 75.0
RoCE (%) 105.3 100.2 82.6 76.7 65.7 50.0 48.9 48.9 51.4 71.2
Return ratios impacted by 1:1 bonus issue in FY16: Return ratios were impacted mainly on account of 1:1 bonus issue in FY16.
A net cash company, with limited capex requirement, CLGT has returned cash to shareholders. Over FY12-21, its average
dividend payout has been 74.5%.
Dividend Payout (%) 76.1 76.7 68.0 58.4 46.8 47.1 96.9 80.7 95.1 99.5

Cash Flow from Investing Activities -102 -473 -1,804 -2,716 -2,366 -3,421 -2,073 -957 -187 714
Net increase/ (decrease) in Cash and Cash Equivalents -55 1,400 -1,451 -183 607 53 1,068 726 198 -1,012

Colgate Palmolive India (CLGT) 16 September 2021
P&L Balance sheet

Taxes 3,670 2,269 3,148 3,281 3,639 Net block 11,909 11,229 10,647 10,744 10,805
Extraordinary items 305 (155) 32 0 0 Inventories 2,486 2,969 3,358 3,577 3,846
EBITDA 11.1 (2.8) 25.6 1.6 8.0 Provisions 823 1,093 1,122 1,195 1,285
Adj. EPS 8.8 9.6 26.8 4.5 10.9 Net current assets 1,675 3,720 354 817 1,378
Gross 65.1 65.2 68.0 67.0 67.0
EBITDA 27.7 26.6 31.2 29.7 29.9 Cashflow
ROE 50.1 53.7 75.0 90.7 95.8 Net Interest 0 0 0 0 0
ROCE 48.9 51.4 71.2 85.0 90.1 Net Change – WC 1,494 (35) (3,826) (2,126) 2,473
ROIC 67.6 67.3 127.3 222.8 249.5 Direct taxes 0 0 0 0 0
Inventory 56 63 75 74 74 Investments 85 417 1,287 0 0
Net working capital 14 30 3 6 9 Net cash from investing (957) (187) 714 (1,797) (1,655)
Solvency (x) FCF 8,873 8,712 8,552 8,601 14,417
Net debt-equity (0.2) (0.2) (0.7) (0.5) (0.7) Issue of share capital (111) (81) (103) 0 0
Interest coverage ratio 494.4 124.9 208.0 0.0 0.0 Increase/(decrease) in debt (121) 0 0 0 0
CEPS 33.2 37.3 44.8 46.0 50.0 Net change in Cash 726 198 (762) (1,662) 3,033
Dividend payout (%) 80.7 95.1 99.5 94.8 94.8
Valuation (x)
P/E 62.7 57.2 45.1 43.1 38.9
P/BV 32.3 29.3 40.0 38.2 36.4
EV/EBITDA 37.5 38.6 30.4 30.0 27.6
Dividend yield (%) 1.3 1.6 2.2 2.2 2.4

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Dabur India (DABUR)

DABUR reported 8.8% revenue CAGR and 10.9% PAT CAGR over FY12-21. Operating Market data
profits have been healthy and have consistently expanded. Gross margins have Current price: Rs640
remained at 48-49%, driven by healthcare segment, where margins are higher than Bloomberg: DABUR IN
company average. Cumulative profit before WC has been Rs149.8bn (tax paid: 52-week H/L: Rs651/479
Rs26.3bn) and cash flow from operating activities has been Rs123.4bn. On an average,
OCF/PAT has been 102% till FY21 (FY21: 125%) and OCF/EBITDA has been 87% (FY21:
112%). Cumulative capex has been Rs27.2bn and DABUR has generated cumulative Free float: 49.8%
FCF of Rs96.3bn over FY12-21. Average dividend payout has been 41.5%. Avg. daily vol. 3mth: 2,538,091
Source: Bloomberg
History of steady improvement in cash flows from operations: Operating profits have grown steadily over the last 10 years.
Working capital intensity in the business has been a bit higher due to focus on healthcare, a seasonal business. DABUR has
been ensuring sufficient liquidity at all times. Over FY12-21, cumulative profit before WC has been Rs149.7bn (of which tax
paid: Rs26.3bn) and cash flow from operating activities has been Rs123.4bn.
25
20
Rs bn
15
10
Analysis of working capital cycle: DABUR has increased its payable days from 25 to 35 days by strengthening its network and
better negotiations. It has also reduced debtor days, but there is scope to cut inventory days, which have shot up from 98 to
119 days. The higher inventory days could be because of higher contribution from the healthcare business. Cash conversion
cycle has improved from 55 days in FY12 to 16 days in FY21. OCF/PAT improved from 93% in FY12 to 125% in FY21, while
EBITDA/PAT improved from 69% in FY12 to 112% in FY21. On an average, OCF/PAT has been 102% till FY21 and OCF/EBITDA
has been 87% till FY21.
Exhibit 385: Cash conversion cycle has improved over the years
140 70
120 60
100 50
80 40
Days
Days
60 30
40 20
20 10
0 -

xxxxx
Dabur India (DABUR) 16 September 2021

140 120
120 100
100
80
80
60
%
%
60
40
40
20 20
0 0
Steady improvement in free cash flows: Over FY12-21, cumulative cash from operating activities was Rs123.4bn, while capex
was Rs27.2bn, translating into cumulative FCF of Rs96.3bn. DABUR increased capacities in Tezpur and Indore to produce a
range of ayurvedic products. Further, it has been able to lower its tax outgo due to tax benefits availed in Tezpur on account
of MAT credit.
Exhibit 388: FCF has improved steadily
25 FY20: Added capacity for
20 Chyawanprash and Honey
FY17: Tezpur factory;
15 Rs2.5bn
Rs bn
10
5
0
-5

50
40
30
%
20
10
0
RoE RoCE
Healthy return ratios: Overall return ratios have been healthy, but lower than peers due to higher investments in inventory.
Over FY12-21, average dividend payout has been 41.5%.
Dividend Payout (%) 37.5 34.2 33.4 33.0 31.6 31.0 97.5 30.5 36.7 49.5

Cash Flow from Investing Activities -2,605 -6,241 -1,073 -8,762 -7,296 -8,069 -5,400 3,369 -5,168 -14,058
Net increase/ (decrease) in Cash and Cash Equivalents 1,380 115 1,873 -2,458 831 811 -256 -522 538 955
Closing Cash & Cash Equivalent 4,184 1,250 3,132 677 356 1,158 892 377 917 1,888

Dabur India (DABUR) 16 September 2021
P&L Balance sheet

Taxes 2,786 2,797 3,611 5,099 5,938 Net block 16,332 19,170 19,072 19,629 20,356
Effective tax rate (%) 15.5 15.3 17.6 20.7 20.4 Capital WIP 638 1,466 1,473 1,473 1,473
Extraordinary items (753) (1,000) 0 0 0 Inventories 13,005 13,796 17,343 18,337 20,533
Gross 48.9 49.3 49.3 49.3 49.5
EBITDA 19.5 19.7 20.0 21.0 22.0 Cashflow
ROE 26.8 25.2 23.8 24.0 25.2 Net Interest (2,002) (2,001) (2,300) (3,558) (4,266)
ROCE 23.8 23.0 21.8 22.6 24.2 Net Change – WC (181) (579) 3,884 2,514 184
Net working capital 190 185 226 219 225 Net cash from investing 3,369 (5,168) (14,058) 890 1,163
Solvency (x) FCF 18,360 10,968 7,089 21,702 22,804
Interest coverage ratio 27.6 34.2 61.5 87.1 139.5 Increase/(decrease) in debt (2,402) (3,580) 369 (2,889) (500)
Dividend payout (%) 30.5 36.7 49.5 50.8 47.7
Valuation (x)
P/E 74.3 73.3 66.8 58.1 48.9
P/BV 20.0 17.1 14.8 13.2 11.6
EV/EBITDA 67.1 65.1 57.2 48.0 40.0
Dividend yield (%) 0.4 0.5 0.7 0.9 1.0

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Emami
Emami reported 9.1% revenue CAGR and 8.2% PAT CAGR over FY12-21. Operating Market data
profits have been healthy and have grown consistently, largely driven by 1,340bp Current price: Rs594
expansion in gross margins. Though the Kesh King acquisition in FY16 helped Emami Bloomberg: HMN IN
to expand its hair oil business, it took three years for Emami to digest. Over FY12-21, 52-week H/L: Rs622/334
cumulative profit before WC has been Rs62.1bn (tax paid: Rs7.5bn) and cash flow
Market cap: Rs264bn
from operating activities has been Rs55.3bn. On an average, OCF/PAT has been 108%
till FY21 (FY21: 138%) and OCF/EBITDA has been 94% till FY21 (FY21: 104%). Free float: 46.1%
Cumulative capex has been Rs29bn and Emami has generated cumulative FCF of Avg. daily vol. 3mth: 788,633
Rs26.3bn over FY12-21. Average dividend payout has been 56.5%. Source: Bloomberg
Robust cash flows from operations: Operating profits have grown consistently over the last 10 years. Working capital intensity
in the business has been low to moderate, and the company has been generating healthy operating cash flows over the years.
Over FY12-21, cumulative profit before WC has been Rs62.1bn (of which tax paid: Rs7.5bn) and cash flow from operating
activities has been Rs55.3bn. The improvement has occurred on the back of strong gross margin expansion of ~1,340bp.
Exhibit 392: Cash flows from operations have improved over the last decade
10
6
Rs bn
Analysis of working capital cycle: Emami has been able to increase its payable days from 32 to 133 days over FY12-21, which
is commendable, resulting in improvement in cash conversion cycle from 65 days in FY12 to 9 days in FY21. However, its
inventory days have been increasing over the period due to erratic seasonality effect. On an average, OCF/PAT has been 108%
till FY21 and OCF/EBITDA has been 94%.
Exhibit 393: Cash conversion cycle has improved, driven by increase in payable days
140 80
120 60
100
40
80
Days
Days
20
60
-
40
20 -20
0 -40

xxxxx
Emami 16 September 2021

160 140
140 120
120 100
100
80
80
%
$
60
60
40
40
20 20
0 0
Steady free cash flows: Over FY12-21, cumulative cash from operating activities was Rs55.3bn, while capex was Rs29bn,
translating to FCF of Rs26.3bn. In FY16, the company acquired the Kesh King brand for Rs16.8bn.
Exhibit 396: Cash flows have grown consistently, except for FY16, when Emami acquired Kesh King
15
FY16: Kesh King brand
10
acquired for Rs16.8bn
5
0
Rs bn
-5
-10
-15
-20

60
50
40
30
%
20
10
0
RoE RoCE
Average dividend payout of 56.5%: In terms of cash flows from financing activities, major chunk of outflows has been towards
dividend and repayment of borrowings. It has also been receiving export credit facilities. Over FY12-21, average dividend
payout has been 56.5%.
Dividend Payout (%) 23.8 44.6 54.9 37.3 18.8 52.3 29.8 55.1 179.8 68.9

Cash Flow from Investing Activities -1,327 -1,236 -1,419 -2,337 -13,064 -2,975 -2,791 -234 -2,277 -2,270
Cash from Financing Activities -1,449 -1,885 -3,013 -2,154 5,018 -4,958 -3,237 -4,277 -4,054 -6,882
Net increase/ (decrease) in Cash and Cash Equivalents 829 108 -149 850 -2,430 -637 -150 1,027 -1,023 64
Closing Cash & Cash Equivalent 2,759 2,809 2,680 3,498 1,005 284 162 1,165 108 198

Emami 16 September 2021
P&L Balance sheet

Others 2,221 3,176 3,009 3,475 3,701 Minority Interest (2) (9) (9) 0 0
EBITDA 6,915 6,905 8,831 10,047 11,593 Total debt 1,099 2,102 919 1,034 1,174
Taxes 1,009 713 1,142 1,791 2,126 Net block 16,812 14,605 11,325 10,485 9,541
Minority/Associates (15) (54) (42) 0 0 Non Current Assets 775 899 882 979 1,096
Recurring PAT 4,963 5,253 6,692 7,962 9,303 Investments 1,791 881 1,664 1,664 1,664
Extraordinary items (249) (1,117) 614 0 0 Inventories 2,217 2,447 3,005 3,381 2,620
Gross 65.3 67.0 67.7 68.1 68.2
EBITDA 26.0 26.0 30.7 31.0 31.5 Cashflow
ROE 24.3 26.9 37.3 41.5 41.1 Net Interest 32 (83) (38) (973) (1,104)
ROCE 14.6 15.9 24.2 35.9 36.1 Net Change – WC (739) (800) 1,088 (81) 1,311
Gross block turnover ratio (x) 0.9 0.9 0.9 1.0 1.1 Capital expenditure (1,329) (1,481) (320) (1,140) (1,027)
Debtors 26 36 34 27 26 Acquisitions, net (25) (20) (15) 0 0
Inventory 82 97 107 113 94 Investments 945 (879) (2,253) 0 0
Creditors 105 128 133 130 129 Others 175 103 319 973 1,104
Net working capital 38 62 66 103 138 Net cash from investing (234) (2,277) (2,270) (167) 77
Solvency (x) FCF 5,279 2,997 6,971 8,008 10,856
Net debt-equity 0.0 0.0 (0.2) (0.4) (0.6) Issue of share capital 0 (625) (1,756) 0 0
Interest coverage ratio 32.3 32.9 66.5 117.1 119.5 Increase/(decrease) in debt (2,160) 970 (1,247) 115 139
Net debt/EBITDA (0.1) 0.0 (0.4) (0.7) (1.2) Dividend paid (1,902) (4,191) (3,747) (4,032) (4,717)
CEPS 18.1 19.0 23.3 22.4 25.4 Net change in Cash 1,003 (1,056) 90 4,005 6,181
Dividend payout (%) 55.1 179.8 68.9 56.3 55.5
Valuation (x)
P/E 54.3 51.2 39.4 33.2 28.4
P/BV 13.0 14.8 15.0 12.7 10.8
EV/EBITDA 38.0 38.3 29.5 25.5 21.6
Dividend yield (%) 0.6 1.3 1.3 1.5 1.8

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Godfrey Phillips India (GP)

Over the last 10 years, GP has delivered 4.4% revenue CAGR and 7.9% PAT CAGR, Market data
though growth has been volatile, as the cigarette industry is highly regulated and Current price: Rs1,050
driven by frequent policy interventions and taxation changes. Operating profits have Bloomberg: GP IN
been moderated due to investments in 24Seven retail business. Over FY12-21, 52-week H/L: Rs1,110/832
cumulative profit before WC has been Rs38.4bn (tax paid: Rs8.9bn) and cash flow
from operating activities has been Rs28.6bn. On an average, OCF/PAT has been 145%
till FY21 (FY21: 84%) and OCF/EBITDA has been 95% till FY21 (FY21: 60%). Cumulative Free float: 41.4%
capex has been Rs12.2bn and GP has generated cumulative FCF of Rs16.4bn over Avg. daily vol. 3mth: 143,111
FY12-21. Average dividend payout has been 26.6%. Source: Bloomberg
Robust cash flows from operations: Operating profits have been moderated, as GP invested heavily in 24Seven retail business.
Working capital intensity in the cigarette business has been moderate. Over FY12-21, cumulative profit before WC has been
Rs38.4bn (of which tax paid: Rs8.9bn) and cash flow from operating activities has been Rs28.6bn.
Exhibit 400: Robust cash flows from operations
8
6 FY15: Increase FY18: Increase in

in inventories trade payables
4
Rs bn
-2
-4 Profit Before Changes In working Capital Net Changes In working Capital Cash From Operating Activities
Analysis of working capital cycle: Over the years, GP has significantly improved its inventory and debtor days (except FY21),
which has reflected in optimization of its cash conversion cycle. On an average, OCF/PAT has been 145% till FY21 and
OCF/EBITDA has been 95%. These ratios were abnormally low in FY15 due to low OCF (increase in inventory) and abnormally
high in FY18 due to high OCF (increase in trade payables).
Exhibit 401: Cash conversion cycle improved consistently over FY16-20
300 250
250 200
200
150
Days
Days
150
100
100
50 50
0 -
xxxxx
Godfrey Phillips India (GP) 16 September 2021

350 250
300
200
250
200 150
%
%
150 100
100
50
50
0 0
Free cash flows: Over FY12-21, cumulative cash from operating activities was Rs28.6bn, while capex was Rs12.2bn, translating
to cumulative FCF of Rs16.4bn. Capex was primarily for addition of cigarette and chewing product capacity.
Exhibit 404: Cumulative FCF of Rs16.4bn over FY12-21
7
FY12: Rabale, FY16: Mumbai Metro
5 Ghaziabad, Bazpur, (Cigarettes)
Kolkata and Ongole
3
Rs bn
-1
-3

25
20
High CoGS impacted margins in FY17 and
15 FY18, which in turn impacted return ratios
%
10
0
RoE RoCE
Return ratios improving since FY18: The Indian tobacco industry is heavily regulated; therefore, business volumes tend to be
volatile. High CoGS impacted margins in FY17 and FY18, which in turn impacted return ratios. However, return ratios have been
improving since then. Over FY12-21, average dividend payout has been 26.6%.
Cash From Operating Activities 2,059 1,837 2,897 631 3,260 2,481 5,138 3,515 3,766 2,996
Cash Flow from Investing Activities -2,251 -785 -1,350 -315 -1,262 -1,314 -4,088 -3,119 -704 -3,180
Cash from Financing Activities 39 -1,059 -1,578 -306 -1,996 -1,200 -961 -394 -2,991 72
Net increase/ (decrease) in Cash and Cash Equivalents -153 -7 -30 10 3 -33 89 2 72 -112

Godfrey Phillips India (GP) 16 September 2021
P&L Balance sheet

Taxes 1,217 1,280 1,080 1,323 1,521 Net block 6,649 9,819 9,986 10,249 9,682
Extraordinary items (18) (102) (14) 0 0 Inventories 5,690 6,140 6,706 6,152 6,756
Reported PAT 2,391 3,777 3,556 3,926 4,514 Sundry debtors 670 667 1,237 904 1,000
Other current assets 837 1,132 1,455 893 988
EBITDA 55.1 60.5 (12.5) 8.2 11.5 Provisions 105 151 197 197 197
Gross 56.3 55.7 50.6 55.0 55.4
EBITDA 14.4 20.0 20.1 19.8 20.0 Cashflow
ROE 13.4 19.6 15.9 15.4 15.8 Net Interest 0 0 0 0 0
ROCE 13.2 18.9 14.7 14.4 14.9 Net Change – WC 690 (1,092) (1,341) 1,778 (686)
ROIC 21.8 31.8 22.5 24.1 29.0 Direct taxes (1,277) (1,225) (991) (1,323) (1,521)
Debtors 12 9 14 14 12 Acquisitions, net (55) (48) (242) 0 0
Inventory 184 172 192 193 177 Investments (1,871) 392 (1,710) 0 0
Net working capital 180 177 253 265 287 Net cash from investing (3,119) (704) (3,180) 670 942
Solvency (x) FCF 396 3,062 (184) 6,485 4,713
Interest coverage ratio 411.0 18.8 16.1 17.1 18.7 Increase/(decrease) in debt 145 (604) 384 (253) (253)
Net debt/EBITDA (3.2) (1.5) (2.4) (3.0) (3.2) Dividend paid (498) (2,087) (25) (1,248) (1,248)
BVPS 364.7 396.4 464.8 518.7 583.5 Net cash from financing (394) (2,991) 72 (1,814) (1,821)
CEPS 64.8 103.9 95.3 106.0 119.5 Net change in Cash 2 72 (112) 4,671 2,892
Dividend payout (%) 21.7 33.0 35.1 41.1 40.3
Valuation (x)
P/E 22.7 14.1 15.3 13.9 12.1
P/BV 2.9 2.7 2.3 2.0 1.8
EV/EBITDA 12.3 8.1 8.7 7.2 5.9
Dividend yield (%) 1.0 2.3 2.3 3.0 3.3

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
Hindustan Unilever (HUVR)

HUVR reported 8.8% revenue CAGR and 13.2% PAT CAGR over FY12-21. Operating Market data
profits have been healthy and have consistently expanded. Gross margins improved Current price: Rs2,768
600bp from 47% in FY12 to 53% in FY21. Over FY12-21, cumulative profit before WC Bloomberg: HUVR IN
has been Rs660bn (tax paid: Rs178.9bn) and cash flow from operating activities has 52-week H/L: Rs2,825/2,000
been Rs502.3bn. Importantly, over the decade, HUVR could cut its inventory from 83
days to 51 days, with investment in IT. On an average, OCF/PAT has been 101% till
FY21 (FY21: 112%) and OCF/EBITDA has been 78% (FY21: 79%). Cumulative capex has Free float: 34.5%
been Rs97.9bn and HUVR has generated cumulative FCF of Rs404.4bn over FY12-21. Avg. daily vol. 3mth: 1,537,602
Average dividend payout has been 83.3%. Source: Bloomberg
Robust cash flows from operations: Operating profits have grown consistently over the last 10 years, driven by 600bp gross
margin expansion. Working capital intensity in the business has been low to moderate, and the company has been ensuring
sufficient liquidity. Over FY12-21, cumulative profit before WC has been Rs660.0bn (of which tax paid: Rs178.9bn) and cash
flow from operating activities has been Rs502.3bn.
120
100
80
Rs bn
60
40
20
0
-20
Analysis of working capital cycle: HUVR has been able to reduce its inventory days from 83 days in FY12 to 51 days in FY21,
with investment in supply chain, IT infrastructure and distributor sales management (DMS). Cash conversion cycle has
improved from -54 days in FY12 to -74 days in FY21. On an average, OCF/PAT has been 101% till FY21 and OCF/EBITDA has
been 78% – one of the healthiest across the FMCG universe.
160 -
140
-20
120
100 -40
Days
Days
80
60 -60
40
-80
20
0 -100
xxxxx
Hindustan Unilever (HUVR) 16 September 2021

120 100
100 80
80
60
%
60
%
40
40
20
20
0 0
Steady improvement in free cash flows, aided by strong M&A: Over FY12-21, cumulative cash from operating activities was
Rs502.3bn, while capex was Rs97.9bn, translating to cumulative FCF of Rs404.4bn. In FY17, HUVR completed the acquisition of
Indulekha for Rs3.3bn and further deferred payments (10% of turnover) based on performance for five years (entered deal in
FY16). In FY19, it acquired Aditya Milks for an upfront consideration of Rs0.65bn and a deferred consideration of Rs0.18bn. In
FY20, it acquired GSK CH nutrition business (Rs30.5bn) and entered into an agreement to acquire the intimate hygiene brand
VWash from Glenmark Pharmaceuticals for a cash consideration of Rs2.86bn and a deferred contingent consideration of
Rs0.12bn (deal effect of both seen in FY21).
Exhibit 411: Free cash flows have improved steadily
FY20: Acquired GSK
100 FY19: Acquired CH and VWash
FY17: Completed Aditya Milks
acquisition of Indulekha
50
Rs bn

140
120
100
80
%
60
40
20
0
RoE RoCE
Average dividend payout of 83.3%: In terms of cash flows from financing activities, major chunk of outflows has been on
dividend and some portion on working capital needs. The company can avail cash credit and working capital loans on demand.
Over FY12-21, average dividend payout has been 83.3%.
Cash Flow from Investing Activities -4,525 343 -5,132 2,799 -510 -7,520 -12,610 -2,640 19,260 -13,670
Net increase/ (decrease) in Cash and Cash Equivalents 6,948 -5,965 2,942 1,014 -850 -630 10 20 25,550 -16,900

Hindustan Unilever (HUVR) 16 September 2021
P&L Balance sheet

Interest expenses 280 1,060 1,080 605 265 Total liabilities 95,120 104,980 572,750 651,873 690,400
Taxes 24,860 23,540 25,360 34,577 37,556 Net block 39,070 46,250 57,860 91,978 123,649
Other current assets 40 180 170 1,940 2,406
Gross 53.8 54.8 53.7 57.6 54.4
EBITDA 22.6 24.8 24.6 25.4 25.4 Cashflow
ROE 85.0 88.4 29.5 19.3 19.0 Net Interest (3,980) (4,900) (3,440) (16,496) (17,451)
ROCE 85.3 89.4 29.8 19.4 19.0 Net Change – WC (2,610) 2,970 (560) 780 13,023
Inventory 49 52 51 58 52 Investments 620 22,140 22,330 0 0
Solvency (x) FCF 54,640 92,310 75,900 70,525 89,099
Per share (Rs) Interest paid (30) (4,320) (4,690) (605) (265)
CEPS 31.3 36.4 39.1 46.0 49.9 Net change in Cash 20 25,550 (16,900) (8,250) 11,945
Dividend payout (%) 78.9 81.4 110.5 66.5 67.8
Valuation (x)
P/E 95.7 86.4 79.5 65.8 60.5
P/BV 78.2 74.6 13.7 11.8 11.2
EV/EBITDA 74.6 67.1 56.8 50.6 46.4
Dividend yield (%) 0.8 0.9 1.4 1.0 1.1

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
ITC
ITC reported 7.9% revenue CAGR and 10.3% PAT CAGR over FY12-21. Operating profits Market data
have been healthy and have consistently expanded, with cigarette business the Current price: Rs231
dominant contributor to profitability. Over FY12-21, cumulative profit before WC has Bloomberg: ITC IN
been Rs1.43tn (tax paid: Rs430.8bn) and cash flow from operating activities has been 52-week H/L: Rs239/163
Rs979.1bn. On an average, OCF/PAT has been 95% till FY21 (FY21: 87%) and
OCF/EBITDA has been 71% (FY21: 76%). As the company invested heavily in
Hotel/FMCG businesses over FY12-21, cumulative capex has been Rs239.9bn and FCF Free float: 56.4%
has been Rs739.2bn. Average dividend payout has been 65.1%. Avg. daily vol. 3mth: 19,552,500
Source: Bloomberg
Robust cash flows from operations: Operating profits have grown consistently, with stable gross margin of ~60% over the last
10 years, despite disruptions in cigarette revenues on account of unpredicted taxation. Working capital intensity in the business
has been low, and the company has been ensuring sufficient liquidity. Over FY12-21 cumulative profit before WC has been
Rs1.43tn (of which tax paid: Rs430.8bn) and cash flow from operating activities has been Rs979.1bn.
Exhibit 414: Cash flows from operations have grown over the last decade
200
150
100
Rs bn
50
0
-50
Analysis of working capital cycle: ITC has been able to reduce its inventory days from 207 to 160 days over FY12-21, resulting
in improvement in cash conversion cycle from 167 days in FY12 to 108 days in FY21. Its payable days have been increasing
mainly due to change in product mix and it may take some time for ITC to gain buyer power. On an average, OCF/PAT has been
95% till FY21 and OCF/EBITDA has been 71%.
250 200
200
150
150
Days
Days
100
100
50
50
0 -
xxxxx
ITC 16 September 2021
120 90
80
100
70
80 60
50
60
%
%
40
40 30
20
20
10
0 0
Steady free cash flows: Over FY12-21, cumulative cash from operating activities was Rs979.1bn, while capex was Rs239.9bn,
translating to cumulative FCF of Rs739.2bn. In FY15, ITC acquired Savlon and Shower to Shower brands from Johnson &
Johnson. In FY16, it acquired Technico Agri Sciences Ltd (TASL) for Rs1.2bn. In FY19, paperboards capacity was augmented in
VAP segment at Bhadrachalam. Domestic manufacturing capacity for agarbatti (incense sticks) was enhanced through
technology upgradation and standardization of processes. In FY21, Sunrise Foods Private Ltd was acquired for Rs21.5bn.
Exhibit 418: Generated cumulative FCF of Rs739.2bn over FY12-21
150 FY15: Savlon and Shower FY16: Technico FY21: Sunrise Foods
to Shower Agri Sciences Ltd
100
Rs bn
50


40
30
20
%
10
0
RoE RoCE
Average dividend payout of 65.1%: In terms of cash flows from financing activities, major chunk of the outflows has been for
dividend and some portion has been for repayment of borrowings. Effective FY20, the company revised its dividend payout
policy, expecting to pay 80-85% of its earnings as dividend. Over FY12-21, average dividend payout has been 65.1%.
Dividend Payout (%) 57.1 55.9 54.3 52.1 73.3 56.6 56.0 55.0 90.7 99.7

Cash From Operating Activities 60,156 67,099 69,623 93,089 92,119 1,00,020 1,26,509 1,17,491 1,38,062 1,14,940
Cash Flow from Investing Activities -25,442 -35,808 -28,233 -48,226 -37,109 -27,803 -66,912 -50,818 -55,167 64,979
Cash from Financing Activities -32,466 -32,326 -41,739 -45,736 -54,651 -71,376 -60,199 -66,006 -78,909 -1,83,789
Net increase/ (decrease) in Cash and Cash Equivalents 2,249 -1,034 -348 -873 359 841 -602 667 3,986 -3,871
Closing Cash & Cash Equivalent 2,593 1,559 1,211 363 722 1,563 960 1,627 5,614 2,312

ITC 16 September 2021
P&L Balance sheet

Taxes 59,798 40,308 41,325 50,358 56,455 Net block 179,457 199,981 195,933 195,997 193,800
Extraordinary items 3,626 (15,139) 2,463 0 0 Inventories 75,872 80,381 94,709 83,531 93,948
EBITDA 10.4 4.1 (13.0) 23.8 13.1 Provisions 252 1,179 1,691 1,833 2,078
Gross 61.1 61.8 55.7 62.1 62.1
EBITDA 37.7 38.6 33.6 38.3 38.2 Cashflow
ROE 22.8 25.0 21.2 26.4 28.4 Net Interest (16,243) (19,343) (19,013) (20,399) (22,170)
Inventory 156 165 160 176 154 Investments (38,514) (53,945) 61,508 0 0
Net working capital 253 301 254 252 242 Net cash from investing (50,818) (55,167) 64,979 5,079 6,551
Solvency (x) FCF 66,673 82,895 179,918 162,620 178,230
Net debt-equity (0.5) (0.5) (0.5) (0.5) (0.5) Issue of share capital 9,691 6,253 2,907 0 0
Interest coverage ratio 489.7 312.6 319.1 395.2 446.8 Increase/(decrease) in debt 39 (44) 389 0 0
CEPS 11.2 13.7 11.9 14.2 16.0 Net change in Cash 667 3,986 (3,871) 27,164 26,432
Dividend payout (%) 55.0 90.7 99.7 85.0 85.0
Valuation (x)
P/E 22.8 18.6 21.8 17.9 15.9
P/BV 4.9 4.4 4.8 4.6 4.4
EV/EBITDA 15.3 14.4 16.9 13.5 11.8
Dividend yield (%) 2.5 4.4 4.7 4.8 5.3

16 September 20211
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
V-Mart Retail (VMART)

VMART has reported 17.5% revenue CAGR and 21.5% EBITDA CAGR over FY12-21. In Market data
FY21, Covid derailed growth for the company; its inventory days rose to 229, Current price: Rs3,494
impacting return ratios. Operating profits have been healthy and have consistently Bloomberg: VMART IN
expanded with scale of operations. Over FY12-21, cumulative profit before WC has 52-week H/L: Rs4,085/1,878
been Rs10.1bn (tax paid: Rs1.8bn) and cash flow from operating activities has been
Market cap: Rs69bn
Rs5.6bn. On an average, OCF/PAT has been 118% till FY20 (VMART reported PAT loss
in FY21 owing to lower scale of operations) and OCF/EBITDA has been 58% till FY21 Free float: 53.1%
(FY21: 114%). Cumulative capex has been Rs3.5bn and FCF has been Rs2.1bn. Avg. daily vol. 3mth: 59,414
Source: Bloomberg
History of steady improvement of cash flows from operations: Operating profits have grown consistently over the last 10
years, led by 360bp improvement in gross margin. Working capital intensity has been high due to the nature of the industry.
VMART has consistently generated healthy operating cash flows over the years (FY21 an exception). Over FY12-21, cumulative
profit before WC has been Rs10.1bn (of which tax paid: Rs1.8bn) and cash flow from operating activities has been Rs5.6bn.
Exhibit 422: Consistent improvement in cash flows from operations over the last decade
2.5 FY20: High inventory
2
1.5
1
Rs bn
0.5
0
-0.5
-1
-1.5
Analysis of working capital cycle: VMART does not have debtors, as it operates on cash sales. Cash conversion cycle improved
from 85 days in FY13 to 60 days in FY19, but worsened in to 75 days in FY20 and 131 days in FY21. OCF/PAT improved from
158% in FY12 to 175% in FY20 (loss in FY21) and OCF/EBITDA improved from 61% in FY12 to 114% in FY21. On an average,
OCF/PAT has been 118% till FY20 and OCF/EBITDA has been 52% till FY20 (58% till FY21).
Exhibit 423: After improving from 85 days in FY13 to 60 days in FY19, cash conversion cycle worsened to 131 days in FY21
250 FY21: Covid impact 140
120
200
100
150 80
Days
Days
100 60
40
50
20
0 -
xxxxx
V-Mart Retail (VMART) 16 September 20211

500 120
0 100
-500 80
-1000 60
%
%
-1500 40
-2000 20
-2500 0
Steady free cash flows: Over FY12-21, cumulative cash from operating activities has been Rs5.6bn, while capex has been
Rs3.5bn, translating to cumulative FCF of Rs2.1bn. Capex is primarily for store expansion and refurbishment. VMART raised
Rs3.75bn in Q4FY21 for setting up warehouse and other expansion plans. In Q2FY22, it announced the acquisition of the
Unlimited brand for Rs1.5bn.
Exhibit 426: Consistent growth in FCF
2
1.5
1
Rs bn
0.5
0
-0.5
-1

30
20
%
10
0
-10
RoE RoCE
Return ratios healthy except for FY20 and FY21: Overall return ratios have been healthy, except for FY20 and FY21. Covid-led
disruptions have derailed store expansion and impacted non-essential purchases.
Exhibit 428: Leverage ratios
Leverage ratios (x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity (x) 0.7 -0.1 0.1 0.1 0.0 -0.1 -0.1 -0.2 1.1 0.3
Net Debt/EBITDA (x) 1.4 -0.2 0.4 0.2 0.1 -0.4 -0.4 -0.5 2.4 1.7
In terms of cash flows from financing activities, VMART targets aggressive store rollout. It does not pay much dividends. Further,
the company has been able to draw working capital loans on demand from its lenders.
Cash From Operating Activities 168 98 110 399 461 687 577 763 863 1,493
Cash Flow from Investing Activities -137 -622 -271 -191 -372 -728 -84 -734 5 -4,188
Cash from Financing Activities -35 666 23 -199 -96 49 -384 -44 -943 2,869
Net increase/ (decrease) in Cash and Cash Equivalents -4 143 -137 10 -6 8 109 -14 -75 174

V-Mart Retail (VMART) 16 September 20211
P&L Balance sheet

Others 615 724 498 789 1,390 Minority Interest 0 0 0 0 0
Depreciation & Amortisation 276 939 1,030 1,123 1,540 Non Current Liabilities 111 61 73 73 73
EBIT 1,053 1,198 282 1,126 1,997 Def tax liab. (net) 0 0 0 0 0
PBT 1,096 695 (97) 887 1,527 Less: acc. Depreciation (641) (925) (1,050) (1,497) (2,247)
Taxes 382 202 (35) 223 385 Net block 1,655 1,749 1,785 1,944 2,752
PAT 714 493 (62) 663 1,142 Net fixed assets 1,695 6,695 6,987 6,697 8,824
Recurring PAT 714 493 (62) 663 1,142 Investments 98 33 36 36 36
Reported PAT 613 493 (65) 663 1,142 Sundry debtors 0 0 0 0 0
Other current assets 225 301 1,102 1,102 1,102
Revenue 17.3 16.0 (35.4) 62.8 55.8 Other current liab. 535 354 224 224 224
Adj. EPS (8.2) (30.9) nm nm 72.2 Net current assets 2,101 2,757 6,558 7,873 8,963
Gross 32.4 32.2 32.8 32.8 32.9
EBITDA 9.3 12.9 12.2 12.8 13.0 Cashflow
Adjusted PAT 5.0 3.0 (0.6) 3.8 4.2 Profit Before Tax 1,095 1,257 316 1,126 1,997
ROE 18.9 11.4 (1.0) 8.0 13.0 Net Interest 0 0 0 0 0
ROCE 19.1 12.7 2.7 7.0 9.6 Net Change – WC (275) (1,091) 182 (1,077) (1,556)
Turnover (days) Net cash from operations 763 863 1,493 948 1,597
Gross block turnover ratio (x) 6.2 6.2 3.8 5.1 5.5 Capital expenditure (407) (546) 1,981 (606) (1,558)
Inventory 120 131 229 160 150 Investments (338) 551 (6,179) 0 0
Net working capital 54 61 223 164 120 Net cash from investing (734) 5 (4,188) (375) (1,419)
Solvency (x) FCF 30 868 (2,695) 574 177
Net debt-equity (0.2) 1.1 0.3 0.4 0.6 Issue of share capital 19 13 3,713 0 0
Interest coverage ratio 82.4 3.9 2.2 4.8 5.8 Increase/(decrease) in debt (3) 8 (11) 0 0
Net debt/EBITDA (0.5) 2.4 1.7 1.3 1.6 Dividend paid (44) (37) 0 (46) (80)
Adjusted EPS 39.4 27.2 (3.1) 33.7 58.0 Others 0 (379) (244) (332) (418)
BVPS 225.7 253.1 418.8 420.1 474.0 Net cash from financing (44) (943) 2,869 (419) (643)
CEPS 54.6 79.0 49.1 90.6 136.1 Net change in Cash (14) (75) 174 154 (466)
Dividend payout (%) 5.0 0.0 nm 7.0 7.0
Valuation (x)
P/E 88.7 128.4 nm 103.8 60.3
P/BV 15.5 13.8 8.3 8.3 7.4
EV/EBITDA 51.3 34.6 54.3 32.0 21.1
Dividend yield (%) 0.0 0.0 0.0 0.1 0.1

16 September 2021
Shirish Pardeshi
+91-22-4215 9634
[email protected]
SECTOR: CONSUMER
VST Industries (VST)

VST’s operating profits have been healthy and have expanded over the last 10 years Market data
despite regulatory headwinds faced by the cigarette industry. The company focuses Current price: Rs3,566
on the entry-point cigarette category and has been able to establish a new brand in Bloomberg: VST IN
the capsule segment, with dominant share. It manages its operations efficiently. Over 52-week H/L: Rs4,538/3,125
FY12-21, cumulative profit before WC has been Rs28.2bn (tax paid: Rs8.6bn) and cash
flow from operating activities has been Rs21.2bn. On an average, OCF/PAT has been
111% till FY21 and OCF/EBITDA has been 74%. Cumulative cash from operating Free float: 61.1%
activities has been Rs21.2bn and capex has been Rs3.7bn, translating to cumulative Avg. daily vol. 3mth: 15,076
FCF of Rs17.5bn. Over FY12-21, average dividend payout has been 67.6%. Source: Bloomberg
History of steady improvement of cash flows from operations: Over the last 10 years, VST has reported 6.7% revenue CAGR
and 11.6% EBITDA CAGR. Operating profits have been healthy and have constantly expanded. Being a single category business,
working capital intensity has been moderate, though in FY18, there was an increase in customer advances and other statutory
liabilities (tax matters), resulting in high cash inflows. The company has been consistently generating incremental operating
cash flows over the years. Over FY12-21, cumulative profit before WC has been Rs28.2bn (of which tax paid: Rs8.6bn) and cash
flow from operating activities has been Rs21.2bn, driven by ~610bp expansion in gross margin.
Exhibit 430: Cash flows from operations grew meaningfully post GST implementation in FY17
5
3
Rs bn
-1
Analysis of working capital cycle: VST has been able to increase its payable days (+51 days) over the years by strengthening its
network/better negotiations and has had tight control over its inventory days (cut by 54 days) as well (FY21 being an exception).
Cash conversion cycle has improved considerably from 233 days in FY12 to 127 days in FY21. While OCF/PAT has improved
from 106% in FY12 to 92% in FY21, OCF/EBITDA has improved from 73% to 70%. On an average, OCF/PAT has been 111% till
FY21 and OCF/EBITDA has been 74%.
350 300
300 250
250
200
200
Days
Days
150
150
100
100
50 50
0 -

xxxxx
VST Industries (VST) 16 September 2021

160
250
140
200 120
100
150
%
80
%
100 60
40
50
20
0 0
GST implementation boosted FCF: Over FY12-21, cumulative cash from operating activities was Rs21.2bn, while capex was
Rs3.7bn, translating to cumulative FCF of Rs17.5bn. Though growth improved once the cigarette industry was brought under
GST in FY17, the FY12-17 period saw frequent changes in taxation, adversely impacting its operations. The company has been
able to reap benefits from its newly-launched capsule brand, Total at higher end of the DSFT segment, driving profitability.
Exhibit 434: Cash flows grew meaningfully post GST implementation in FY17
5
3
Rs bn
-1
Cash From Operating Activities CAPEX FCFF


RoE (%) 51.4 42.5 47.5 45.1 42.7 33.3 32.5 36.4 41.9 36.0
RoCE (%) 51.4 42.5 47.5 45.1 42.7 33.3 32.5 36.4 41.9 36.0
Healthy return ratios: Despite lower sales CAGR of ~8% over FY12-21, return ratios have been healthy. The company maintains
high dividend payout, resulting in steady RoE/RoCE. Being a net cash company, VST has enough liquidity. As its leverage ratios
are favorable, it can access debt easily and quickly. In terms of cash flows from financing activities, there have been outflows
only towards dividend payments. VST follows the SLR (Safety, Liquidity and Return) model in deployment of surplus funds. The
company predominantly deploys money in debt funds of reputed mutual funds and tax-free bonds issued by government
bodies, ensuring sufficient liquidity to meet its liabilities. In the last 3-4 years, dividend payout was on declining trend; however,
over FY12-21, average dividend payout has been 74.5%.
Dividend Pay-out (%) 70.4 76.4 72.0 71.0 70.6 76.4 65.8 64.7 52.3 56.6

Cash Flow from Investing Activities -634 87 -183 31 -240 -178 -2,641 -1,480 -1,548 -1,440
Cash from Financing Activities -808 -1,167 -1,129 -1,265 -1,301 -1,301 -1,394 -1,443 -1,769 -1,591
Net increase/ (decrease) in Cash and Cash Equivalents 65 104 -14 -59 -219 -22 166 -21 -2 -169

VST Industries (VST) 16 September 2021
P&L Balance sheet

Employee cost 923 1,024 1,144 1,022 1,105 Shareholders fund 6,640 7,871 9,404 10,832 12,445
Taxes 1,238 1,162 1,065 1,132 1,217 Net block 2,133 1,871 1,727 1,930 2,188
Growth (%) Trade payables 830 1,428 1,315 840 921
Gross 49.9 51.7 56.8 51.5 51.7
EBITDA 32.0 33.4 36.9 34.5 34.9 Cashflow
ROE 36.4 41.9 36.0 32.6 30.5 Net Interest 0 0 0 0 0
ROCE 36.4 41.9 36.0 32.6 30.5 Net Change – WC 631 206 (181) (777) 46
ROIC 201.3 768.9 1,389.1 355.6 225.0 Direct taxes (1,287) (1,054) (1,075) (1,132) (1,217)
Inventory 177 177 227 200 212 Investments (1,223) (1,333) (977) 0 0
Net working capital 144 169 239 252 269 Net cash from investing (1,480) (1,548) (1,440) (17) (169)
Solvency (x) FCF 1,421 1,767 1,422 2,323 3,337
CEPS 173.7 224.0 224.0 237.4 257.0 Net change in Cash (21) (2) (169) 563 1,400
Dividend payout (%) 64.7 52.3 56.6 58.6 60.6
Valuation (x)
P/E 24.3 18.1 17.7 16.7 15.5
P/BV 8.3 7.0 5.9 5.1 4.4
EV/EBITDA 13.9 11.4 11.2 10.7 9.4
Dividend yield (%) 2.7 2.9 3.2 3.5 3.9

16 September 2021
Chirag Muchhala
Research Analyst, Consumer Electricals
+91 22 4215 9203
[email protected]
SECTOR: CONSUMER ELECTRICALS
Rahulkumar Mishra
Research Associate, Consumer Electricals
Bajaj Electricals +91-22-4215 9265

[email protected]
Bajaj Electricals operates with higher ex-cash NWC cycle (average of 84 days in the Market data
past 10 years) compared to peers. Debtor days remain elevated at an average of 136 Current price: Rs1,443
days due to the presence of EPC business. Creditor days have declined sharply from Bloomberg: BJE IN
an average of 103 days over FY11-15 to an average of 61 days over FY16-21 and are 52-week H/L: Rs1,458/442
lower than peers. In absolute terms, the total OCF generated over FY12-21 is low at
Rs16.2bn, of which ~30% was spent on capex while conversion to FCF was Rs11.4bn.
Fixed asset turn is above-industry (at 8.5x in FY21) due to low share of in-house Free float: 37.8%
manufacturing. Return ratios are lower than peers (RoE/pre-tax RoCE of ~12%/~15% Avg. daily vol. 3mth: 2,553,14.5
in FY21) due to the presence of EPC projects. Source: Bloomberg
OCF positive except in FY18 and FY19: Over FY12-17, Bajaj Electricals posted positive OCF. In that six-year period, three years
saw cumulative working capital deployment of Rs3bn, which was largely offset by cumulative working capital release of
Rs2.5bn in the remaining three years. However, FY18 and FY19 were adversely affected due to the impact of UP
electrification project, which led to incremental working capital deployment of Rs4.1bn/Rs8.6bn in FY18/FY19, leading to
negative OCF of Rs1bn/Rs6bn. A turnaround was witnessed in FY20 and FY21, with positive working capital change of
Rs4.5bn and Rs3.3bn, leading to positive OCF of Rs6.3bn and Rs6.6bn, respectively.
Exhibit 438: Cash flows from operations – positive except in FY18 and FY19
10,000
Impact of UP Electrification Project

5,000
0
(Rsmn)
-5,000
-10,000
Op profit before Wk cap change (Rsmn) Wk cap change (Rsmn) OCF (Rsmn)
Ex-cash NWC higher than peers due to presence in EPC projects business: Ex-cash NWC (in days of sales) was 55-70 days
over FY12-15, but increased to 80-120 days over FY16-19. While it has declined from 120 days in FY19 to 110/98 days in
FY20/FY21, it still remains elevated compared to peers, largely due to the presence of EPC projects business. Inventory has
traditionally remained at 40-50 days, but in FY21, it increased to 78 days. Debtors have remained elevated at an average of
120 days over FY12-17 and increased to more than 150 days over FY18-21 due to projects business. Creditor days declined
from an average of 100 days over FY12-14 to an average of 60 days over FY16-21. Other current liabilities increased from an
average of 30 days in the initial five years (FY12-16) to an average of 85 days in the past five years (FY17-21). Other current
liabilities have outweighed other current assets which have largely remained at 30-60 days.
Exhibit 439: Working capital movement
200
150
Days of sales
100
50
-
Inventories Debtors Other current assets Creditors Other current liabilities Ex-cash NWC
Bajaj Electricals 16 September 2021
600% 400%
400% 300%
200%
200%
NA
0%
100%
-200%
0%
-400%
FY13
FY12
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY19
FY20
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY21
-100%
-600%
-800% -200%
Healthy conversion of operating cash to free cash except in FY18 and FY19: Capex intensity has been low over the years,
with an average capex outlay of Rs500mn in plant and equipment over the past ten years. As against total OCF of Rs16.2bn
over FY12-21, total capex incurred was Rs4.8bn, while total FCF generation was Rs11.4bn. Both OCF and FCF were negative in
FY18 and FY19 due to working capital elongation on account of UP electrification projects.
Exhibit 442: OCF, capex intensity and free cash flows
8000 Impact of UP Electrification Project
6000
4000
2000
(Rsmn)
0
-2000
-4000
-6000
-8000
OCF (Rsmn) Capex (Rsmn) FCF (Rsmn)
Low in-house manufacturing keeps fixed asset turn high: Bajaj Electricals operates with a very low in-house manufacturing
share of ~20% for the consumer electrical business. In addition, the EPC projects business does not need high gross block.
Hence, the fixed asset turn has been higher at an average of ~11x over FY12-19. In FY20 and FY21, it declined to 8.5x due to
deliberate downsizing of rural electrification projects.
Exhibit 443: Fixed asset turn – deliberate downsizing of rural electrification projects led to decline in FY20 and FY21
Fixed Asset turn (x) 11.4 10.3 10.8 9.8 10.1 11.6 11.5 14.5 8.6 8.5
Leverage reducing, return ratios lower than peers: Net D/E ratio had increased to 1.4x in FY19, but it has been brought
under control at 0.1x in FY21, with repayment of debt over the past two years. Prior to FY19, net D/E ratio averaged around
0.5x over FY12-17. The return ratios are lower than peers due to the impact of EPC projects. RoE was 12% in FY21 and has not
exceeded 19% in the past ten years. Similarly, pre-tax RoCE has exceeded 20% only thrice in the past ten years, with the
highest being 29.4% in FY21.
Exhibit 444: Leverage ratios – net D/E, which had surged to 1.4x in FY19, declined to 0.1x in FY21
Leverage ratio (x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity 0.21 0.15 0.41 0.51 1.01 0.55 0.73 1.45 0.46 0.12
Source: Company Data, Centrum Broking

RoE 18.0 7.2 (0.7) (2.0) 15.3 13.2 19.0 16.5 (0.0) 12.3
RoCE (Pre-tax) 29.4 12.6 7.4 7.9 21.5 16.6 20.3 17.4 8.0 15.3
RoIC (Pre-tax) 26.4 11.5 5.7 5.7 15.6 15.7 15.9 11.7 6.9 12.9
Source: Company Data, Centrum Broking

Bajaj Electricals 16 September 2021
P&L Balance sheet

EBITDA 2,069 3,015 3,058 5,449 6,789 Total debt 7,375 2,588 1,788 1,288 788
Interest expenses 1,692 756 656 308 228 Total liabilities 21,167 18,635 19,201 21,538 24,598
PBT 224 2,412 2,437 5,169 6,594 Less: acc. Depreciation (1,685) (1,970) (2,588) (3,253) (3,962)
Taxes 225 575 613 1,301 1,660 Net block 4,058 3,426 3,258 2,993 2,684
PAT (1) 1,836 1,824 3,868 4,934 Net fixed assets 4,151 3,527 3,308 3,043 2,734
Recurring PAT (1) 1,836 1,824 3,868 4,934 Investments 529 1,639 1,639 1,639 1,639
Reported PAT (1) 1,836 1,824 3,868 4,934 Sundry debtors 25,365 19,162 21,667 24,816 27,836
Cash & Cash Equivalents 1,047 616 2,155 4,343 7,306
Ratios Loans & advances 419 1,448 1,048 1,208 1,373
Revenue (25.7) (7.2) 14.5 15.3 13.7 Other current liab. 14,318 13,319 15,451 18,116 20,595
EBITDA (40.6) 45.7 1.4 78.2 24.6 Provisions 1,097 1,106 1,161 1,219 1,280
Adj. EPS nm nm (0.7) 112.1 27.6 Net current assets 16,034 12,945 13,729 16,332 19,701
Gross 27.1 29.1 28.3 29.8 30.1
EBITDA 4.2 6.6 5.8 9.0 9.9 Cashflow
Adjusted PAT 0.0 4.0 3.5 6.4 7.2 Profit Before Tax 224 2,412 2,437 5,169 6,594
ROE 0.0 12.3 10.9 20.5 22.4 Net Interest 1,692 756 656 308 228
ROCE 0.0 11.7 12.2 20.1 22.1 Net Change – WC 6,944 2,658 755 (414) (406)
Gross block turnover ratio (x) 8.6 8.5 9.0 9.7 10.3 Capital expenditure (1,515) (68) (400) (400) (400)
Inventory 76 94 95 86 78 Investments (21) (1,110) 0 0 0
Net working capital 119 103 96 99 105 Net cash from investing (1,537) (1,178) (400) (400) (400)
Solvency (x) FCF 7,778 4,765 3,454 4,027 5,066
Net debt-equity 0.5 0.1 0.0 (0.2) (0.3) Issue of share capital 23 2 0 0 0
Interest coverage ratio 1.2 4.0 4.7 17.7 29.7 Increase/(decrease) in debt (8,401) (4,787) (800) (500) (500)
Net debt/EBITDA 3.1 0.7 (0.1) (0.6) (1.0) Dividend paid 0 0 (458) (1,031) (1,374)
Per share (Rs) Interest paid (1,692) (756) (656) (308) (228)
Adjusted EPS 0.0 16.0 15.9 33.8 43.1 Others 3,178 345 0 0 0
CEPS 6.0 22.1 21.3 39.6 49.3 Net change in Cash 887 (431) 1,539 2,188 2,963
Dividend payout (%) nm 0.0 25.1 26.6 27.9
Valuation (x)
P/E nm 90.0 90.6 42.7 33.5
P/BV 11.9 10.3 9.5 8.2 6.9
EV/EBITDA 83.0 55.5 54.0 29.8 23.4
Dividend yield (%) 0.0 0.0 0.3 0.6 0.8

16 September 2021
Chirag Muchhala
+91 22 4215 9203
[email protected]
Rahulkumar Mishra
Crompton Greaves Consumer Electricals Research Associate, Consumer Electricals

+91-22-4215 9265
[email protected]
Crompton operates at least working capital intensity among peers, with negative ex- Market data
cash NWC (in days of sales) in four out of the past five years. Total OCF/EBITDA over Current price: Rs490.35
FY17-21 is in line with the industry at 74%. In value terms, Crompton has generated Bloomberg: CROMPTON IN
healthy OCF of Rs21.6bn over FY17-21, from which conversion to FCF is strong at 52-week H/L: Rs513/253
Rs20.5bn due to minimal capex at an average of only Rs230mn per year. With high
share of outsourcing and suppressed base on gross block (recognized at fully
depreciated value on demerger), fixed asset turn (22.5x in FY21) and return ratios Free float: 87.6%
(RoE/pre-tax RoCE of ~36%/~40% in FY21) are the highest in the industry. Avg. daily vol. 3mth: 1,511,565
Source: Bloomberg
Cash flows from operations healthy: Operating profits have consistently expanded over the past five years. Working capital
intensity in the business is low, with ex-cash net working capital being negative in four out of the past five years. Over FY17-
20, incremental working capital was deployed in the business every year. However, in FY21, higher payables led to a positive
change in working capital, as its total deployment reduced by Rs1.4bn. OCF has been healthy over the past five years, with a
sharp rise in FY21.
Exhibit 446: Cash flows from operations healthy, with a sharp rise in FY21
10,000
8,000
6,000
(Rsmn)
4,000
2,000
-2,000 FY17 FY18 FY19 FY20 FY21

Analysis of working capital movement: Ex-cash NWC (in days of sales) was negative in four of the last five years (barring
FY20). Inventory days have risen consistently from 26 in FY17 to 39 in FY21. However, debtor days have reduced from 45+
over FY17-19 to 37 each in FY20 and FY21. After declining in FY19 and FY20, creditor days in FY21 rose to 66, similar to FY17.
Other current liabilities (23 days in FY21) largely outweighed other current assets (19 days in FY21) over the past five years.
Exhibit 447: Working capital movement – ex-cash NWC negative in four of the last five years
80
60
Days of Sales
40
20
FY17 FY18 FY19 FY20 FY21

-20

xxxxx
Crompton Greaves Consumer Electricals 16 September 2021

Has been 80-100% over FY17-20, but rose to 135% in FY21 Has been 50-70% over FY17-20, but rose to 115% in FY21
160% 140%
140% 120%
120% 100%
100%
80%
80%
60%
60%
40% 40%
20% 20%
0% 0%
FY21
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
Robust conversion of operating cash to free cash: Capex intensity has been low over the years, as Crompton has relied on
outsourcing instead of in-house manufacturing. Capex on plant & equipment during the past five years has averaged only
Rs230mn. Consequently, conversion of OCF to FCF has been robust – against total OCF of Rs21.6bn over FY17-21, total FCF
was Rs20.5bn.
Exhibit 450: Low capex leads to robust conversion of OCF to FCF
10000
8000
6000
(Rsmn)
4000
2000
0
-2000
Fixed asset turn: Crompton operates at outsourcing share of 50%. Fixed asset turn was very high at 45x in FY17, since the
new legal entity that took over the consumer business of erstwhile Crompton Greaves started with fully depreciated gross
block of only Rs760mn and a high goodwill (towards brand) of Rs7.8bn. Over the past five years, the fixed asset turn has
rationalized to 22.5x (due to rise in gross block), but it still remains the highest in the industry.
Exhibit 451: Fixed asset turn – halved over FY17-21, but still the highest in the industry
Fixed Asset turn (x) 45.0 42.8 41.2 25.3 22.5
Reducing leverage; strong return ratios: Leverage on the balance sheet has reduced considerably from net D/E ratio of 1.12x
in FY17 (debt of Rs6.5bn at the time of company formation) to net D/E of (0.16) in FY21, as Crompton became a net-cash
company. The return ratios are highest in the industry, with RoE of 36% and RoCE of 40% in FY21. In the initial years of FY17
and FY18, RoE was inflated due to lower base of net worth when the company was newly formed.
Exhibit 452: Leverage ratios – consistent reduction; now a net-cash company
Leverage ratios (x) FY17 FY18 FY19 FY20 FY21
Net Debt/Equity 1.12 0.60 0.19 0.09 (0.16)
Exhibit 453: Return ratios – highest in the industry

Return Ratios (%) FY17 FY18 FY19 FY20 FY21
RoE 54.7 49.5 42.5 38.7 36.3
RoCE (Pre-tax) 42.3 42.2 42.9 40.8 39.5
RoIC (Pre-tax) 43.2 44.0 44.6 39.4 42.8

Crompton Greaves Consumer Electricals 16 September 2021
P&L Balance sheet

EBITDA 5,991 7,205 7,762 9,237 10,769 Total debt 1,797 2,988 2,988 0 0
PBT 5,907 7,236 7,892 9,439 11,139 Less: acc. Depreciation (539) (810) (1,152) (1,528) (1,966)
Taxes 943 1,070 1,986 2,376 2,804 Net block 1,251 1,328 1,594 1,729 1,800
Gross 32.1 32.0 30.8 31.7 32.3
EBITDA 13.3 15.0 13.9 14.5 15.0 Cashflow
ROE 38.7 36.3 28.5 29.8 30.5 Net Interest 407 429 318 288 116
ROCE 34.3 33.7 25.9 28.9 30.8 Net Change – WC (2,416) 2,075 (1,856) 226 196
Inventory 49 55 53 53 51 Investments 4 (2,289) 0 0 0
Net working capital 10 36 48 43 58 Net cash from investing (918) (2,573) (510) (510) (510)
Solvency (x) FCF 2,400 6,316 4,200 7,443 8,576
Interest coverage ratio 14.7 16.8 24.4 32.1 92.8 Increase/(decrease) in debt (1,695) 1,191 0 (2,988) 0
Net debt/EBITDA 0.2 (0.4) (0.5) (0.8) (1.0) Dividend paid 0 (3,452) (3,139) (3,767) (4,395)
Adjusted EPS 7.9 9.8 9.4 11.3 13.3 Others (1,248) 1,933 0 0 0
BVPS 23.4 30.8 35.2 40.4 46.7 Net cash from financing (3,349) (757) (3,457) (7,043) (4,511)
CEPS 8.3 10.3 10.0 11.8 14.0 Net change in Cash (949) 5,558 743 400 4,065
Dividend payout (%) 0.0 56.0 53.2 53.3 52.7
Valuation (x)
P/E 62.1 49.9 52.1 43.6 36.9
P/BV 20.9 15.9 13.9 12.1 10.5
EV/EBITDA 51.6 42.3 39.2 32.6 27.5
Dividend yield (%) 0.0 1.1 1.0 1.2 1.4

16 September 2021
Chirag Muchhala
+91 22 4215 9203
[email protected]
Rahulkumar Mishra
Havells India Research Associate, Consumer Electricals

+91-22-4215 9265
[email protected]
With healthy operating profits (led by superior margin profile) and low ex-cash NWC Market data
at an average of 7 days over the past 10 years, Havells India has generated the Current price: Rs1,453
highest OCF within the sector at Rs72.8bn over FY12-21. Total OCF/EBITDA stands at Bloomberg: HAVL IN
79% over the 10-year period. With a higher focus on in-house manufacturing (93% of 52-week H/L: Rs1,477/645
sales ex-Lloyd) and the acquisition of Lloyd, capex over the past 10 years is also the
highest among peers at Rs38.6bn (53% of total OCF), leading to FCF conversion of
Rs33.9bn. With high in-house manufacturing, fixed asset turn is low at 2.7x in FY21 Free float: 47.1%
(industry average is 5x), while return ratios are decent (RoE/pre-tax RoCE of Avg. daily vol. 3mth: 2,123,740
~22%/~31% in FY21). Source: Bloomberg
Positive OCF in past 10 years; rise in working capital in recent years: Operating profit over the past ten years has been
healthy and on a rising trend since FY15. In six out of the past 10 years, working capital change was negative while in the
remaining four years, it was positive. The deployment of working capital was high in FY19 at Rs4.7bn (likely due to Lloyd
acquisition in the previous year) and in FY21 at Rs7bn (likely due to lockdown impact). This led to lower conversion of
operating profit to OCF in FY19 and FY21. Except for these two years, OCF has been healthy.
Exhibit 454: Cash flows from operations – healthy except in FY19 and FY21
Sylvania Exit Lloyd

15,000
acquisition
10,000
5,000
(Rsmn)
-5,000
-10,000
Analysis of working capital movement: Ex-cash NWC (in days of sales) is one of the lowest in the industry and has averaged
only 7 days over the past 10 years. It was negative in three years (FY14, FY15 and FY18) and exceeded 20 days only twice
(FY13 and FY21) in the past 10 years. The key reason for the lower NWC is low debtor days due to channel financing. Debtor
days have reduced from an average of 40 over FY12-15 to an average of 15 over FY16-21. Inventory has largely remained at
60-70 days, except in FY16 (when it was lower at 40) and in FY21 (when it was higher at 91 due to lockdown impact). Creditor
days have largely remained at 50-55 days. Other current liabilities (largely in 30-35 days range) outweigh other current assets
(largely in 10-15 days range).
Exhibit 455: Working capital movement – ex-cash NWC has averaged at 7 days over the decade
100
80
60
Days of Sales
40
20
-
-20

xxxxx
Havells India 16 September 2021

250% 140%
200% 120%
100%
150%
80%
100% 60%
40%
50%
20%
0% 0%
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY12
FY14
FY16
FY18
FY20
FY13
FY15
FY17
FY19
FY21
Source: Company, Centrum Broking Source: Company Centrum Broking
Capex and Lloyd acquisition took away more than half of OCF earned over the past ten years: Havells’ capex intensity has
been higher than peers, as it prefers in-house manufacturing (~93% of sales ex-Lloyd) to outsourcing. Over the past 10 years
(excluding FY18 when it acquired Lloyd), its average capex outlay has been Rs2.5bn per annum in plant and equipment. In
FY18, Lloyd acquisition led to total capital outlay of Rs16bn. Investment in subsidiaries was Rs356mn towards the residual
value of Sylvania. Over FY12-21, Havells has generated total OCF of Rs72.8bn and has spent 53% of this towards capex and
Lloyd acquisition totalling to Rs38.6bn. Consequently, it generated total FCF of Rs33.9bn over FY12-21.
12,000 Sylvania exit impact Lloyd acquisition
8,000
4,000
(Rsmn)
-
-4,000
-8,000
-12,000
-16,000
OCF (Rsmn) Capex (Rsmn) Investments (Rsmn) FCF (Rsmn)
Fixed asset turn higher than peers due to higher share of in-house manufacturing: As Havells operates with a higher share
of in-house manufacturing (~93% ex-Lloyd), it has lower fixed asset turn than peers. Over FY12-15, fixed asset turn was ~2.5x.
In FY16 and FY17, it looks higher due to restatement of gross block as per IndAS in FY16. Post Lloyd acquisition in FY18, fixed
asset turn has settled in the 2.5-3x range.
Exhibit 459: Fixed asset turn – settled at 2.5-3x post Lloyd acquisition in FY18
Net-cash company since FY14; decent return ratios: Since FY14, Havells has been a net-cash company. Its gross debt has
declined from Rs10.2bn in FY12 to nil in FY20. In FY21, it had a gross debt of Rs3.9bn, likely as a cushion in lockdown, but this
is far outweighed by the cash balance of Rs16.5bn. Return ratios are decent with RoE profile of 20-22% and RoCE (pre-tax)
profile of 28-31%.
Exhibit 460: Leverage ratio – a net-cash company since FY14
Leverage ratio (x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity 0.83 0.35 (0.03) (0.26) (0.45) (0.54) (0.39) (0.30) (0.26) (0.24)

RoE 46.0 48.5 28.7 22.1 53.7 15.3 19.2 19.8 17.2 22.0
RoCE (Pre-tax) 32.2 26.9 27.2 27.5 27.1 25.2 27.9 28.7 21.6 30.6
RoIC (Pre-tax) 32.6 29.4 34.3 39.1 40.6 41.2 43.9 35.9 24.1 34.3

Havells India 16 September 2021
P&L Balance sheet

EBITDA 10,274 15,654 18,820 22,153 26,481 Total debt 0 3,937 2,437 937 0
Taxes 1,687 3,919 4,367 5,311 6,441 Net block 18,994 18,607 21,620 23,853 25,205
Other current assets 706 665 773 896 1,033
Revenue (6.3) 10.6 22.7 16.0 15.3 Other current liab. 7,969 10,103 11,513 12,616 13,692
EBITDA (13.2) 52.4 20.2 17.7 19.5 Provisions 2,456 3,160 3,476 3,823 4,206
Gross 38.1 37.9 36.4 37.2 38.1
EBITDA 10.9 15.0 14.7 14.9 15.5 Cashflow
ROE 17.3 22.0 23.3 24.5 25.5 Net Interest 197 726 508 305 168
ROCE 17.5 22.2 22.7 24.2 25.6 Net Change – WC 783 (5,563) 773 (177) (482)
Inventory 119 127 124 118 112 Investments 0 (3,063) 0 0 0
Solvency (x) FCF 4,843 3,376 11,616 13,685 17,483
Interest coverage ratio 52.1 21.5 37.0 72.6 157.8 Increase/(decrease) in debt (405) 3,937 (1,500) (1,500) (937)
BVPS 68.8 82.5 95.2 110.5 129.1 Net cash from financing (6,651) 1,802 (7,017) (8,065) (8,616)
Dividend payout (%) 34.1 39.1 38.6 39.6 39.2
Valuation (x)
P/E 124.1 87.5 70.1 57.6 47.5
P/BV 21.1 17.6 15.3 13.2 11.3
EV/EBITDA 87.5 57.4 47.4 39.9 33.0
Dividend yield (%) 0.3 0.4 0.6 0.7 0.8

16 September 2021
Chirag Muchhala
+91 22 4215 9203
[email protected]
Rahulkumar Mishra
Orient Electric Research Associate, Consumer Electricals

+91-22-4215 9265
[email protected]
Orient Electric has seen the best improvement in working capital cycle among peers, Market data
led by channel financing and improved credit terms from vendors. Its ex-cash NWC Current price: Rs359
has declined from 60 days in FY18 to 51/40 days in FY19/FY20 and to negative 2 days Bloomberg: ORIENTEL IN
in FY21 (four-year average of 37 days). This led to a sharp rise in OCF to Rs4.2bn in 52-week H/L: Rs368/174
FY21, which was 4x FY18 levels. Its total OCF/EBITDA ratio is the highest among
peers at 116% over FY18-21. Over FY18-21, the conversion of OCF (Rs7.8bn) to FCF
(Rs6.6bn) has been healthy due to low capex intensity (annual average of Free float: 61.6%
~Rs300mn). Fixed asset turn is in line with the industry (5.7x in FY21) and return Avg. daily vol. 3mth: 704,044
ratios are strong (RoE/pre-tax RoCE of 29%/39% in FY21). Source: Bloomberg
Healthy cash flows from operations: Operating profits have consistently expanded over the past four years, led by margin
expansion. Working capital intensity in the business has consistently reduced over the past four years led by increased
channel financing, improved collections and favorable credit terms with the vendors. FY21 witnessed a sharp positive change
in working capital, as its total deployment reduced by Rs2.2bn. The OCF of Rs4.2bn in FY21 was 4x FY18 levels.
Exhibit 462: Cash flow from operations – consistent improvement in last four years
5,000
4,000
3,000
Rsmn
2,000
1,000
-1,000 FY18 FY19 FY20 FY21

Analysis of working capital movement: Ex-cash NWC (in days of sales) has consistently reduced from 60 days in FY18 to
51/40 days in FY19/FY20, and further to negative 2 days in FY21. This has been led by strong focus on improving collections,
with debtor days declining from 88 in FY18 to 69 in FY21. Inventory days have sustained at 45-50. Creditor days have
increased from 63 in FY18 to 93 in FY21, indicating favorable credit terms the company managed to command from its
vendors. Other current liabilities (17-20 days) have largely outweighed other current assets (9-10 days) over the past four
years.
Exhibit 463: Working capital movement – consistent reduction in ex-cash NWC days
100
80
60
Days of sales
40
20
-
FY18 FY19 FY20 FY21
-20 Inventories Debtors Other current assets Creditors Other current liabilities Ex-cash NWC

xxxxx
Orient Electric 16 September 2021

Sharp improvement in FY21 Sharp improvement in FY21
400% 250%
350%
200%
300%
250% 150%
200%
100%
150%
100% 50%
50%
0% 0%
Low capex outlay aids in healthy free cash flow generation: Capex intensity has been lower over the past four years, with an
average outlay of only Rs300mn towards plant & equipment. Hence, the conversion of OCF to FCF has been robust. As
against the total OCF of Rs7.8bn over FY18-21, the total FCF conversion was strong at Rs6.6bn.
Exhibit 466: Healthy conversion from OCF to FCF
5,000
4,000
3,000
(Rsmn)
2,000
1,000
-
FY18 FY19 FY20 FY21
-1,000
Fixed asset turn – in line with industry average: In FY18/FY19, Orient Electric operated at a healthy fixed asset turnover of
8.1x/8.3x, respectively and had 55% share of in-house manufacturing in total sales. With revenue growth being impacted in
FY20/FY21 due to Covid-linked lockdown and rise in gross block, fixed asset turn reduced to 6.3x in FY20 and 5.7x in FY21, but
remains in line with industry average.
Exhibit 467: Fixed asset turn – declined in FY20 and FY21, but in line with industry average of 5x
FY18 FY19 FY20 FY21
Fixed asset turn (x) 8.1 8.3 6.3 5.7
Reducing leverage; strong return ratios: Leverage on the balance sheet has reduced considerably, with gross debt declining
from Rs1.6bn in FY18 to Rs153mn in FY21. This has led to reduction in net D/E ratio from 0.51x in FY18 to 0.53x in FY21, as
Orient Electric became a net-cash company in FY21. Return ratios are healthy and on a rising trend. In FY21, RoE was ~29%
and RoCE was ~39%.
Exhibit 468: Leverage ratios – became a net-cash company in FY21
FY18 FY19 FY20 FY21
Net Debt/Equity (x) 0.51 0.30 0.24 (0.53)

Return Ratios (%) FY18 FY19 FY20 FY21
RoE (%) 24.3 24.3 23.6 29.4
RoCE (%) (Pre-tax) 28.6 29.7 31.7 39.5
RoIC (%) (Pre-tax) 31.4 31.4 33.8 57.6

Orient Electric 16 September 2021
P&L Balance sheet

EBITDA 1,764 2,195 2,298 3,062 3,728 Total debt 947 153 1,335 1,035 635
Taxes 357 422 403 579 737 Net block 1,838 1,716 1,625 3,040 2,828
Recurring PAT 786 1,197 1,199 1,721 2,191 Investments 0 0 0 0 0
Reported PAT 786 1,197 1,199 1,721 2,191 Sundry debtors 3,889 3,838 4,273 4,828 5,335
Gross 31.6 30.1 28.8 31.0 31.7
EBITDA 8.6 10.8 9.7 11.3 12.1 Cashflow
ROE 23.6 29.4 24.3 29.3 30.9 Net Interest 261 207 298 273 242
ROCE 21.8 29.2 25.0 27.3 29.9 Net Change – WC 346 2,350 (1,611) (12) (81)
Turnover (days) Net cash from operations 1,777 4,137 353 2,547 2,994
Gross block turnover ratio (x) 6.3 5.7 6.0 4.6 4.9 Capital expenditure (1,110) (301) (1,180) (1,180) (425)
Net working capital 41 44 57 52 60 Net cash from investing (1,110) (301) (1,180) (1,180) (425)
Solvency (x) FCF 667 3,836 (827) 1,367 2,569
Interest coverage ratio 6.8 10.6 7.7 11.2 15.4 Increase/(decrease) in debt (303) (794) 1,183 (300) (400)
Net debt/EBITDA 0.5 (1.1) (0.4) (0.4) (0.8) Dividend paid (272) (424) (424) (637) (849)
BVPS 16.9 21.5 25.1 30.2 36.6 Net cash from financing (908) (1,336) 461 (1,209) (1,491)
CEPS 5.6 7.7 7.9 10.8 13.3 Net change in Cash (241) 2,501 (367) 158 1,078
Dividend payout (%) 31.0 35.4 35.4 37.0 38.7
Valuation (x)
P/E 96.9 63.6 63.5 44.2 34.7
P/BV 21.2 16.7 14.3 11.9 9.8
EV/EBITDA 43.6 33.6 32.7 24.4 19.7
Dividend yield (%) 0.3 0.6 0.6 0.8 1.1

16 September 2021
Chirag Muchhala
+91 22 4215 9203
[email protected]
Rahulkumar Mishra
Polycab India Research Associate, Consumer Electricals

+91-22-4215 9265
[email protected]
Polycab India has demonstrated healthy operating profit trend but operates at Market data
higher working capital cycle, with ex-cash NWC at an average of 82 days over FY17- Current price: Rs2,442
21. In absolute terms, it has generated robust OCF of Rs33.7bn over the past five Bloomberg: POLYCAB IN
years, with total OCF/EBITDA ratio of 76%. With more than a third of total OCF being 52-week H/L: Rs2,503/795
spent on capex (Rs2.5bn annual average), the conversion of OCF to FCF (Rs21.2bn)
has been decent. Fixed asset turn is lower than industry at 3.4x in FY21 (industry
average is 5x) due to highest share of in-house manufacturing (95% of total sales). Free float: 24.6%
Return ratios are decent (RoE/pre-tax RoCE of ~21%/~25% in FY21). Avg. daily vol. 3mth: 456,541
Source: Bloomberg
Cash flows from operations: Operating profit has consistently expanded over the past five years. Trend in working capital
intensity has been inconsistent. FY19 had a positive change in working capital, with reduction in working capital deployment.
However, FY20 witnessed an even higher amount being ploughed back in working capital (partly due to Covid lockdown
impact in March 2020). In FY21, working capital again saw a minor positive change. OCF has remained positive in the past five
years, with FY19 and FY21 being strong years.
Exhibit 470: Cash flows from operations – FY19 and FY21 the best years
15,000
10,000
5,000
Rsmn
-5,000
-10,000
Analysis of working capital movement: Ex-cash NWC (in days of sales) was high at 95-100 days in FY17 and FY18, but
reduced sharply in FY19 to 57 days, largely due to rise in other current liabilities (from 20 days of sales to 46 days of sales).
With Covid lockdowns, ex-cash NWC again rose to 82/77 days in FY20/FY21, respectively. Inventory days reduced from 101 in
FY17 to 80 in each of FY20 and FY21. Debtor days declined from 75-85 in FY17-18 to ~65 days in each of FY19, FY20, and
FY21. Creditor days were higher at 90 in FY17, but have largely remained at 55 in the past two years. Other current liabilities
(largely at 20-25 days) outweigh other current assets (largely at 13-18 days).
120
100
Days of Sales
80
60
40
20
-
xxxxx
Polycab India 16 September 2021
300% 140%
250% 120%
100%
200%
80%
150%
60%
100%
40%
50% 20%
0% 0%
Higher capex intensity among peers: Polycab has higher capex intensity among peers averaging at Rs2.5bn per annum over
the past five years. The capex is towards cables & wires (capacity expansion as well as diversification in specialty cables) and
setting up greenfield manufacturing plants for FMEG products (fans, lights, switchgears). Against the OCF of Rs33.7bn over
FY17-21, total capex incurred was Rs12.5bn, more than one-third of total OCF. This led to total FCF generation of Rs21.2bn
over FY17-21.
15,000
10,000
(Rsmn)
5,000
-5,000
Fixed asset turn: Polycab has consistently operated at fixed asset turn of 4x-4.5x over FY17-20. With higher capex outlay and
revenue growth impacted in FY21 due to lockdown, fixed asset turn temporarily reduced to 3.4x in FY21. Polycab has one of
the highest shares of in-house manufacturing at ~95% of total sales, and unlike peers, does not depend on outsourcing.
Exhibit 475: Fixed asset turn
Fixed Asset turn (x) 4.1 4.4 4.5 4.4 3.4
Low leverage; decent return ratios: Polycab’s leverage position has reduced over the past five years, with gross debt
declining from Rs8.2bn in FY17 to Rs1.9bn in FY21. This has turned Polycab into a net-cash company from FY19 compared to
a net D/E ratio of 0.39x in FY17. The return ratios are decent, with RoE of ~21% and RoCE of ~25% in FY21.
Leverage ratios (x) FY17 FY18 FY19 FY20 FY21
Net Debt/Equity 0.39 0.30 (0.04) (0.04) (0.07)

Return Ratios (%) FY17 FY18 FY19 FY20 FY21
RoE 23.3 16.5 19.2 22.7 20.5
RoCE (Pre-tax) 30.4 22.4 28.6 30.4 24.8
RoIC (Pre-tax) 25.1 19.9 27.6 30.1 24.0

Polycab India 16 September 2021
P&L Balance sheet

EBITDA 11,350 11,670 13,078 16,325 18,839 Total debt 1,221 1,926 1,226 826 476
Other income 928 1,282 1,154 1,292 1,447 Gross block 20,451 26,627 29,877 33,127 36,377
Taxes 2,444 1,791 2,931 3,747 4,384 Net block 14,203 18,602 19,744 20,717 21,508
Effective tax rate (%) 24.0 16.8 25.2 25.2 25.2 Capital WIP 2,412 991 750 500 300
Minority/Associates (140) (40) (60) (50) (45) Non Current Assets 0 0 0 0 0
Gross 27.9 26.0 24.7 25.5 26.3
EBITDA 12.9 13.1 11.9 13.0 13.3 Cashflow
ROE 22.7 20.5 17.0 18.9 19.2 Net Interest 495 531 478 454 409
Inventory 112 108 96 97 93 Investments (361) (5,695) 0 0 0
Solvency (x) FCF (1,389) 1,974 4,315 8,656 10,595
Interest coverage ratio 22.9 22.0 27.3 35.9 46.1 Increase/(decrease) in debt (699) 705 (700) (400) (350)
Adjusted EPS 51.0 59.2 58.0 74.4 87.1 Others 3,410 1,841 (60) (50) (45)
BVPS 257.7 318.8 364.8 421.2 486.3 Net cash from financing 1,036 526 (3,028) (3,589) (4,085)
CEPS 61.8 71.7 72.2 89.6 103.6 Net change in Cash (353) 2,500 1,287 5,068 6,510
Dividend payout (%) 13.7 16.9 20.7 24.2 25.3
Valuation (x)
P/E 47.9 41.3 42.1 32.8 28.0
P/BV 9.5 7.7 6.7 5.8 5.0
EV/EBITDA 32.0 30.9 27.4 21.7 18.4
Dividend yield (%) 0.3 0.4 0.5 0.7 0.9

16 September 2021
Chirag Muchhala
+91 22 4215 9203
[email protected]
Rahulkumar Mishra
V-Guard Industries Research Associate, Consumer Electricals

+91-22-4215 9265
[email protected]
V-Guard has demonstrated a decent operating profit trend but has higher working Market data
capital cycle than peers, with an average ex-cash NWC of 68 days over FY12-21. The Current price: Rs255
working capital cycle is higher due to lower creditor days (10-year average of 44 Bloomberg: VGRD IN
days). Thus, its OCF over the past 10 years is low in absolute terms at Rs11.1bn. Total 52-week H/L: Rs285/162
OCF/EBITDA ratio over the past 10 years is also lower than peers at 61%. The
conversion of OCF to FCF (Rs6.7bn) has been decent, with ~40% of total OCF being
spent on capex. Fixed asset turn (5.8x in FY21) is in line with the industry and return Free float: 39%
ratios are decent (RoE/pre-tax RoCE of ~18%/~26% in FY21). Avg. daily vol. 3mth: 985,565
Source: Bloomberg
OCF healthy but consistent deployment of working capital every year: Operating profits have consistently expanded over
the past 10 years. However, V-Guard has consistently deployed working capital in the past seven years. Over the past ten
years, the average working capital deployed stands at Rs400mn per annum. While the amount is small and manageable, a
positive change in working capital is missing. OCF has always remained positive in the past 10 years, as the negative impact of
working capital change has been adequately offset by improvement in operating profits.
3000
2000
1000
Rsmn
-1000
-2000
Analysis of working capital movement: Ex-cash NWC (in days of sales) has largely remained at 60-75 days over the past ten
years. Inventory, which was in excess of 60 days over FY12-14, reduced to 50 days or lower over FY16-19, but increased to
70/85 days in FY20/FY21 due to lockdown impact. Debtors have largely remained steady at 50-55 days. Creditor days used to
be below 40 up to FY17, but increased to above 50 in FY18 and FY19, and were even higher at 64 days in FY21. Other current
assets and other current liabilities largely negated each other at ~20 days of sales in FY20 and FY21.
100
Ex-cash NWC largely remained at 60-75 days over the last 10 years
80
Days of Sales
60
40
20
-

xxxxx
V-Guard Industries 16 September 2021
180% 100%
160% 90%
140% 80%
120% 70%
60%
100%
50%
80%
40%
60% 30%
40% 20%
20% 10%
0% 0%
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Healthy conversion of operating cash to free cash: Capex intensity has been low over the years. Over FY12-16, average
annual capex was only Rs230mn. Over FY17-21, the average annual capex rose to Rs570mn, as V-Guard set up a greenfield
manufacturing plant in Sikkim. In the past 10 years, there were two instances of investments in subsidiaries / associate firms,
albeit small in value. V-Guard invested Rs88mn in FY18 (for 74% stake in Guts Electromech, a maker of MCB and RCCB) and
Rs334mn in FY21 (for 18.7% stake in a battery start-up, Gegadyne). Against the OCF of Rs11.1bn over FY12-21, total capex
incurred was Rs4bn. This led to total FCF generation of Rs6.7bn over FY12-21.
Exhibit 482: Capex intensity, investments and free cash flows
2500
2000
1500
1000
Rsmn
500
0
-500
-1000
OCF (Rsmn) Capex (Rsmn) Investments (Rsmn) FCF (Rsmn)

Asset turn: V-Guard operates with in-house manufacturing share of 40% and fixed asset turn in the range of 6x to 7x. Fixed
asset turn looks higher from FY16 to FY19 due to restatement of gross block as per IndAS in FY16.
Exhibit 483: Fixed asset turn
Unleveraged balance sheet; decent return ratios: V-Guard’s gross debt has reduced from Rs1bn in FY12 to only Rs100mn for
the past three years. The company is net cash positive for the past five years compared to net D/E ratio of 0.5x in FY12. The
return ratios are decent, with RoE profile of 18%-20% and RoCE profile of ~26% over the past four years. In the past two
years, a cash build-up of Rs1.1bn/Rs2.8bn in FY20/FY21 has been impacting return ratios while RoIC has risen to ~29%.
Net Debt/Equity 0.50 0.57 0.33 0.15 0.02 (0.02) (0.01) (0.08) (0.10) (0.22)

RoE 26.6 26.7 24.3 20.4 26.1 26.1 19.2 20.0 19.6 18.1
RoCE (Pre-tax) 27.3 27.4 27.1 28.4 36.5 36.4 25.8 26.0 26.0 26.1
RoIC (Pre-tax) 26.6 26.6 26.0 26.9 34.7 34.4 24.4 25.1 26.2 29.5

V-Guard Industries 16 September 2021
P&L Balance sheet

PBT 2,454 2,847 2,965 3,700 4,396 Less: acc. Depreciation (766) (1,123) (1,561) (2,046) (2,582)
Taxes 603 857 746 931 1,106 Net block 2,675 3,538 4,095 4,420 4,694
Revenue (3.3) 8.7 18.6 15.1 13.8 Other current liab. 898 1,152 1,281 1,473 1,677
Gross 33.2 31.5 30.7 31.8 32.4
EBITDA 10.2 11.4 10.1 10.9 11.3 Cashflow
ROE 19.6 18.1 17.2 18.8 19.4 Net Interest 37 56 59 62 65
ROCE 19.6 18.3 17.5 19.1 19.7 Net Change – WC 33 (76) (448) (470) (504)
ROIC 21.5 21.6 22.5 25.9 28.7 Direct taxes (647) (861) (746) (931) (1,106)
Net working capital 91 108 104 108 113 Net cash from investing (941) (737) (810) (810) (810)
Solvency (x) FCF 1,217 1,602 1,458 2,035 2,576
Interest coverage ratio 67.8 54.8 55.2 64.9 73.0 Increase/(decrease) in debt 0 0 (100) 0 0
BVPS 23.2 28.1 31.8 36.6 42.2 Net cash from financing (948) 94 (761) (793) (925)
CEPS 5.0 5.5 6.2 7.6 8.9 Net change in Cash 269 1,696 697 1,242 1,651
Dividend payout (%) 20.8 25.9 27.1 26.4 26.2
Valuation (x)
P/E 59.0 55.1 49.4 39.6 33.3
P/BV 11.0 9.1 8.0 7.0 6.0
EV/EBITDA 42.9 34.9 32.7 26.2 21.8
Dividend yield (%) 0.4 0.5 0.5 0.7 0.8

16 September 2021
Ashish Shah
Research Analyst, Infrastructure
+91 22 4215 9021
SECTOR: INFRASTRUCTURE [email protected]
Vaibhav Shah
Research Associate, Infrastructure
Adani Ports and SEZ (APSEZ) +91 22 4215 9815

[email protected]
APSEZ’s operating profits have consistently expanded over the last 10 years. Working Market data
capital intensity in the business has been declining since FY19. Loans/ICDs (including Current price: Rs770
to group companies) too have materially reduced over the last five years. APSEZ has Bloomberg: ADSEZ IN
rapidly expanded capacity at its existing ports, developed new greenfield ports, and 52-week H/L: Rs901/312
acquired large operating ports and logistics assets over the last decade. Against CFO
of Rs354bn over FY12-21, it incurred capex of Rs286bn and invested Rs241bn in
acquiring new assets. This has led to negative FCF of Rs173bn over this period, which Free float: 36.2%
has been funded entirely by debt. Avg. daily vol. 3mth: 14,340,360
Source: Bloomberg
expanded over the last 10 years. Working capital intensity in the business had increased substantially over FY13-18 but there
has been significant unwinding since then, resulting in release of ~Rs14bn cash. Loans/ICDs (including to group companies)
have been a major contributor historically, but have reduced sharply in the last five years. Operating cash flows have
remained positive led by strong growth and sustained profitability and have particularly strengthened since FY17.
Exhibit 486: Operating cash flows have strengthened in recent years
100
80 80
75
60
48 52
Rs bn
40 36
26
20 7 8 7 14
0
-20
Operating profit before wcap changes (Rsbn) Wcap changes (Rsbn) CFO (Rsbn)
Analysis of working capital movement: Working capital levels in the ports business should be inherently low. APSEZ’s NWC
levels however had risen due to increased debtors from group companies and others. Debtors from group companies have
declined from Rs24.6bn in FY18 to Rs7.4bn in FY21. Accrued interest declined from Rs12.4bn in FY19 to Rs4.4bn in FY21,
leading to sharp reduction in working capital levels.
Exhibit 487: Working capital, while elevated historically, is on a declining trend since FY19
200
150
days
100
50
0
Debtors Current liabilities NWC (ex-cash and ex L&A to subs/JVs)
Exhibit 488: EBITDA to CFO conversion moderate at 72% over FY12-21

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21
CFO/PAT 65% 50% 39% 113% 48% 93% 132% 130% 198% 160% 118%
CFO/EBITDA 41% 34% 25% 67% 31% 64% 69% 79% 126% 92% 72%
Adani Ports and SEZ (APSEZ) 16 September 2021
Rapid capacity expansions and acquisitions have led to weak conversion of operating cash to free cash: Over the last
decade, APSEZ has rapidly expanded capacity at its existing ports, developed new greenfield ports, and acquired large
operating ports and logistics assets. Against CFO of Rs354bn over FY12-21, APSEZ has incurred capex of Rs286bn and invested
Rs241bn in acquiring new assets. This has led to negative FCF of Rs173bn over this period, which has been funded by debt.
Exhibit 489: Capex intensity and acquisitions have resulted in negative FCF of Rs173bn over FY12-21
100
50
0
Rs bn
-50
-100 Acquisition of AALL & Acquisition of

Acquisition of Dhamra Kattupalli Krishnapatnam
-150
CFO (Rsbn) Capex (Rsbn) Acquisitions and Investments (Rsbn) Net FCF (Rsbn)
Acquisitions gave strategic advantage but returns yet to kick in: The performance of Dhamra, which was acquired in FY15,
has been below expectations, as the cargo ramp-up has taken longer than expected and APSEZ also had to invest
considerable capital to improve its operating efficiency. Kattupalli was acquired as a near greenfield asset in FY18 with
negligible cargo volume and is still scaling up. KPCL, acquired in FY21, had low RoCE historically due to low capacity
utilization, lower pricing, and higher cost structure. There have been pricing increases and cost reductions post takeover,
which along with cargo growth should improve returns going forward.
Exhibit 490: Returns from acquisitions yet to pick up
Dhamra Kattupalli Krishnapatnam
Acquired in FY15 FY18 FY21
RoCE of the asset (past 3 years) 7.6% 3.2% 7.2%
RoCE at acquisition price (past 3 years) 5.4% 3.0% 5.1%
Exhibit 491: Gap in FCF funded predominantly by borrowings (no equity raise on net basis)
Rs bn FY12* FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21
FCF (27) (45) (31) (7) (30) 13 11 (10) 31 (78) (173)
Inflow from equity raise/Outflow from dividend/Buyback (1) (2) 8 (2) (5) (0) (3) (5) (28) (0) (40)
Increase/ (decrease) in net debt 29 47 23 9 36 (13) (7) 15 (3) 78 213
Source: Company, Centrum Broking *net of impact of discontinued operations of Abbott Point
Exhibit 492: Leverage in check led by strong operating performance; improved capacity utilization to improve return ratios
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21 Average
Net Debt/Equity 3.4 1.7 1.4 1.6 1.6 1.1 0.9 0.9 0.9 1.0 1.4
Net Debt/EBITDA 4.0 4.5 4.4 4.4 4.6 3.6 2.7 3.1 3.0 3.4 3.8
RoE 26.5% 28.4% 24.1% 23.0% 23.3% 25.9% 21.1% 17.6% 15.2% 17.8% 22.3%
RoCE pre-tax 8.9% 10.1% 13.3% 13.7% 12.9% 15.1% 17.0% 13.8% 11.3% 13.8% 13.0%
RoCE 8.2% 9.4% 11.7% 12.7% 11.7% 14.1% 12.3% 10.9% 10.1% 11.1% 11.2%
Profitability has improved, but return ratios under pressure due to rapid expansions and acquisitions
APSEZ’s RoE has declined over the past decade, mainly on account of its sharp inorganic growth. While the quality of the
acquired assets is good, these are long-gestation assets and take time to generate returns. Also, many of these have been
acquired at a premium. Once the utilization levels of these assets improve, return ratios should also improve.
Exhibit 493: Profitability has consistently improved; capacity utilization has room to increase
APSEZ Capacity (mt) 335 335 378 380 396 472
Total volume (mt) 151 169 180 208 223 247
Capacity Utilization 45% 51% 48% 55% 56%^ 57%^
EBITDA/MT (Rs/MT)* 252 269 290 291 316 305
Source: Company, Centrum Broking; *: Port EBITDA ex forex loss/gain; ^: utilization computed on annualized volume of cargo in case of new assets

Adani Ports and SEZ (APSEZ) 16 September 2021
P&L Balance sheet

Others 10,433 22,903 (236) 11,356 8,067 Minority Interest 9,657 9,198 21,030 10,649 11,216
EBIT 52,181 42,587 65,913 79,386 107,041 Def tax liab. (net) (8,124) (9,227) 3,214 5,233 9,467
Taxes 10,815 4,594 12,433 14,268 20,026 Net block 248,535 294,283 441,005 503,732 503,129
Minority/Associates (545) (258) (687) (188) (1,108) Non Current Assets 0 0 0 0 0
Extraordinary items (258) (586) 0 0 0 Inventories 8,067 2,883 9,919 12,285 14,940
Growth (%)
Trade payables 0 0 0 0 0
Revenue (3.5) 8.7 5.7 37.6 21.6
Gross 74.7 73.9 74.0 71.4 73.2
EBITDA 60.3 50.0 69.3 60.8 65.7 Cashflow
ROE 17.6 15.2 17.8 15.9 16.9 Net Interest 14,283 18,131 22,553 23,440 26,394
Debtors 119 92 89 69 68 Acquisitions, net 0 0 (119,250) (144,240) 0
Inventory 88 65 72 82 88 Investments 2,966 (3,957) (10,582) 7,360 0
Creditors 0 0 0 0 0 Others (576) (555) (656) (1,482) (540)
Solvency (x) FCF (590) 49,156 (41,276) (68,028) 88,211
Interest coverage ratio 4.6 3.3 3.9 4.5 5.2 Increase/(decrease) in debt 48,656 9,038 55,798 65,843 (26,151)
Adjusted EPS 19.4 18.8 24.6 26.9 35.1 Others 770 (495) 1,151 291 291
BVPS 118.5 126.1 150.7 193.8 221.8 Net cash from financing 30,615 (16,091) 24,237 33,385 (67,301)
CEPS 26.0 27.1 35.0 39.1 49.8 Net change in Cash 30,026 33,066 (17,040) (34,643) 20,911
Dividend payout (%) 11.4 17.3 20.3 16.6 20.3
Valuation (x)
P/E 18.9 20.3 16.9 28.6 21.9
P/BV 3.1 3.0 2.8 4.0 3.5
EV/EBITDA 14.8 16.9 13.2 18.2 13.5
Dividend yield (%) 0.6 0.8 1.2 0.6 0.9

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
Ahluwalia Contracts (ACIL) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
Ahluwalia Contracts’ (ACIL) cash flow analysis indicates significant improvement in Market data
working capital management and cash generation since FY15. ACIL faced substantial Current price: Rs388
stress over FY12-14 due to execution delays and cost escalations. Starting FY15, ACIL Bloomberg: AHLU IN
re-oriented its business mix towards government contracts, which helped stabilize 52-week H/L: Rs430/202
execution and margins. While revenue/profit growth has been weak, working capital
Market cap: Rs26bn
levels have been moderate at 60-80 days and operating cash flows have been
consistently positive since FY15. Capex intensity has been low, which helped ACIL Free float: 42.0%
unwind its leverage to become net cash. Return ratios were strong since FY15, but Avg. daily vol. 3mth: 59,083
weakened in FY20 and FY21 due to provisions related to legacy contracts. Source: Bloomberg
Sustained improvement in operating cash flows: Operating cash flows during FY12-14 had turned negative due to delays in
project execution and increase in raw material costs in fixed price contracts. Private sector orders comprised ~80% of the
order backlog during this period. With a change in strategy to focus on government contracts, margins and cash flows began
to improve from FY15.
Exhibit 494: Steady improvement in cash flow from operations, led by tight control on working capital
3,000
Sharp rise in Lower receivables, higher
Execution delays government orders mobilization advances
2,000 & cost increase
1,000
(1,000)
Working capital levels have been stable: ACIL’s working capital has remained largely stable over the years at 60-80 days, in
sync with industry standards. However, in FY21, it declined sharply to 40 days due to sharp reduction in receivables and rise
in mobilization advances.
Exhibit 495: NWC has remained stable and in line with industry standards
200
150
100 72 75 73 77 69
66 70
62
46 40
50
-
Trade receivables (days) Trade payables (days) Mobilization advances (days) NWC (ex cash ex L&A)
Ahluwalia Contracts (ACIL) 16 September 2021
Exhibit 496: Healthy conversion of EBITDA into CFO Exhibit 497: CFO/PAT consistently strong over FY15-21
200% 162%
350% 324%
150%
300%
100% 60% 66% 65%
37% 35% 38% 250%
50%
NM 1% 200%
0% 155%
150% 132%
-50% 107%
100% 70% 66% 71%
-100%
50%
-150% NM NM 3%
0%
-200% -180%
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY13*
FY12*
FY12
FY13*
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Source: Company, Centrum Broking; *: both CFO and EBITDA were negative Source: Company, Centrum Broking; *: both CFO and PAT were negative
Free cash flows improved consistently since FY15: ACIL has consistently generated strong operating cash flows, which have
helped the company to completely fund its capex requirements. Against CFO of Rs6.8bn over FY12-21, ACIL has incurred
capex of only Rs2.7bn, which led to positive FCF generation of Rs4bn over this period. ACIL follows an asset-light model,
which limits capex investments and improves cash flow generation.
Exhibit 498: Disciplined working capital management and low capex intensity led to consistent FCF
3,000
2,000
1,000
-1,000
CFO (Rs mn) Capex (Rs mn) Acquisitions and Investments (Rs mn) Net FCF (Rs mn)
Exhibit 499: Strong cash flows have helped ACIL repay debt
FCF (994) (467) (166) 427 376 937 584 535 637 2,148 4,016
Inflow from equity raise/dividend outflow - - - 499 - - - (24) (24) - 450
Increase/ (decrease) in net debt 994 467 166 (926) (376) (937) (584) (511) (613) (2,148) (4,467)
Source: Company, Centrum Broking Issue of 4.2m shares to promoters on
preferential basis @Rs118/share to repay debt
Exhibit 500: Leverage has been reducing since FY15
Leverage ratios (x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21 average
Net Debt/Equity 0.6 0.8 0.8 0.3 0.1 (0.1) (0.2) (0.2) (0.2) (0.5) 0.1
Net Debt*/EBITDA 9.2 (15.6) 9.3 2.5 1.6 0.7 0.0 (0.0) 0.1 (0.5) 0.7
Source: Company, Centrum Broking; *: includes mobilization advances
Exhibit 501: Return ratios declined over last two years due to elevated provisions
Return Ratios (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21 average
RoE -13.5% -31.8% 3.5% 22.7% 22.2% 18.6% 20.5% 17.3% 8.4% 9.2% 7.7%
RoCE pre-tax* -3.0% -7.8% 6.8% 15.8% 21.4% 21.2% 27.2% 24.1% 13.5% 13.1% 13.2%
RoCE -3.0% -7.8% 6.7% 15.2% 15.2% 14.0% 18.0% 15.7% 9.0% 9.8% 9.3%
Source: Company, Centrum Broking; *: Capital employed includes mobilization advances
Execution delays and Provisions for disputes in

cost escalations legacy contracts

Ahluwalia Contracts (ACIL) 16 September 2021
P&L Balance sheet

PBT 1,795 966 1,035 2,305 2,983 Less: acc. Depreciation (751) (1,067) (1,371) (1,751) (2,172)
Taxes 621 322 263 580 751 Net block 1,862 2,208 2,295 2,215 2,294
PAT 1,174 644 772 1,725 2,232 Net fixed assets 1,866 2,210 2,299 2,219 2,298
Recurring PAT 1,174 644 772 1,725 2,232 Investments 63 63 63 63 63
Reported PAT 1,174 644 772 1,725 2,232 Sundry debtors 5,950 5,973 4,349 7,820 9,541
Growth (%)
Trade payables 4,285 5,231 6,402 5,811 7,702
Revenue 6.6 7.4 5.2 20.0 22.0
Gross 23.1 20.2 19.9 22.5 22.5
EBITDA 12.3 8.1 7.8 12.2 12.7 Cashflow
Adjusted PAT 6.7 3.4 3.9 7.3 7.7 Profit Before Tax 1,795 966 1,035 2,305 2,983
ROE 17.3 8.4 9.2 17.9 19.2 Net Interest 192 350 426 454 472
ROCE 15.3 8.8 9.6 16.3 18.4 Net Change – WC (540) 125 1,372 (2,712) (1,038)
Turnover (days) Net cash from operations 1,030 1,289 2,820 (153) 2,087
Creditors 109 115 134 121 110 Others 6 (67) 6 0 0
Solvency (x) FCF 750 859 2,473 (453) 1,587
Interest coverage ratio 11.3 4.4 3.6 6.4 7.8 Increase/(decrease) in debt 311 (138) (310) (10) (50)
Net debt/EBITDA (0.7) (1.3) (2.6) (1.1) (1.1) Dividend paid (24) (24) 0 0 0
BVPS 110.2 120.0 131.4 157.1 190.4 Net cash from financing 94 (512) (736) (465) (522)
CEPS 21.6 14.4 16.1 31.4 39.6 Net change in Cash 845 347 1,737 (918) 1,066
Dividend payout (%) 1.7 3.1 0.0 0.0 0.0
Valuation (x)
P/E 18.6 31.6 20.5 15.1 11.6
P/BV 3.0 2.5 1.8 2.5 2.0
EV/EBITDA 9.4 12.0 7.6 7.9 5.9
Dividend yield (%) 0.1 0.1 0.0 0.0 0.0

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
Ashoka Buildcon (ABL) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
Ashoka Buildcon’s (ABL) operating cash flows (standalone basis) have been healthy, Market data
though there have been a few large dips, intermittently. Operating cash flow of Current price: Rs101
Rs21.8bn has funded 88% of capital commitments over this period (capex of Rs6.1bn Bloomberg: ASBL IN
and net equity investments of Rs18.5bn in BOT/HAM assets). Working capital 52-week H/L: Rs119/60
intensity has remained low, with higher debtor levels being compensated by higher Market cap: Rs28.3bn
payables, mobilization advances and other liabilities. Return ratios moderated after Free float: 45.5%
fresh equity capital raise in FY16, but have since bounced back to historical levels.
Part of this recovery is due to growth rebound in FY19 and higher margins while the
Source: Bloomberg
balance is also on account of interest income from SPVs, 78% of which is accrued.
Cash generation healthy but with significant cyclicality: Operating profits have consistently risen over the last 10 years.
Working capital cycle has been low to moderate through this period, which has helped generate positive operating cash
flows in 7 out of the 10 years. Having said that, there have been some sharp swings in working capital, led in part by higher
inventories/WIP and higher T&D receivables.
Exhibit 502: Generated operating cash flow^ of Rs21.8bn over 10 years though with significant cyclicality
8,000 Release of working capital
Sharp rise in NWC levels led by fall in share of T&D
6,000 from a very low base revenue
4,000
2,000
Rs mn
-
(2,000)
(4,000)
Normalization in
(6,000) working capital from
very low levels
Source: Company, Centrum Broking ^standalone basis
Working capital levels have remained low: Working capital levels have largely remained low to moderate. The sharp
increase in NWC to 113 days in FY16 was driven by surge in inventories/WIP for new projects and a sharp increase in share of
T&D revenue, leading also to higher receivables. This was also followed by a sharp reduction to 31 days over FY17. Over the
years, ABL’s NWC has exhibited a pattern of higher debtors balanced by higher creditors.
Exhibit 503: Net working capital^ levels remain low with higher payables balancing higher receivables
180
150
120
90
Days
60
30
-
(60)
Higher inventories and T&D Higher debtors offset by higher

receivables, with share of T&D creditors, customer advances
revenue at 45% in FY16 and other liabilities
Ashoka Buildcon (ABL) 16 September 2021
Exhibit 504: EBITDA to CFO conversion of 67% over 10 years Exhibit 505: PAT to CFO conversion of 105% over 10 years
200%
350%
150%
250%
100%
150%
50%
50%
0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -50% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-50%
-100% -150%
-150% -250%
Capex and investments largely funded by CFO: ABL has generated total operating cash flows of Rs21.8bn over FY12-21,
which have funded 88% of its total capital commitments – capex of Rs6.1bn and net equity investment of Rs18.5bn in
BOT/HAM assets. FCF over this period has been negative Rs2.8bn.
Exhibit 506: CFO^ funded 88% of capital commitments; negative FCF of Rs2.8bn over 10 years
8,000
4,000
Rs mn
0
-4,000
-8,000
Exhibit 507: Deficit in FCF largely funded by equity

Standalone (Rs mn) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21
FCF 202 620 704 (2,226) (4,228) 2,541 1,211 (6,168) 6,069 (1,572) (2,848)
Inflow from equity raise/dividend outflow (189) (176) (221) (197) 4,503 (150) (158) (150) - - 3,262
Increase/ (decrease) in net debt (13) (443) (484) 2,423 (276) (2,390) (1,053) 6,318 (6,069) 1,572 (414)
Exhibit 508: Leverage has been consistently low

Leverage ratios (x)^ FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21 Average
Net Debt/Equity 0.4 0.3 0.2 0.4 0.2 0.1 0.0 0.3 0.1 0.1 0.2
Net Debt*/EBITDA 3.2 2.9 3.4 3.2 3.1 2.8 2.4 2.7 0.9 1.1 2.6
Source: Company, Centrum Broking; *: includes mobilization advances ^standalone basis
Exhibit 509: Return ratios normalized post equity raise in FY16; bounced backed to historical levels over FY19-21
Return Ratios (%)^ FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21 Average
RoE 14.1% 15.7% 13.3% 13.9% 10.6% 10.3% 13.0% 16.1% 16.1% 14.6% 13.8%
RoCE pre-tax* 13.9% 14.4% 13.0% 14.2% 12.7% 10.5% 12.3% 16.6% 16.8% 16.7% 14.1%
RoCE* 10.6% 10.8% 9.2% 10.4% 8.9% 8.5% 10.1% 11.9% 12.2% 12.5% 10.5%
Source: Company, Centrum Broking; *: Capital employed includes mobilization advances ^-standalone basis
Equity raise of FY16 followed by low

Recovery led by strong growth in
earnings growth led to dip in RoE in FY16
FY19 + higher margins + surge in
interest income from SPVs (78%
of which is accrued)

Ashoka Buildcon (ABL) 16 September 2021
P&L Balance sheet

Depreciation & Amortisation 763 1,111 872 769 928 Non Current Liabilities 1,899 2,074 2,074 2,074 2,074
Taxes 1,307 1,468 1,391 1,433 1,609 Net block 3,799 3,491 2,854 2,484 2,406
Growth (%)
Trade payables 15,516 11,591 11,358 12,606 14,638
Revenue 56.1 3.1 (3.0) 16.1 16.8
Gross 20.7 23.9 22.0 19.7 19.3
EBITDA 13.5 14.9 13.6 12.0 12.0 Cashflow
Returns (%) Depreciation & Amortisation 763 1,111 872 769 928
ROE 16.1 16.1 14.6 13.3 13.2 Net Interest 907 855 772 771 888
Creditors 170 165 141 123 119 Others 1,117 (173) 0 0 0
Solvency (x) FCF (4,809) 6,835 (795) 337 2,300
Interest coverage ratio 5.7 6.9 6.7 6.9 7.0 Increase/(decrease) in debt 6,284 (3,549) 62 772 (1,300)
Net debt/EBITDA 1.4 0.2 0.6 0.7 0.4 Dividend paid 0 0 0 (281) (281)
BVPS 78.8 92.6 107.1 121.3 137.3 Net cash from financing 5,377 (4,403) (710) (280) (2,469)
CEPS 14.6 17.7 17.6 17.9 20.4 Net change in Cash 568 2,432 (1,505) 57 (170)
Dividend payout (%) 0.0 0.0 0.0 6.6 5.9
Valuation (x)
P/E 11.7 7.9 5.1 6.6 5.9
P/BV 1.8 1.2 0.7 0.8 0.7
EV/EBITDA 9.0 5.5 4.6 6.0 5.0
Dividend yield (%) 0.0 0.0 0.0 1.0 1.0

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
G R Infraprojects (GRIL) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
GRIL’s operating profits have consistently expanded over the last 10 years. Working Market data
capital intensity has increased over the last 2-3 years, but is still under control and in Current price: Rs1,586
line with industry standards. Strong operating cash flow generation has helped GRIL Bloomberg: GRINFRA IN
to fund 77% of its capex requirements and equity investments (net of monetization) 52-week H/L: Rs1,839/1,543
over FY12-21. Against CFO of Rs23.6bn over FY12-21, GRIL has incurred capex of
Rs19.8bn and invested Rs10.8bn of equity in assets (net of monetization). Given its
strong cash flow generation, better working capital control and prudent capital Free float: 13.5%
allocation, GRIL has remained thinly levered and has generated strong return ratios Avg. daily vol. 3mth: -
over FY12-21. Source: Bloomberg
History of robust and consistent cash generation: Operating profits for GRIL have been robust and have grown substantially
over the last 10 years. While working capital intensity has increased over the last 2-3 years given the significant scale-up in
operations, it is well under control and in line with the industry standards. Consequently, GRIL’s cash flow from operations
has remained strong and consistent for a large part of FY12-21.
Exhibit 510: Cash flow from operations
11,000 Rise in working capital intensity

Cash generation, while consistent, was low, given resulted in moderation of
8,000 the scale of operations of GRIL during FY12-15 operating cash flows in FY21
5,000
Rs mn
2,000
(1,000)
(4,000)
(7,000)
Analysis of working capital movement: After a sharp rise over FY12-14 due to rise in receivables and loans to subsidiaries,
NWC levels declined materially in FY17, led by reduction in receivables. Having said that, working capital is still under control
and in sync with industry standards (typically 90-120 days).
Exhibit 511: NWC has risen in last 2-3 years, but under control and in line with industry standards
100 Higher inventories + GST receivables and lower
mobilization advances from SPVs
86 86
75 82
67 72
69
days
50 51
48
31 31
25
-
Trade receivables (days) Trade payables (days) Mobilization advances (days) NWC (ex-cash ex-L&A days)
G R Infraprojects (GRIL) 16 September 2021
Exhibit 512: EBITDA to CFO conversion moderate at 44% Exhibit 513: PAT to CFO conversion at 70% over FY12-21
150% 127% 400%

115% 288%
100% 192%
63% 60% 60% 200% 102% 108%
86%
29% 35% 60% 49%
50% 21% 29%
0%
0% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -10%
-200%
-50% -7%
-100% -400%
-402%
-150% -133% -600%
Strong CFO generation meets 77% of the capex and net investment requirements: Over the last decade, GRIL has
consistently generated operating cash flows, which have helped the company to fund 77% of its total capex requirements
and investments (net of monetization) despite scale-up in operations. GRIL also benefitted from monetization of two PPP
assets, namely Shillong e-way and Jodhpur-Pali e-way in FY17 at a premium valuation of 1.8x P/B, resulting in cash inflows of
Rs3bn (net gain of Rs1.4bn). Against CFO of Rs23.6bn over FY12-21, GRIL has incurred capex of Rs19.8bn and invested
Rs10.8bn of equity in assets (net of monetization).
Exhibit 514: Strong operating cash flow has funded 77% of the capex and equity commitments over FY12-21
9,000
5,000
Rs mn
1,000
(3,000)
(7,000) CFO (Rs mn) Capex (Rs mn) Investments (Rs mn) Net FCF (Rs mn)
Exhibit 515: Strong operating cash flows along with monetization proceeds have kept GRIL’s leverage in check
FCF (458) (55) (1,941) 356 (159) 5,196 (6,107) (1,220) 2,407 (5,008) (6,988)
Inflow from equity raise/dividend outflow - - - - - - (41) - - (14) (55)
Increase/ (decrease) in net debt 458 55 1,941 (356) 159 (5,196) 6,148 1,220 (2,407) 5,022 7,043
Exhibit 516: GRIL continued to be thinly levered over FY12-21

Leverage ratios (x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21 Average
Net Debt/Equity 0.1 0.1 0.6 0.5 0.4 (0.1) 0.2 0.2 0.1 0.2 0.2
Net Debt*/EBITDA 0.6 1.1 4.5 3.8 2.2 0.6 1.1 1.0 0.5 0.8 1.6
Exhibit 517: Strong return ratio profile; recent moderation due to inefficiencies of scale/diversification
Return Ratios (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21 Average
RoE 26.4% 15.9% 7.6% 9.0% 27.9% 46.7% 30.7% 32.4% 27.7% 24.3% 24.9%
RoCE pre-tax* 23.9% 18.9% 10.0% 9.2% 20.2% 33.3% 26.5% 31.4% 28.4% 25.0% 22.7%
RoCE* 16.9% 12.8% 6.4% 7.6% 17.7% 29.5% 22.1% 22.5% 19.5% 18.2% 17.3%

G R Infraprojects (GRIL) 16 September 2021
P&L Balance sheet

Others 626 695 952 1,095 1,357 Minority Interest 0 0 0 0 0
EBIT 8,693 10,545 10,835 10,333 14,420 Def tax liab. (net) (685) 646 638 638 638
Other income 674 938 1,275 1,388 1,807 Gross block 12,197 15,289 20,585 24,085 27,585
Taxes 2,353 3,142 2,908 2,544 3,584 Net block 9,025 10,322 13,451 14,115 14,385
Growth (%)
Trade payables 5,189 5,570 7,283 7,123 9,705
Revenue 59.3 21.8 20.2 6.7 34.3
Adj. EPS 45.4 15.6 13.7 (3.1) 40.9 Net current assets 19,299 26,505 32,517 36,419 47,433
Gross 28.6 29.2 25.7 25.2 24.1
EBITDA 20.4 20.6 18.1 17.0 17.0 Cashflow
ROE 32.4 27.7 24.3 19.0 21.8 Net Interest 1,057 1,452 1,396 1,614 1,990
ROCE 21.8 19.5 18.5 15.7 17.9 Net Change – WC (2,375) (2,414) (5,355) (488) (6,278)
Solvency (x) FCF 550 4,656 (2,173) 4,135 (1,896)
Interest coverage ratio 9.5 8.5 9.4 8.2 8.9 Increase/(decrease) in debt 4,458 133 2,771 (1,628) 5,370
Net debt/EBITDA 0.5 0.2 0.5 0.4 0.6 Dividend paid 0 0 0 0 0
BVPS 220.7 291.6 372.8 451.0 561.2 Net cash from financing 3,402 (1,320) 1,376 (3,243) 3,380
CEPS 75.7 90.3 104.2 107.6 143.6 Net change in Cash 3,194 2,339 (1,814) (316) (4)
Dividend payout (%) 0.0 0.0 0.0 0.0 0.0
Valuation (x)
P/E 0.0 0.0 0.0 20.3 14.4
P/BV 0.0 0.0 0.0 3.5 2.8
EV/EBITDA 0.0 0.0 0.0 12.1 9.3
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
Gujarat Pipavav Port (GPPL) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
Over the last 10 years, GPPL has emerged from its previous phase of financial stress. Market data
Operating profits and cash flows, though consistent have been stagnant since FY15. Current price: Rs104
Working capital levels have been negative, in line with the characteristics of the Bloomberg: GPPV IN
ports business. Total operating cash flow of Rs33bn has fully funded capex of 52-week H/L: Rs124/76
Rs10.9bn, leading to FCF of Rs22.2bn over this period. This FCF and QIP proceeds of
Rs3.5bn in CY12 have been used for debt repayment of Rs8bn and dividend
distribution of Rs11.3bn, with the rest being accumulated as surplus cash in the Free float: 56.0%
balance sheet (Rs7.3bn in Mar-21). RoE has stagnated at 10-11% despite the high Avg. daily vol. 3mth: 1135,,147
dividend distribution due to sluggish growth in cargo and earnings. Source: Bloomberg
Cash generation consistent but stagnant: Cash flow from operations, while consistent has been stagnant. Ports as such is a
negative working capital business; so, there has been no material impact of any working capital changes. Cash from
operations has declined or stagnated due to reduced volume of containers and bulk cargo.
5,000
4,000
3,000
Rs mn
2,000
1,000
-
CY11 CY12 CY13 15MFY15 FY16 FY17 FY18 FY19 FY20 FY21
(1,000)
Working capital remains negative: Except the storage charges for dry bulk cargo, GPPL receives its entire billing before the
departure of the vessel. The storage income for dry bulk cargo is paid at the time of evacuation of the cargo, depending upon
the duration for which the cargo has been stored at the port. As a result, working capital for port operations is negative.
Exhibit 519: Working capital levels negative, in line with the nature of port operations
150
100
50
Days
(50) CY11 CY12 CY13 15MFY15 FY16 FY17 FY18 FY19 FY20 FY21
(100)
(150)
Trade receivables (days) Trade payables (days) NWC days (ex cash ex MAT credit)
Gujarat Pipavav Port (GPPL) 16 September 2021
Exhibit 520: EBITDA to CFO conversion of 94% in 10 years Exhibit 521: PAT to CFO conversion of 160% over 10 years
150% 300%
250%
120%
200%
90%
150%
60%
100%
30% 50%
15MFY15
CY13
CY11
CY12
CY13
15MFY15
CY11
CY12
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
FCF generation has been strong: Total operating cash flow of Rs33bn over CY11-FY21 has fully funded capex of Rs10.9bn,
leading to FCF of Rs22.2bn over this period. This FCF and QIP proceeds of Rs3.4bn (totalling to Rs25.5bn) have been used for
payment of dividend of Rs11.3bn and debt reduction of Rs8bn, with the rest accruing as surplus cash in the balance sheet.
GPPL had net cash of Rs7.3bn as at Mar-21.
Exhibit 522: Strong cash flows and low capex have led to consistent FCF
5,000
2,500
Rs mn
-
CY11 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
(2,500)
(5,000)
CFO (Rs mn) Capex (Rs mn) Investments (Rs mn) Net FCF (Rs mn)
Exhibit 523: FCF used to repay debt and maintain consistent dividends
Rs mn CY11 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 CY11-FY21
FCF 538 290 1,691 3,472 461 2,791 2,718 2,933 3,562 3,744 22,200
Inflow from equity raise/dividend outflow - 3,448 - - - (2,268) (2,034) (1,977) (2,272) (2,705) (7,807)
Increase / (decrease) in net debt (538) (3,738) (1,691) (3,472) (461) (523) (684) (956) (1,291) (1,039) (14,393)
Exhibit 524: Leverage has been consistently low or non-existent

Leverage ratios (x) CY11 CY12 CY13 15MFY15 FY16 FY17 FY18 FY19 FY20 FY21 CY11-FY21 Average
Net Debt/Equity 0.7 0.2 0.1 (0.1) (0.1) (0.2) (0.2) (0.3) (0.3) (0.4) (0.1)
Net Debt/EBITDA 3.0 1.6 0.4 (0.5) (0.8) (0.8) (1.2) (1.4) (1.5) (1.7) (0.3)
Exhibit 525: Return ratios have stagnated due to absence of growth

Return Ratios (%) CY11 CY12 CY13 15MFY15 FY16 FY17 FY18 FY19 FY20 FY21 CY11-FY21 Average
RoE 7.2% 5.2% 12.5% 24.1% 9.6% 12.4% 9.5% 10.2% 11.3% 10.2% 11.2%
RoCE pre-tax 9.5% 8.7% 13.1% 26.2% 15.9% 16.1% 14.3% 15.7% 17.4% 15.6% 15.3%
RoCE 9.5% 8.7% 13.1% 26.2% 9.9% 11.6% 9.1% 10.1% 11.3% 10.1% 12.0%

Gujarat Pipavav Port (GPPL) 16 September 2021
P&L Balance sheet

EBIT 2,760 3,152 2,887 3,181 4,206 Def tax liab. (net) 462 494 1,007 1,505 1,518
Taxes 1,153 1,264 1,161 1,234 1,197 Net block 15,901 15,825 14,673 14,168 13,014
Extraordinary items 0 602 80 (71) 0 Inventories 84 76 105 86 79
Growth (%)
Trade payables 325 298 339 371 416
Revenue 8.2 4.8 (0.3) 11.0 17.7
Gross 74.6 78.2 76.9 74.7 75.5
EBITDA 55.4 60.7 57.6 55.9 58.0 Cashflow
ROE 10.2 11.3 10.2 11.1 17.2 Net Interest 4 74 63 63 63
ROIC 12.2 14.8 14.4 17.6 29.3 Direct taxes (691) (1,269) (1,180) (736) (1,185)
Gross block turnover ratio (x) 0.3 0.3 0.3 0.4 0.4 Capital expenditure 294 841 653 533 200
Creditors 62 71 69 63 61 Others (11) 1,611 76 0 0
Net working capital (96) (93) (97) (74) (56) Net cash from investing 283 2,452 728 533 200
Solvency (x) FCF 3,018 2,881 2,921 3,349 4,603
Interest coverage ratio 1,065.4 60.5 66.9 72.1 88.1 Increase/(decrease) in debt 0 0 0 0 0
Dividend payout (%) 79.9 92.6 99.6 92.9 90.0
Valuation (x)
P/E 25.3 17.3 19.0 22.2 14.1
P/BV 2.6 1.9 2.0 2.5 2.4
EV/EBITDA 12.0 7.5 7.7 9.2 7.3
Dividend yield (%) 3.2 6.8 5.5 4.1 6.4

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
HG Infra Engineering (HG) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
HG Infra’s (HG) cash flows during its scale-up phase since FY17 indicate a fair degree Market data
of resilience after an initial spike in working capital levels. Working capital averaged Current price: Rs658
at a moderate level of 58 days over FY13-21, though it spiked intermittently during Bloomberg: HGINFRA IN
FY18-20. Operating cash flow of Rs8bn has funded 77% of its capex of Rs7.7bn and 52-week H/L: Rs680/151
investments of Rs2.6bn in HAM assets. FCF of (-) Rs2.3bn has been funded by IPO
proceeds, and as a result, net debt remained largely unchanged. While FCF has
recovered since FY20, HG needs to sustain the improvement to cement credentials. Free float: 25.5%
Return ratios have been strong, with average RoE of 22.4% over FY13-21. Avg. daily vol. 3mth: 529,285
Source: Bloomberg
Operating cash flows marginal in the past; on an improving trend since FY20: HG’s operating profits have picked up in the
last 3-4 years along with strong scale-up in revenue. Operating cash flows, while positive, were miniscule till FY17. HG saw
significant expansion in working capital levels in FY18 and FY19 due to delayed collections in certain contracts. Since FY20,
there has been significant release in working capital, leading to a surge in operating cash flow.
Exhibit 526: Operating cash flows seeing a pick-up since FY20
5,000
3,750
2,500
Rs mn
1,250
(1,250)
(2,500)
Working capital levels improving after witnessing a surge: HG has maintained an average working capital cycle of 58 days
over FY13-21, which is well within the industry standards. NWC levels, however, had surged to about 80 days during FY18-20
due to rise in receivables from its Rajasthan PWD contracts as well as from some private developers. In FY21, NWC of just 46
days has been led by unwinding of ~Rs2bn delayed receivables from Rajasthan PWD and increase in mobilization advances.
We note that such low levels are not sustainable and one should expect a reversion to mean, going forward.
Exhibit 527: Average NWC levels low at 58 days; FY21 levels of 46 days too low and are bound to increase
150
100 77 82 81
days
60
47 46
39
45 43
50
-
Unwinding of ~Rs2bn delayed receivables from
Rajasthan PWD and higher mobilization advances
HG Infra Engineering (HG) 16 September 2021
Exhibit 528: EBITDA to CFO conversion moderate at 50% Exhibit 529: PAT to CFO conversion high at 113% in FY13-21
125% 116% 240% 225%
100% 180% 148% 148%

75% 125%
61%
50% 120% 90%
50% 38% 60%
31% 46%
23% 60% 38%
25% 14% 15%
0% 0%
-25% -60%
-21% -51%
FCF seeing recovery; needs to sustain improvement to cement credentials: Since FY13, HG’s operating cash flow has been
Rs8bn, which has funded 77% of its capex of Rs7.7bn and investments of Rs2.6bn in HAM assets. Recent improvement in
operating cash flows over FY20-21 has materially aided this track record. However, we note that HG will need to sustain the
improvement in cash generation in the coming years to cement its credentials among peers.
Exhibit 530: Operating cash flows have funded 78% of the capex and equity commitments over FY13-21
6,000
4,500
3,000
Rs mn
1,500
(1,500)
(3,000)
CFO Capex Investments Net FCF

Exhibit 531: FCF of (-) Rs2.3bn funded by IPO proceeds; net debt has remained largely unchanged
Rs mn FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY13-21
FCF (101) 245 (29) (424) (607) (2,956) (1,028) 383 2,201 (2,316)
Inflow from equity raise/ dividend outflow 30 - - 28 - 2,806 (39) (39) - 2,785
Increase/ (decrease) in net debt 71 (245) 29 396 607 151 1,067 (344) (2,201) (468)
Exhibit 532: Leverage has improved, led by equity raise and improved cash generation since FY20
Leverage ratios (x) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY13-21 Average
Net Debt/Equity 0.2 0.2 0.1 0.2 0.4 0.2 0.2 0.2 0.2 0.2
Net Debt/EBITDA 1.8 1.4 1.7 1.8 1.4 1.6 1.2 1.3 0.9 1.5
Exhibit 533: Return ratios have been strong; average RoE of 22.4%
Return Ratios (%) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY13-21 Average
RoE 19.6% 21.5% 10.9% 24.6% 35.7% 23.5% 20.6% 22.4% 22.8% 22.4%
ROCE pre-tax* 21.0% 25.4% 18.8% 27.6% 29.5% 21.1% 21.6% 22.3% 22.5% 23.3%
RoCE* 14.1% 16.9% 12.8% 18.1% 18.9% 15.0% 14.0% 16.2% 16.8% 15.9%
Growth and margin profile intact.

Moderation due to equity raise of
Rs2.8bn through IPO.

HG Infra Engineering (HG) 16 September 2021
P&L Balance sheet

Depreciation & Amortisation 755 756 844 902 1,042 Non Current Liabilities 0 0 0 0 0
EBIT 2,278 2,668 3,262 4,376 4,864 Def tax liab. (net) (84) 0 0 0 0
Taxes 667 623 712 986 1,090 Net block 4,620 4,824 4,831 4,629 4,587
Recurring PAT 1,236 1,662 2,110 2,931 3,239 Investments 200 908 2,612 4,129 6,130
Growth (%)
Trade payables 3,992 5,437 4,984 6,076 7,041
Revenue 44.3 9.3 15.1 31.0 15.0
Gross 22.5 22.3 21.6 21.2 20.6
EBITDA 15.1 15.6 16.2 15.9 15.5 Cashflow
Returns (%) Depreciation & Amortisation 755 756 844 902 1,042
ROE 20.6 22.4 22.8 24.9 21.9 Net Interest 490 524 596 626 720
ROCE 14.0 16.2 16.8 18.3 16.8 Net Change – WC (1,542) (413) 1,735 (3,203) (928)
ROIC 15.8 17.6 21.1 25.4 23.9 Direct taxes (689) (624) (685) (986) (1,090)
Gross block turnover ratio (x) 3.3 3.1 3.3 4.0 4.1 Capital expenditure (1,163) (1,072) (758) (700) (1,000)
Inventory 26 24 25 27 29 Investments (200) (708) (1,704) (1,517) (2,001)
Solvency (x) FCF (446) 748 2,849 (961) 1,072
Interest coverage ratio 6.2 6.5 6.9 8.4 8.2 Increase/(decrease) in debt (237) (129) (785) 1,110 0
Net debt/EBITDA 0.9 0.7 0.1 0.4 0.3 Dividend paid (39) (39) 0 (52) (65)
Adjusted EPS 19.0 25.5 32.4 45.0 49.7 Others (75) 86 (29) 0 0
BVPS 101.2 126.1 158.4 202.6 251.3 Net cash from financing (841) (606) (1,410) 432 (785)
CEPS 30.5 37.1 45.3 58.8 65.7 Net change in Cash (1,287) 142 1,440 (529) 287
Dividend payout (%) 2.6 2.0 2.5 1.8 2.0
Valuation (x)
P/E 13.1 9.3 6.5 14.6 13.2
P/BV 2.5 1.9 1.3 3.2 2.6
EV/EBITDA 6.3 5.3 3.4 8.5 7.5
Dividend yield (%) 0.2 0.2 0.4 0.1 0.2

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
KEC International (KEC) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
After a brief period over FY13-15, when KEC’s operating performance was impacted Market data
amid diversification into several new verticals, impacting margins, KEC’s operating Current price: Rs428
profits have expanded since FY16. Net working capital intensity has remained Bloomberg: KECI IN
elevated but stable at 80-100 days during FY12-21. Having said that, KEC has 52-week H/L: Rs486/299
generated FCF of Rs6.6bn after completely meeting its capex requirements. FCF was
Market cap: Rs110bn
also propelled by increase in acceptances and monetization of land (inflow of
Rs2.1bn from Thane land sale). Against CFO of Rs14.6bn over FY12-21, KEC has Free float: 48.2%
incurred capex of Rs8.6bn. Given its strong cash flow generation in the recent past Avg. daily vol. 3mth: 469,415
and better control over working capital, KEC’s leverage has improved over FY16-21. Source: Bloomberg
Operating cash flows healthy, but cyclical: Over FY13-15, KEC’s financial performance was impacted due to moderation in
margins in the SAE business and adverse revenue mix, as diversification into newer businesses yielded poor margins. Since
then, its operating profits have improved. Working capital levels, while elevated, have remained at 87-110 days in recent
years. Overall, KEC’s operating cashflow has been aided by increase in acceptances from Rs9.7bn in FY15 to Rs15.3bn in FY21.
15,000
12,500 Release of wcap led by
10,000 rise in acceptances and
mobilization advances
7,500
5,000
Rs mn
2,500
-
(5,000)
(7,500)
(10,000)
Analysis of working capital movement: KEC’s net working capital cycle has remained elevated but stable at 80-100 days over
the last decade, as trade receivables and payables have remained in sync. Power T&D and Railways, which accounted for
majority revenue share, are characterised by longer payment cycles, leading to working capital cycle of 80-100 days.
Exhibit 535: NWC has remained elevated but stable at 80-100 days over the last decade
250
200
150
110 110
days
98 87 98 101
87
100 67 80
55
50
-
KEC International (KEC) 16 September 2021
Exhibit 536: EBITDA - CFO conversion weak at 18% in FY12-21 Exhibit 537: PAT to CFO conversion at 50% over FY12-21
200% 600%
150% 400%
100% 200%
50% 0%
0% -200%
-50% -400%
-100% -600%
FCF of Rs6.6bn driven by low capex intensity: KEC has generated operating cash flows of Rs14.6bn over FY12-21, which have
been adequate to fund its capex requirements of Rs8.6bn. Inflows of Rs2.1bn from sale of Thane land parcel in FY15 have
aided FCF of Rs6.6bn over FY12-21.
Exhibit 538: Capex requirements largely met by operating cashflows
15,000 Proceeds of Rs574mn from
Includes proceeds of Rs2.1bn
12,500 sale of subsidiary
from monetization of Thane
10,000 land parcel
7,500
Rs mn
5,000
2,500
0
-2,500
-5,000
Exhibit 539: Recovery in FCF led to reduction in debt levels

FCF 3,437 (4,059) (4,075) (275) (3,696) 13,421 3,391 (1,541) (3,801) 3,791 6,594
Inflow from equity raise/dividend outflow (355) (357) (150) (175) (575) (11) (411) (614) (1,558) (5) (4,211)
Increase/ (decrease) in net debt (3,082) 4,416 4,224 450 4,271 (13,410) (2,980) 2,155 5,359 (3,786) (2,383)
Exhibit 540: KEC’s leverage has declined gradually, driven by improved cash flows
Net Debt/Equity 0.9 1.3 1.7 1.4 1.5 1.2 0.8 0.6 0.8 0.5 1.1
Net Debt*/EBITDA 3.6 5.1 4.5 7.0 5.7 4.7 4.1 3.8 3.8 4.0 4.6
Source: Company, Centrum Broking; *: includes mobilization advances and acceptances
Exhibit 541: Strong return ratios; moderation in FY14-16 due to losses in new businesses
RoE 20.5% 5.8% 7.3% 2.1% 10.4% 19.7% 25.6% 21.9% 21.6% 18.0% 15.3%
RoCE pre-tax* 16.4% 10.7% 12.6% 9.9% 10.6% 12.6% 15.0% 15.5% 14.7% 12.8% 13.1%
RoCE* 10.8% 4.8% 6.3% 2.1% 5.4% 8.4% 10.2% 10.3% 10.6% 9.4% 7.8%
Source: Company, Centrum Broking; *: Capital employed includes mobilization advances and acceptances
Moderation due to losses

in SAE business

KEC International (KEC) 16 September 2021
P&L Balance sheet

EBIT 10,328 10,872 9,887 10,120 14,203 Def tax liab. (net) 1,497 527 (68) (668) (1,068)
Taxes 2,571 2,248 2,032 1,928 3,124 Net block 11,824 13,518 13,975 14,255 14,778
Ratios Loans & advances 424 1,130 1,129 799 1,336
Growth (%)
Trade payables 48,009 50,073 61,840 66,882 74,091
Revenue 9.4 8.8 9.6 11.2 11.5
Gross 26.8 29.0 26.8 26.6 28.3
EBITDA 10.5 10.3 8.7 8.1 10.0 Cashflow
ROE 21.9 21.6 18.0 16.1 20.2 Net Interest 3,119 3,080 2,627 2,650 2,845
ROCE 12.0 12.4 11.1 11.1 13.8 Net Change – WC (5,416) (6,565) (138) (3,734) (5,077)
Gross block turnover ratio (x) 7.7 7.0 6.7 6.8 6.8 Capital expenditure (690) (3,642) (1,137) (2,000) (2,500)
Inventory 29 30 31 30 31 Investments 261 (93) 214 0 0
Creditors 214 211 213 219 221 Others (5) (901) 399 0 0
Net working capital 107 115 108 104 104 Net cash from investing (434) (4,636) (524) (2,000) (2,500)
Solvency (x) FCF 3,449 (1,601) 8,962 3,819 5,291
Interest coverage ratio 3.7 4.0 4.3 4.5 5.7 Increase/(decrease) in debt 732 5,338 (4,451) (1,000) (1,000)
Net debt/EBITDA 2.4 2.7 2.8 2.8 2.1 Dividend paid (614) (1,558) (1,028) (1,041) (1,520)
BVPS 94.7 108.8 130.7 149.1 176.1 Net cash from financing (3,000) 700 (8,107) (4,691) (5,365)
CEPS 23.8 27.7 27.4 29.2 40.5 Net change in Cash 449 (901) 855 (871) (74)
Dividend payout (%) 14.0 15.5 18.6 18.0 18.0
Valuation (x)
P/E 16.6 13.3 14.8 19.0 12.9
P/BV 3.3 2.7 2.4 2.9 2.4
EV/EBITDA 8.4 7.9 8.6 10.6 7.7
Dividend yield (%) 0.9 1.2 1.3 0.9 1.4

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
KNR Constructions (KNR) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
KNR’s 10-year financials exemplify how a difficult business like construction can also Market data
generate value if run well. Operating cash flows have been positive for 9 out of 10 Current price: Rs309
years and have more than adequately funded capex and equity investments in Bloomberg: KNRC IN
BOT/HAM assets. Working capital intensity has remained low-to-moderate, with the 52-week H/L: Rs344/114
recent increase driven by post-Covid rise in receivables for Telangana irrigation Market cap: Rs86.9bn
projects. Leverage has consistently remained low, reflecting efficient project Free float: 46.8%
management and disciplined capital allocation. RoE has normalized from its peak,
led partly by discontinuation of MAT regime, but remains remunerative at 15-16%.
Source: Bloomberg
Consistent cash generation: KNR’s operating profits have been robust and have consistently expanded over the last 10 years.
While working capital intensity has increased over the last 2-3 years, it is well under control and in line with industry
standards. KNR’s cash flow from operations has remained strong and consistent for large part of FY12-21.
Exhibit 542: Generated positive cash flow from operations in 9 out of 10 years
6,000 Higher irrigation
receivables
4,500
3,000
Rs mn
1,500
(1,500)
(3,000)
Working capital levels remained low to moderate: Working capital levels declined materially starting FY16, led by fall in
receivables and sharp rise in advances from clients. However, since FY19, we have seen a rise in the share of irrigation
revenues (~23% in FY18 to ~30% in FY21), primarily from the Telangana government, which typically come without
mobilization advances. KNR also delays or avoids taking mobilization advances from its HAM project SPVs in order to save IDC
in the assets and it also uses its strong liquidity position at the parent level. Receivables from Telangana irrigation projects
have remained elevated post Covid (Rs5bn in Mar-21), though intermittent payments keep overall exposure within control.
Exhibit 543: Working capital levels have normalised from very low levels; remain in control
94
100 86
79
74
75 60
51
42 44
days
50
25 11
5
-
Rise in share of irrigation revenue to 30% in FY21 from

23% in FY18 - no mobilization advances and elongated
receivables leads to rise in working capital levels
KNR Constructions (KNR) 16 September 2021
Exhibit 544: EBITDA to CFO conversion of 68% in FY12-21 Exhibit 545: PAT to CFO conversion of 118% over 10 years
191% 190%
200% 200%
170%
159% 151%
150% 130% 150%
110%
90% 93%
100% 82% 100% 84%
75%
52% 50% 53%
44% 37%
50% 50%
0% 0%
-8% -19%
-50% -50%
Capex and investments funded by internal cash generation: Total operating cash flows of Rs18.4bn over FY12-21 have
adequately funded capex of Rs10.6bn and equity investment of Rs4.9bn in BOT/HAM assets (net of monetization proceeds of
Rs3.1bn). This has led to positive FCF generation of Rs2.9bn over this period.
Exhibit 546: Capital commitments fully funded by operating cash flows, leading to deleveraging
4,000
3,000
2,000
1,000
Rs mn
-1,000
-3,000 Proceeds of Rs3.1bn from
CFO (Rs mn) Capex (Rs mn) Acquisitions and Investments (Rs mn) Net FCF (Rs mn) sale of Walayar BOT asset
Exhibit 547: Strong cash flows and asset monetization proceeds have helped KNR become debt free
FCF 560 (691) 392 324 (133) (188) (487) (678) 697 3,133 2,930
Inflow from equity raise/ dividend outflow (65) (33) (33) (33) (68) - (85) (68) (153) - (537)
Increase/ (decrease) in net debt (495) 724 (359) (291) 200 188 571 746 (545) (3,133) (2,393)
Exhibit 548: Leverage has been consistently low

Net Debt/Equity 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.2 0.1 (0.1) 0.1
Net Debt*/EBITDA 0.9 1.7 1.3 1.1 1.8 1.7 1.0 0.8 0.7 0.1 1.1
Exhibit 549: Return ratios normalized from peak levels, but strong, nevertheless
RoE 13.8% 12.1% 12.6% 13.3% 16.9% 20.6% 26.5% 20.7% 13.5% 15.7% 16.6%
RoCE pre-tax* 16.5% 13.1% 12.5% 11.9% 15.5% 16.7% 20.2% 19.4% 16.7% 22.1% 16.4%
RoCE* 11.1% 10.2% 11.4% 12.0% 14.0% 16.1% 20.5% 17.6% 12.9% 15.5% 14.1%
Strong revenue growth, Discontinuation of MAT,

higher asset turn and high capex/lower asset turn
margin improvement

KNR Constructions (KNR) 16 September 2021
P&L Balance sheet

Employee cost 929 1,252 1,390 1,473 1,768 Shareholders fund 14,143 16,239 18,678 21,569 26,055
EBITDA 4,270 4,690 5,434 5,815 7,940 Total debt 2,641 2,297 7 0 0
Taxes 273 601 1,176 1,514 1,588 Net block 4,339 4,464 4,051 4,207 4,541
Extraordinary items (25) 208 (306) 0 0 Inventories 951 1,232 1,480 1,345 1,844
Cash & Cash Equivalents 130 330 1,173 1,479 994
Growth (%)
Trade payables 2,236 2,511 2,397 3,767 5,164
Revenue 10.6 3.9 21.7 15.0 37.0
Gross 26.1 29.2 27.5 25.7 25.1
EBITDA 20.0 21.1 20.1 18.7 18.6 Cashflow
ROE 20.7 13.5 15.7 14.7 19.8 Net Interest 291 474 487 355 372
ROCE 17.6 12.9 15.8 14.6 19.1 Net Change – WC (1,992) (530) (2,111) 596 (1,872)
Gross block turnover ratio (x) 2.0 1.7 2.0 2.0 2.5 Capital expenditure (2,086) (2,145) (939) (1,500) (2,000)
Inventory 19 25 25 22 18 Investments (844) (949) 2,250 (3,446) (2,931)
Creditors 51 55 46 49 51 Others 158 306 (336) 76 0
Net working capital 77 86 111 92 78 Net cash from investing (2,773) (2,787) 975 (4,870) (4,931)
Solvency (x) FCF (437) 1,085 3,703 738 (42)
Net debt-equity 0.2 0.1 (0.1) (0.1) 0.0 Issue of share capital 0 0 0 0 0
Interest coverage ratio 14.7 9.9 11.2 16.4 21.3 Increase/(decrease) in debt 523 (344) (2,290) (7) 0
Net debt/EBITDA 0.6 0.4 (0.2) (0.3) (0.1) Dividend paid (59) (66) (82) (70) (70)
BVPS 50.3 57.7 66.4 76.7 92.6 Net cash from financing 173 (884) (2,859) (432) (443)
CEPS 15.4 14.1 15.2 15.3 22.7 Net change in Cash (264) 200 843 306 (485)
Dividend payout (%) 2.1 3.1 2.8 2.4 5.0
Valuation (x)
P/E 12.2 17.3 13.8 29.4 18.4
P/BV 2.3 2.2 2.1 4.0 3.3
EV/EBITDA 8.2 8.0 7.0 14.7 10.8
Dividend yield (%) 0.1 0.1 0.1 0.1 0.3

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
Larsen & Toubro (L&T) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
L&T’s standalone operating cash flows, while growing at a muted pace over the last Market data
10 years, have been consistently positive. Working capital levels have ranged from Current price: Rs1,721
80 to 100 days, within the average range for the industry. FCF has shown an Bloomberg: LT IN
improving trend since FY15, led by L&T’s decision to not invest in PPP assets as well 52-week H/L: Rs1,729/826
as due to monetization of several existing investments. Acquisition of 60% stake in
Mindtree in FY20 was the only exception to this trend. Leverage has remained under
control throughout the period on the back of consistent cash generation. Return Free float: 68.6%
ratios though have moderated post FY14 owing to moderation in margins and drag Avg. daily vol. 3mth: 2,430,782
due to investments in Hyderabad Metro, power generation and forgings business. Source: Bloomberg
Analysis of operating cash flows: Operating profits have grown at a muted 2.3% CAGR over FY12-21. Operating cash flows,
however, rose fairly consistently or at least remained steady till FY19, with working capital remaining within the range of 80-
100 days. FY20 saw a sharp deterioration in operating cash flows due to sharp rise in unbilled revenue with the impact on
execution caused by outbreak of Covid in Mar-21. FY21, on the other hand, saw a significant release of working capital,
leading to sharp rebound in operating cash flow. CFO over FY12-21 was Rs349bn.
Exhibit 550: Operating cash flows (standalone) had been weakening since FY18 but witnessed a strong rebound in FY21
90
60
30
Rs bn
-
(30)
(60) Sharp drop in receivables +

higher creditors
(90)
Operating profit before wcap changes (Rsbn) Wcap changes (Rsbn) CFO (Rsbn)
Analysis of working capital movement: Over FY12-16, L&T’s working capital increased sharply from very low levels of 27
days in FY12 to 101 days in FY16. After remaining benign in FY17 at 84 days, it again climbed back to 114/103 days in FY20/21
owing to rise in advances to contractors, as L&T extended support to its vendors before and during the pandemic.
Exhibit 551: NWC (standalone) has risen in last 2-3 years, but under control and in line with industry standards
200 Increase in payables and
Sharp rise in unbilled revenue, retentions
and advances to contractors customer advances
150
Days
100 87 103
84 114
96 101
81 86
50
50
27
-
Larsen & Toubro (L&T) 16 September 2021
Exhibit 552: EBITDA to CFO conversion moderate at 52% over FY12-21
Standalone Rs bn CFO PAT EBITDA CFO/PAT CFO/EBITDA
FY12-21 349 613 667 57% 52%
Analysis of free cash flow: L&T has generated CFO of Rs349bn over FY12-21, which has completely funded the capex and
investments of Rs168bn (capex of Rs93bn and net investments/acquisitions of Rs75bn). This resulted in positive FCF
generation of Rs181bn over FY12-21.
Exhibit 553: CFO of Rs349bn over FY12-21 sufficed for capex and investment (net of monetization) requirements
200
Sale of electrical business
150 resulted in post tax cash
100 inflow of Rs109bn
50
Rsbn
0
-100 Acquisition of
-150 Mindtree for Rs96bn
CFO (Rsbn) Capex (Rsbn) Acquisitions and Investments (Rsbn) Net FCF (Rsbn)
Exhibit 554: Free cash generation of Rs181bn utilized to pay dividends consistently over FY12-21
Rsbn FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY12-21
FCF (17) (3) (29) 10 11 76 28 63 (123) 165 181
Inflow from capital raise/ (dividend outflow) (8) (10) (11) (13) (16) (18) (22) (26) (41) (36) (201)
Increase/ (decrease) in net debt 26 13 40 3 4 (58) (6) (37) 164 (129) 20
Exhibit 555: Leverage under control throughout the last 10 years

Net Debt/Equity 0.1 0.1 0.2 0.2 0.1 0.0 0.1 0.0 0.3 0.0 0.1
Net Debt*/EBITDA 1.8 2.0 2.0 2.3 3.1 2.1 2.3 2.1 4.5 2.1 2.4
Source: Company, Centrum Broking; *: includes mobilization advances and acceptances
Exhibit 556: Return ratios have moderated post FY14 owing to weak margins and slower growth
RoE 18.8% 15.8% 16.1% 13.3% 11.0% 10.2% 10.4% 11.8% 11.8% 10.3%^ 13.0%
RoCE (pre-tax)* 18.8% 14.7% 15.7% 13.7% 11.1% 10.3% 11.5% 13.5% 11.1% 10.1% 13.1%
RoCE* 13.2% 10.7% 11.5% 10.1% 8.6% 8.0% 8.4% 9.4% 9.3% 7.8% 9.7%
Source: Company, Centrum Broking; *: Capital employed includes mobilization advances and acceptances ^adjusted for gain from E&A sale net of other impairments
Exhibit 557: Performance of key subsidiaries

Loans and Investments Profit/(Loss)
Rsbn
FY21 FY21 FY20
Mindtree 95.7 11.1 6.3
LTI 1.1 17.9 15.5
LTTS 8.1 6.7 7.9
LTFH 53.8 1.2 2.7
Power development 22.8 (5.6) (1.1)
L&T Metro Rail (Hyderabad) Limited 53.8 (17.7) (3.8)
L&T Seawoods Limited 16.5 0.5 0.4
L&T Hydrocarbon Engineering Limited 15.0 8.3 9.4
L&T Uttaranchal Hydropower Limited 8.4 (7.4) (0.1)
L&T Infrastructure Development Projects Limited 10.2 (0.5) (0.2)
L&T Special Steels and Heavy Forgings - (12.0) (2.2)
Total of the above 285.4 2.4 34.7

Larsen & Toubro (L&T) 16 September 2021
P&L Balance sheet

Operating Expense 956,330 973,627 867,009 999,104 1,163,885 Reserves & surplus 620,943 664,424 755,876 816,478 893,701
EBITDA 153,296 163,290 156,241 181,079 217,761 Total debt 1,255,552 1,410,071 1,326,053 1,270,322 1,260,322
EBIT 134,066 138,667 127,199 150,968 184,637 Def tax liab. (net) (31,078) (23,935) (15,183) (19,183) (24,183)
Taxes 43,433 34,919 65,552 47,045 55,308 Net block 193,670 334,155 342,308 349,917 341,793
Minority/Associates (13,325) (12,733) (12,626) (14,533) (18,638) Non Current Assets 913,246 963,246 888,246 888,246 918,246
Extraordinary items 2,948 0 45,204 0 0 Inventories 64,139 57,467 58,205 61,619 66,712
Growth (%)
Trade payables 429,948 436,439 455,046 410,343 449,118
Revenue 12.8 7.6 (6.5) 15.1 13.0
Gross 29.3 33.1 36.2 36.2 34.2
EBITDA 11.3 11.2 11.5 11.6 12.3 Cashflow
ROE 14.6 14.8 9.9 11.0 12.5 Net Interest 18,026 27,967 39,134 33,340 33,840
ROCE 5.4 5.6 3.9 5.2 6.1 Net Change – WC 18,255 (39,802) 53,304 (45,690) (26,872)
Inventory 21 23 24 22 20 Investments (58,090) 10,738 (195,802) 0 (7,500)
Creditors 154 162 188 158 135 Others (154,159) (70,798) 101,225 (5,350) (37,350)
Solvency (x) FCF (98,370) (76,882) 172,417 97,684 100,845
Net debt-equity 1.6 1.7 1.3 1.2 1.0 Issue of share capital (1,101) 13,514 12,537 0 0
Interest coverage ratio 8.5 5.8 4.0 5.4 6.4 Increase/(decrease) in debt 180,311 154,520 (84,019) (55,731) (10,000)
BVPS 441.7 475.3 540.2 583.3 638.3 Net cash from financing 135,307 110,797 (161,180) (115,208) (73,583)
CEPS 75.1 85.6 71.0 83.2 99.7 Net change in Cash 36,937 33,915 11,237 (17,525) 27,262
Dividend payout (%) 25.1 26.5 43.7 30.1 27.8
Valuation (x)
P/E 21.7 19.8 21.4 27.9 22.6
P/BV 3.0 2.8 2.0 3.0 2.7
EV/EBITDA 13.2 12.9 11.5 19.6 16.1
Dividend yield (%) 1.0 1.1 2.2 1.1 1.2

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
NCC Ltd (NCC) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
NCC’s 10-year cash flows reflect the burden of its legacy investments in land and Market data
power plant. They also reflect the stress faced by construction companies during Current price: Rs83
2010-2014 due to delayed approvals and cost increases. Operating cash flow, and Bloomberg: NJCC IN
hence, FCF has largely remained weak, though we have seen an improvement in 52-week H/L: Rs100/30
these over the last two years. Negative FCF has been almost entirely funded through
equity issuances, leading to leverage remaining in control. Working capital levels are
elevated due to sticky exposures (Sembcorp arbitration and AP unpaid dues) while Free float: 80.3%
incremental execution is supported by regular payments. Net debt declined Rs3.4bn Avg. daily vol. 3mth: 5,273,902
over FY20-21, led partly by equity infusion by promoters in FY20. Source: Bloomberg
Cash conversion weak historically; some improvement lately: NCC witnessed considerable stress during FY11-14, led by
sluggish execution and cost increases, leading to weak operating profits. Operating profits have recovered since, but cash
conversion was weak. FY20 and FY21 witnessed improved cash conversion on incremental execution, but we are still to see
any material release of older working capital, despite lower revenue and operating profits.
Exhibit 558: Operating cash flows have been weak until recently
10,000
6,000
Rs mn
2,000
(2,000) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
(6,000)
(10,000)
Working capital levels have been moderate to high: Working capital levels have remained largely at elevated levels, with
intermediate moderation in some years. Specifically, working capital levels remain impacted by (i) encashment of BG,
overdue receivables, and retentions related to dispute with Sembcorp totalling to ~Rs7bn, (ii) outstanding exposure of
Rs7.1bn in AP projects, and (iii) decline in revenue by 40% from peak revenue of Rs121bn in FY21.
Exhibit 559: Working capital levels have spiked due to large sticky receivables amid sharp drop in revenue
220
205
163 167
160
119 137
Days
115 108 117

108
94
100 84
40
BG of Rs3.4bn encashed Unpaid AP exposure of

by Sembcorp + Rs4bn of Rs7.1bn (Mar-21) and
receivables & retentions sharp drop in revenue
NCC Ltd (NCC) 16 September 2021
Exhibit 560: EBITDA to CFO conversion weak Exhibit 561: PAT to CFO conversion of 42% over 11 years
200% 150%
150% 120%
100% 90%
50% 60%
0% 30%
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
-50% 0%
FY11*
FY12*
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
-100% -30%
-150% -60%
Source: Company, Centrum Broking Source: Company, Centrum Broking; *: values not included as they were out of range
Free cash flows weak due to low CFO amid capex and investments: Total operating cash flow of Rs10.1bn over FY12-21 has
been hugely inadequate to fund capex of Rs17.4bn and equity investment (net) of Rs4.8bn in BOT and Power assets as well as
in real estate subsidiaries. This has led to negative FCF of Rs12.1bn over this period, which was largely funded with fresh
equity raise of Rs12.7bn. Net debt over this period reduced by Rs540mn.
Exhibit 562: FCF in the negative zone historically, but seeing some reversal in recent years
7,500
5,000
2,500
-
Rs mn
(2,500)
(5,000)
(7,500)
(10,000)
Exhibit 563: Negative FCF of Rs12.1bn was almost entirely funded with fresh equity raise
Rs mn FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY11-21
FCF (9,908) 2,230 334 (6,208) (648) 2,411 2,406 (2,814) (3,555) 978 2,697 (12,077)
Inflow from equity raise/dividend outflow (389) (298) (89) 3,600 5,881 (263) (402) 5,145 (450) (263) 143 12,617
Increase/ (decrease) in debt 10,297 (1,932) (245) 2,609 (5,234) (2,148) (2,004) (2,331) 4,005 (716) (2,840) (540)
Exhibit 564: Leverage has remained low-to-moderate, despite weak cash flows due to timely fund raise
Leverage ratios (x) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY11-21 Average
Net Debt/Equity 1.0 0.9 0.9 1.0 0.6 0.5 0.4 0.3 0.4 0.3 0.3 0.6
Net Debt*/EBITDA 6.2 8.2 6.6 9.1 5.2 3.7 3.4 3.7 2.5 3.2 3.7 5.0
Source: Company, Centrum broking; *: includes mobilization advances and acceptances
Exhibit 565: Return ratios remained weak, led by lower margins, impairments and burden of unproductive investments
Return Ratios (%) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY11-21 Average
RoE 7.1% 1.5% 2.6% 1.6% 4.2% 9.2% 7.5% 10.3% 13.8% 6.9% 5.0% 6.4%
RoCE pre-tax* 8.7% 7.7% 8.8% 7.8% 11.6% 14.0% 12.0% 13.1% 17.8% 11.8% 9.1% 11.1%
RoCE* 5.4% 5.2% 5.7% 5.2% 8.1% 10.9% 9.7% 10.8% 11.9% 8.2% 7.1% 8.0%
Source: Company, Centrum broking; *: includes mobilization advances and acceptances
Revenue/margin expansion with NWC/CE RoE remained low due to equity issuances Surge in operations led by AP
remaining flat. Rise in income from loans (used for debt repayment), rise in tax projects followed by a very
to subsidiaries (but low cash conversion). rates, and impairments. sharp dip.

NCC Ltd (NCC) 16 September 2021
P&L Balance sheet

EBIT 12,736 8,529 6,804 9,380 12,941 Def tax liab. (net) (1,726) (2,055) (411) (411) (411)
Other income 1,183 1,513 1,156 824 890 Gross block 21,802 22,565 24,567 26,567 28,567
Taxes 3,178 1,444 771 1,432 2,219 Net block 13,098 12,597 12,858 12,966 12,923
Growth (%)
Trade payables 44,923 39,830 37,134 47,460 61,615
Revenue 59.8 (32.0) (11.7) 38.0 30.0
EBITDA 66.5 (27.6) (17.1) 31.9 32.9 Provisions 617 857 1,021 1,217 1,578
Gross 17.8 21.0 19.1 17.2 16.8
EBITDA 11.8 12.5 11.8 11.3 11.5 Cashflow
ROE 13.8 6.9 5.0 7.6 10.8 Net Interest 4,513 5,179 4,578 4,514 5,014
ROCE 11.5 8.1 6.9 8.3 10.4 Net Change – WC (7,985) (1,952) (3,311) (3,209) (7,887)
ROIC 12.3 8.0 7.0 9.1 11.6 Direct taxes (3,087) (1,731) (74) (1,432) (2,219)
Inventory 41 29 32 25 23 Investments 2,313 (684) 1,750 0 0
Creditors 147 238 239 186 184 Others 574 (1,049) 0 0 0
Net working capital 131 206 242 194 168 Net cash from investing (2,751) (3,021) 234 (2,000) (2,000)
Solvency (x) FCF 1,000 5,513 6,551 5,454 3,768
Net debt-equity 0.4 0.3 0.3 0.2 0.2 Issue of share capital 0 1,098 0 266 797
Interest coverage ratio 3.2 2.0 1.9 2.5 3.0 Increase/(decrease) in debt 6,930 (829) (1,212) 1,000 0
Net debt/EBITDA 1.2 1.5 1.6 1.1 0.9 Dividend paid (1,086) (147) (488) (488) (669)
CEPS 12.9 8.6 7.1 10.1 14.0 Net change in Cash 2,331 456 273 1,718 (1,119)
Dividend payout (%) 16.0 3.2 18.7 11.5 10.1
Valuation (x)
P/E 9.2 11.7 10.4 12.2 7.9
P/BV 1.2 0.8 0.5 0.9 0.8
EV/EBITDA 5.2 5.4 4.8 5.6 4.3
Dividend yield (%) 1.6 0.3 1.8 1.0 1.3

16 September 2021
Ashish Shah
+91 22 4215 9021
Vaibhav Shah
PNC Infratech (PNC) Research Associate, Infrastructure

+91 22 4215 9815
[email protected]
PNC’s cash flows over last 10 years reflect its good project management skills along Market data
with its focus on conserving balance sheet integrity. Operating profits have grown Current price: Rs370
consistently and working capital levels have been maintained at an average of 83 Bloomberg: PNCL IN
days over this period. Operating cash flows of Rs26.8bn have completely funded the 52-week H/L: Rs389/147
capex requirements and equity investments. Balance sheet has remained thinly-
Market cap: Rs95bn
levered throughout this period with average Net Debt/Equity at 0.1x and Net
Debt/EBITDA at 1.3x. Average RoE has been 13.8% over the 10-year cycle, with FY21 Free float: 43.9%
RoE at 13.3% being impacted due to adverse impact of Covid on execution. Avg. daily vol. 3mth: 1,212,496
Source: Bloomberg
Operating cash flows have been strong: Led by fairly consistent growth in operating profits, PNC’s cash flows from
operations have been strong, especially during the last 3-4 years. There was considerable release of working capital in end-
FY20 due to the government’s liquidity push in response to Covid. Over FY12-21, PNC’s cumulative operating profits were
Rs27.6bn while CFO was Rs26.8bn with working capital absorption of Rs836m.
Exhibit 566: Operating cash flows of Rs26.8bn over FY12-21
10,000 Liquidity stimulus in
7,500 response to Covid
5,000
Rs mn
2,500
-
(2,500)
(5,000)
Working capital management has been good: PNC’s working capital cycle has been at 83 days on an average over FY12-21,
in line with the industry standard of 80-100 days. However, over the last three years, NWC has declined sharply. Particularly,
in FY20, NWC came down to 16 days, led by substantial release of liquidity by government clients in Mar-21 as a Covid relief
measure and also due to draw down of mobilization advances in several projects. Share of EPC revenue from HAM projects
increased to an average of 45% during FY18-20 vis-à-vis 8% in FY17, giving better ability to control NWC levels.
Exhibit 567: Historical NWC levels in line with industry standards
150
Decline aided by
120 Covid relief measures
in Mar-20
90
69
days
51 48 49 53
60 43
39
24 19 19
30
-
Trade receivables (days) Trade payables (days) Mobilization (days) NWC (ex cash ex L&A)
EPC revenue from own HAMs at
45% (8% in FY17), giving better
control on NWC
PNC Infratech (PNC) 16 September 2021
Exhibit 568: EBITDA to CFO conversion at 80% over FY12-21 Exhibit 569: PAT to CFO conversion at 124% in FY12-21
139% 294%
150% 300%
117% 121% 123% 239%
99% 204%
100% 200%
154%
139%
42% 45% 47% 88%

50% 100%
48% 47%
14% 30%
0% 0%
-26% -51%
-50% -100%
Growth funded by operating cash flows: PNC generated operating cash flows of Rs26.8bn over FY12-21, which completely
funded its total capex requirements (Rs11.4bn) and equity investments (Rs13.2bn) in assets. FCF stood at Rs2.1bn over this
period. Net debt declined by Rs5.3bn from Rs627m (net debt) in Mar-11 to net cash of Rs4.7bn in Mar-21.
Exhibit 570: Operating cash flows completely funded capital commitments; FCF at Rs2.1bn over FY12-21
10,000
8,000
6,000
4,000
Rs mn
2,000
-
(2,000)
(4,000)
Exhibit 571: Positive FCF and IPO proceeds helped unwinding of debt
FCF (1,701) 209 406 (1,478) (142) (1,866) 1,467 (274) 5,703 (213) 2,110
Inflow from equity raise/dividend outflow - (35) - (93) 4,079 (161) (161) (155) (309) - 3,166
Increase/ (decrease) in net debt 1,701 (175) (406) 1,571 (3,937) 2,027 (1,306) 429 (5,393) 213 (5,276)
Exhibit 572: PNC has always remained thinly-levered

Net Debt/Equity 0.5 0.4 0.3 0.4 (0.1) 0.1 0.0 0.0 (0.2) (0.1) 0.1
Net Debt*/EBITDA 2.4 1.9 2.8 2.4 0.7 1.4 0.4 1.1 0.4 (0.2) 1.3
Exhibit 573: Average RoE of 13.8% over FY12-21

RoE 17.3% 14.5% 11.2% 14.8% 18.5% 12.5% 9.5% 12.3% 14.1% 13.3% 13.8%
ROCE pre-tax* 19.8% 15.2% 12.4% 16.2% 16.0% 12.0% 10.4% 15.4% 18.0% 17.8% 15.3%
RoCE* 13.2% 10.2% 8.1% 11.0% 16.1% 11.4% 9.5% 11.7% 12.6% 11.6% 11.5%

PNC Infratech (PNC) 16 September 2021
P&L Balance sheet

EBIT 3,398 5,289 5,604 6,867 8,120 Def tax liab. (net) (5) 0 0 (125) (125)
Interest expenses 641 1,144 771 810 957 Total liabilities 24,894 28,732 33,060 37,518 42,954
Taxes 773 1,391 1,966 2,010 2,218 Net block 6,155 5,880 6,557 6,469 6,477
Growth (%)
Trade payables 4,737 4,675 7,194 5,077 6,230
Revenue 70.8 55.3 3.3 21.0 19.2
Gross 31.2 29.3 29.0 29.2 29.0
EBITDA 14.1 13.7 13.7 13.8 13.5 Cashflow
ROE 12.3 14.1 13.3 15.0 15.3 Net Interest 641 1,144 771 810 957
ROCE 11.7 12.6 11.6 13.6 13.9 Net Change – WC 507 3,549 (1,379) (7,608) (1,537)
Gross block turnover ratio (x) 3.6 5.0 4.3 4.7 5.0 Capital expenditure (2,858) (822) (1,820) (1,250) (1,500)
Creditors 81 51 62 53 41 Others (121) (142) 144 0 0
Solvency (x) FCF 370 6,709 854 (3,523) 1,787
Net debt-equity 0.0 (0.2) (0.1) 0.0 0.0 Issue of share capital 0 0 0 0 0
Interest coverage ratio 6.7 5.7 8.7 10.1 10.0 Increase/(decrease) in debt 2,047 (482) 709 0 0
Net debt/EBITDA 0.2 (0.6) (0.6) 0.1 0.0 Dividend paid (155) (154) (128) (128) (128)
Per share (Rs) Interest paid (641) (1,144) (771) (810) (957)
BVPS 82.5 99.3 113.4 131.2 152.4 Net cash from financing 1,252 (1,780) (190) (939) (1,086)
CEPS 13.0 17.7 18.5 23.6 27.5 Net change in Cash 1,621 4,930 664 (4,461) 702
Dividend payout (%) 3.9 2.8 3.5 2.7 2.3
Valuation (x)
P/E 16.1 14.1 11.9 20.2 17.1
P/BV 1.8 1.8 1.5 2.8 2.4
EV/EBITDA 9.2 6.4 5.9 11.7 9.9
Dividend yield (%) 0.3 0.3 0.3 0.1 0.1

16 September 2021
Ashish Kejriwal
Research Analyst, Metals & Mining
+91 22 4215 9855
SECTOR: METALS & MINING [email protected]
Kunal Kothari
Research Associate, Metals & Mining
APL Apollo (APAT) +91 22 4215 9375

[email protected]
APAT has consistently grown (capacity expanded at 20% CAGR over FY12-21) and Market data
gained leadership in the structural tubes industry, with >50% market share. Despite Current price: Rs956
consistent volume growth, its operating cash flows have fluctuated through the Bloomberg: APAT IN
commodity cycle. Shift towards value-added products from FY20 has helped 52-week H/L: Rs1,050/230
operating cash flows to improve. APAT changed from credit to cash sales model from
FY21 and improved inventory management, which led to a decline in net working
capital from an average of 46 days over FY12-21 to 18 days in FY21. It has mastered Free float: 63.1%
turning around acquired assets, though its last acquisition was expensive. Return Avg. daily vol. 3mth: 626,170
ratios have remained robust, with average RoE of 19.7% and RoCE of 20.9% (FY12-21). Source: Bloomberg
Operating cash flows have fluctuated with commodity cycle: Despite consistent growth in sales volumes, we observe OCF has
fluctuated with commodity cycle. In FY21, we observe a shift in profitability owing to premiumization and better cost control,
which may lead to higher cash flows. We observe consistent reduction in working capital, with better control on inventory,
changing business model from credit to cash sales, and increasing payable days with increasing business size.
Exhibit 574: Operating cash flows fluctuate with commodity cycle
VAP volume growth, premiumization,

Despite increasing volume over FY12-19, OCF movement and cost control led to OCF growth
6000 has been directed by steel cyclicality
5,096
4000
3,576
3,148 3,154
Rs in mn
2000
373 256 1,327 113
41 914
0
-2000
-4000
Operating profit before Wcap Changes W Cap Changes CFO
Consistent decline in working capital over FY12-21: Net working capital (NWC) has been on a downward trend since FY12.
Receivables were largely under control (average at 28 days over FY12-19), and with change from credit sales to cash sales,
NWC fell further to 13 days in FY21. APAT has also cut inventory from 49 days in FY17 to 33 days in FY21. With increasing
business size, it has gained some influence over creditors too, which allows higher credit steel HRC purchases. As a result, NWC
declined from an average of 34 days over FY17-21 to 18 days in FY21.
Exhibit 575: NWC days on a downward trend
80 74 Inventory, which had spiked to 49 days in
68 FY17, reduced to 33 days in FY21 Change from credit to cash sales and low
70 65
inventory resulted in lower NWC in FY21
60
No of Days
50 45
37 47 40
40
35
30 30
20 17
10
0
Inventories Receivables Payable Net Working capital
APL Apollo (APAT) 16 September 2021
Exhibit 576: OCF/EBITDA has fluctuated widely Exhibit 577: OCF/PAT
200 600
173
494
160 500
107 400
120 95 91
81 300
%
241
%
225 207
80 199
200
32 25 76
40 16 100 58
37
4 4 8 11
0 0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Capacity expansions and acquisitions led to poor conversion of operating cash to free cash: APAT expanded capacity by 5.3x
to 2.6mtpa over FY12-21, leading to largely negative free cash flows. From FY19, APAT decided to expand only via internal
accruals, which helped in debt peaking in FY19. Despite acquiring Apollo Tricoat and Taurus Value Steel & Pipes in FY20, we
observe positive free cash flows during FY19-21. Against OCF of Rs20.6bn over FY12-21, APAT incurred capex of Rs17.8bn and
invested Rs2.2bn in acquisition. This was funded by a mix of internal accruals, debt and equity. Net debt increased from Rs3bn
in FY12 to Rs8bn in FY19, which later reduced to Rs1.7bn in FY21.
Exhibit 578: On a continuous capex mode, with balance sheet under control
10000
8000 Capex spend for 5.3x capacity expansion over Since FY19, capex funded through internal
FY12-18 led to largely negative FCF accruals and higher OCF led to positive FCF
6000 6,279
Rs in mn
4000
2000
645 657 193 816
0
(560)
-2000 (738) (1,023) (1,839) (1,585)
-4000
CFO Capex Change in Invesment Net FCF
Acquisition of assets remunerative: APAT acquired Apollo Tricoat (55.8% stake as at March 2021) in FY20. With the
integration of a high-margin business, APAT’s overall profitability improved. The acquisition is value-accretive.
Exhibit 579: Acquisition of Apollo Tricoat turned out to be value-accretive
FY19 FY20 FY21
ROCE (%) 2.0 26.6 45.4
APL share in ROIC (%) 1.0 30.0 40.6
Leverage under control despite continuous capex; return ratios superior: Despite continuous expansion via
organic/inorganic route, APAT’s average Net Debt/Equity and Net Debt/EBITDA were comfortable at 0.9x and 2.1x,
respectively. However, with sharp increase in profitability in FY21, Net Debt/EBITDA fell to 0.3x. APAT has managed
its return ratios well. Over FY12-21, average return ratios remained robust, with RoE at 19.7% and RoCE at 20.9%.
Exhibit 580: Net Debt/EBITDA at 0.3x in FY21 against 10-year average of 2.1x
Leverage Ratio (x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
Net Debt/EBITDA 2.7 2.7 3.0 2.6 2.3 1.8 2.1 2.1 1.7 0.3 2.1
Exhibit 581: Over FY12-21, average return ratios remained robust, with RoE at 19.7% and RoCE at 20.9%
(%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
ROE 18.5 20.8 14.9 13.9 23.7 23.9 20.5 16.5 20.5 23.6 19.7
ROCE 19.5 20.9 17.2 17.2 23.5 22.9 22.4 19.8 19.7 26.3 20.9
Source: Company, Centrum Broking *ROCE is pre tax

APL Apollo (APAT) 16 September 2021
P&L Balance sheet

Others 3,439 5,252 5,266 7,411 7,203 Minority Interest 0 954 1,383 1,383 1,383
Depreciation & Amortisation 643 959 1,028 1,118 1,262 Non Current Liabilities 584 842 930 930 930
Taxes 787 403 1,381 2,106 2,591 Net block 10,078 15,681 15,964 16,846 18,833
Effective tax rate (%) 34.7 13.6 25.3 25.2 25.2 Capital WIP 275 101 1,077 1,327 327
Minority/Associates 0 (180) (475) (649) (756) Non Current Assets 1,744 960 1,550 2,126 2,135
Growth (%)
Trade payables 6,989 7,644 7,859 11,559 11,621
Revenue 34.1 8.0 10.1 47.1 0.5
Other current liab. 736 298 544 544 544
Adj. EPS (6.7) 54.0 50.6 (22.1) 23.8 Net current assets 7,156 6,547 5,576 7,006 12,322
Gross 11.8 14.8 15.7 14.7 16.0
ROE 16.5 20.5 23.6 28.8 27.5 Net Interest 1,105 1,073 661 0 0
ROCE 12.9 17.0 19.7 26.2 26.6 Net Change – WC 287 1,017 4,121 (2,568) (34)
ROIC 12.9 16.6 20.3 28.9 31.3 Direct taxes (673) (816) (1,195) (2,106) (2,591)
Inventory 35 37 33 29 35 Investments (390) (1,423) (462) 0 0
Creditors 28 35 33 28 34 Others 121 167 (3,137) 0 0
Solvency (x) FCF 1,207 2,003 6,902 2,561 6,681
Net debt-equity 0.8 0.5 0.1 0.0 (0.2) Issue of share capital 56 1,775 154 0 0
Interest coverage ratio 3.5 4.5 10.3 23.3 36.3 Increase/(decrease) in debt 830 (949) (3,111) (2,000) 0
Net debt/EBITDA 2.1 1.7 0.2 0.0 (0.4) Dividend paid (332) (411) 0 (1,122) (1,389)
Per share (Rs) Interest paid (1,014) (1,187) (623) 0 0
Adjusted EPS 12.4 19.1 28.8 22.5 27.8 Others (68) (6) (6) 0 0
CEPS 17.8 26.9 37.1 26.9 32.8 Net change in Cash 410 (32) (283) (562) 5,292
Dividend payout (%) 22.6 14.3 0.0 20.0 20.0
Valuation (x)
P/E 78.7 51.1 33.9 43.5 35.2
P/BV 12.1 9.0 7.2 11.1 8.6
EV/EBITDA 10.8 8.1 24.0 25.6 21.1
Dividend yield (%) 0.3 0.3 0.0 0.5 0.6

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Coal India (COAL) Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
COAL, being a cash-rich company, has been recording moderate cash flows except for Market data
the last two years, when debtors surged. Net working capital has largely been Current price: Rs162
negative till FY19. Cash conversion ratio has remained moderate in the last decade, Bloomberg: COAL IN
with average CFO/EBITDA of 67% during FY12-21. The entire capex of ~Rs609bn 52-week H/L: Rs165/110
during FY12-21 has been funded via internal cash flows and COAL has not raised any
equity. The company has been continuously paying high dividend (cumulatively paid
Rs218/share during FY12-21), which led net cash to decline to Rs24/share in FY21 Free float: 33.9%
from Rs93/share in FY12. Due to higher dividend payout and better profitability, Avg. daily vol. 3mth: 10,962,410
return ratios were high, with average RoE of 56% and RoCE of 72% over FY12-21. Source: Bloomberg
Operating cash flows hit by higher debtors in last two years: COAL’s continuous volume growth and stable profitability (except
for the last two years) helped it to generate moderate OCF throughout the cycle. Its cash flows were hit in FY20 due to higher
receivables from power discoms. Due to absence of debt and negative working capital (except for last two years), it generated
~Rs1,387bn OCF during FY12-21. Cash conversion ratio remained moderate (average CFO/EBITDA of 67% during FY12-21).
Exhibit 582: Moderate operating cash flows
COAL generated moderate OCF throughout the cycle,

400
but was hit in FY20-21 due to higher recievables
300
211
200 164
Rs in bn
198 145 144 167

91 114
100 41 113
-100
-200
Analysis of working capital movement: Net working capital (NWC) has largely been negative till FY19 due to other financial
liabilities and provisions. However, cash conversion cycle is on the higher side (average 51 days during FY12-21). Due to delay
in payments from state discoms, working capital got hit from FY20. Inventory has largely been stable at an average of 30 days.
Exhibit 583: Negative net working capital till FY19, post which higher debtors adversely impacted working capital
NWC negative till FY19, though cash Due to delay in payments from power
conversion cycle averaged at 51 days. discoms, NWC got hit from FY20.
80 69
48 56 53
60 42 41 47 40 38
40 26 22
No of Days
20
0 4
1 4 -3
-20 -1
-19
-40 -30 -35 -40
-60
Recievable Days Inventory Days Payable Days NWC
Coal India (COAL) 16 September 2021
Exhibit 584: OCF/EBITDA Exhibit 585: OCF/PAT
120 109 105 160

137
96 140
100 119
120 108
80 69 68 100
79 82 80
53 56 56 74
60 80 67
%
%
40
60 44
40
40
15 18
20 20
0 0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Low capex, no acquisition led to healthy free cash flows till FY19: During FY12-21, COAL spent ~Rs609bn to expand its mining
capacity, which includes land acquisition, machinery, etc. It has accelerated capex from FY21 to improve evacuation facilities
along with expanding capacities. The entire capex has been funded via internal accruals. As it has not acquired any company,
it generated high cash flows till FY19. However, cash flows were hit during FY20-21 on account of high debtors and lower
profits. It generated net free cash flows of Rs777bn during FY12-21.
Exhibit 586: Low capex till FY19; accelerating now
300 COAL generated high FCF till FY19, post which FCF
was hit due to high capex and recievables.
164
200 125
104
Rs in bn
95 78 93
66 59
100
(11) 4
0
-100
-200
CFO Capex Acquisition & Investments Net FCF
No equity raised in last 10 years; dividend payout higher than FCF – net cash has declined: COAL has not raised any equity
from the market. Being cash rich, it has been continuously paying higher dividend (even higher than free cash flows in many
years). During FY12-21, it paid ~Rs1,366bn dividend (Rs218/share), much higher than free cash flows of ~Rs777bn. This led net
cash to decline from Rs587bn (Rs93/share) in FY12 to Rs151bn (Rs24/share) in FY21, down Rs436bn.
Exhibit 587: High dividend-paying company Exhibit 588: Net cash/share has declined due to high dividend
300 700 120
250 242 208 600 100
Net Cash declined due
200 156 197 500 100 to dividend paid > FCF
93 80
89 generated
Rs/share
164 123
Rs in bn
150 112 400

77
Rs in bn
79 60
100 97 300
95 125 61
104 77 40
50 66 78 93 200 46 49 50
74 59 4
100 36 20
0
24
(11) 0 0
-50
FCF Dividend Paid Net cash (Rs bn - LHS) Net cash (Rs/share - RHS)
Return ratios healthy: COAL’s return ratios remain healthy (average RoCE of ~72% and RoE of 56% over FY12-21) due to
higher operating profits and higher dividend payout.
Exhibit 589: Return ratios are healthy
ROE 49.9 46.2 40.5 42.0 45.0 40.3 79.6 96.6 75.9 41.2 56.0
ROCE 65.1 61.7 56.8 60.5 63.6 54.8 87.8 127.0 88.5 49.1 72.0

Coal India (COAL) 16 September 2021
P&L Balance sheet

Revenues 928,961 893,733 827,103 949,772 1,027,982 Equity share capital 61,627 61,627 61,627 61,627 61,627
Taxes 96,625 73,710 53,071 53,818 63,413 Net block 285,391 323,024 377,537 421,567 458,757
Growth (%)
Trade payables 68,155 101,076 76,376 78,063 84,492
Revenue 14.6 (3.8) (7.5) 14.8 8.2
Gross 98.3 100.7 102.2 98.9 98.6
EBITDA 30.2 28.6 22.2 23.0 25.4 Cashflow
ROE 96.6 75.9 41.2 41.5 43.3 Net Interest (31,320) (29,642) (9,154) 0 0
ROCE 88.9 66.5 35.7 36.6 38.6 Net Change – WC (48,918) (123,268) (56,552) 73,050 85,282
ROIC (230.8) 1,079.8 84.3 57.5 56.0 Direct taxes (95,329) (119,463) (56,630) (53,818) (63,413)
Inventory 22 23 32 28 22 Investments (40,675) 24,871 96,392 0 0
Net working capital 95 161 160 107 97 Net cash from investing (82,658) 3,324 3,389 (138,478) (138,979)
Solvency (x) FCF 93,561 (10,590) (2,927) 121,061 170,948
Interest coverage ratio 109.3 54.6 31.1 40.0 47.6 Increase/(decrease) in debt 6,718 22,776 (5,508) 0 0
Per share (Rs) Interest paid (96) (686) (1,982) (5,883) (5,883)
Adjusted EPS 36.6 36.1 23.0 25.8 30.4 Others 3,972 5,169 0 0 0
CEPS 42.2 41.7 29.0 33.2 39.0 Net change in Cash (17,220) (24,712) 24,433 3,445 52,831
Dividend payout (%) 36.0 34.6 69.7 77.6 65.8
Valuation (x)
P/E 4.4 4.5 7.1 6.3 5.3
P/BV 3.8 3.1 2.7 2.5 2.2
EV/EBITDA 3.9 2.3 3.2 3.6 2.5
Dividend yield (%) 8.1 7.7 9.9 12.3 12.3

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Hindalco (HNDL) Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
HNDL shifted its focus to value addition (with Novelis acquisition), giving it Market data
sustainable and increasing operating cash flows after FY15. Working capital intensity Current price: Rs483
reduced over the period. With no major expansion in India since FY15 and Novelis Bloomberg: HNDL IN
generating consistent free cash flows, HNDL recorded positive free cash flows since 52-week H/L: Rs488/154
FY16 till it acquired Aleris in FY21, generating ~2.5% RoCE in FY21. Balance sheet is
under control with consistent decline in leverage. It spent ~Rs846bn over FY12-21,
largely funded via debt and raised equity of ~Rs49bn via warrants and QIP. Though Free float: 65.4%
Novelis has generated ~14% RoCE during FY17-21, HNDL’s consolidated return ratios Avg. daily vol. 3mth: 12,769,480
remain poor (average RoCE of ~10% over FY17-21) due to low aluminum prices. Source: Bloomberg
Consistent improvement in CFO since FY16: With consistent improvement in Novelis’ operations since FY17 and cost control
at Indian operations, we observe consistent increase in HNDL’s operating profits, despite fluctuating aluminium prices. Until
FY16, Indian operations had a higher share in profits – as Indian operations have higher exposure to aluminium prices, cash
flow from operations (CFO) kept fluctuating. Working capital intensity too has reduced since FY16 and cash conversion ratio
improved to an average of 62% during FY16-21.
Exhibit 590: Consistent improvement in cash flows from operations since FY16
Until FY16, domestic operations had FY17 onwards, consistent improvement in
200
higher share. As a result, amid higher Novelis operations provided stable growth
exposure to aluminum prices, OCF kept in operating profits
150 142
fluctuating
Rs in bn
100 84 86
67 66 70
50 47 31 19
(7)
0
-50
NWC on downward trend: HNDL’s net working capital (NWC) has been on a downward trend since FY16. Though debtors and
inventory days have largely been stable, other avenues of working capital financing aided the decline in NWC. Against an
average of 36 days over FY12-21, NWC stood at 25 days in FY21.
Exhibit 591: Net working capital on downward trend
NWC remained stable throughout cycle;

80 while since FY17 improved further
70
60
48 50
No of days
50 43
39 43
40 32
31
30 22 25
25
20
10
0
xxx
Hindalco (HNDL) 16 September 2021
Capacity expansions and acquisitions led to poor conversion of operating cash to free cash: HNDL expanded aluminum
capacity in India till FY16 (aluminium capacity by 718ktpa and alumina capacity by 1.6mtpa), leading to negative free cash flows
during FY12-15. With focus turning to capacity expansion in Novelis through its internal accurals, we observe positive free cash
flows during FY16-20. In FY21, it acquired Aleris, leading to negative free cash flows. Against CFO of Rs607bn over FY12-21,
HNDL incurred capex of Rs672bn and invested Rs195bn in acquiring new assets. This led to negative FCF of Rs240bn over this
period, which was funded by debt. Net debt increased by Rs149bn from Rs329bn in FY12 to Rs478bn in FY21.
Exhibit 592: Capacity expansions and acquisitions led to poor conversion of operating cash to free cash flows
200 Until FY17, moderate CFO and high
150 expansion and acquisition cost resulted
100 in negative FCF
61.5
26.5 3…
50 24.3
Rs bn
0 19.4
-50 (38.6)
(76.5) (62.0)
-100 FCF remained positive since FY16, but Aleris (108.1)
(124.1)
-150 acquisition in FY21 led to negative FCF
-200
-250
CFO Capex Acquisition Net FCF
Returns from acquisitions weak: Novelis acquired Aleris (similar business model) at an EV of ~USD2.6bn, which generated an
EBITDA of ~USD200mn (calculated EBIT of ~USD60mn) in FY21, the first year of acquisition. It thereby generated ~2.5% RoCE,
which is much lower than the average RoCE of ~14% generated by Novelis.
Exhibit 593: Besides internal accruals, capex largely debt-funded
200 Raised Rs22bn via warrants Purchased Aleris in FY21 at
Raised Rs33bn via QIP USD2.6bn
143 to promoters
150 @Rs189.45/share in FY17
@Rs144.35/share in FY14 113
90
Rs in bn
100 57
49
50 28
0
-50 (25) (14)
(36)
-100
-150 (123)
FCF Increase/Decrease in Debt Inflow from equity raise/Outflow from buyback
Raised equity twice in last 10 years; Net Debt/EBITDA peaked in FY16: HNDL has raised equity of ~Rs49bn since FY14 (Rs16bn
by issuing warrants to promoters in FY14 and ~Rs33bn via QIP in FY17). The gap in free cash flows was largely funded via debt,
but we observe Net Debt/EBITDA peaked out in FY16. Novelis continues to generate free cash flows despite organic expansion,
except in FY21, when it bought Aleris.
Exhibit 594: Net Debt/EBITDA peaked at 6.3x in FY16 and has declined to 2.7x in FY21
Net Debt/EBITDA 4.1 5.9 6.4 6.5 6.3 3.7 2.9 2.5 2.7 2.7 4.4
Return ratios poor due to low aluminum prices: HNDL’s consolidated return ratios remain poor (average RoCE of ~10% over
FY17-21 and 8.3% over FY12-21) due to low aluminum prices, though Novelis generated average RoCE of ~14% during FY17-
21, with improved profitability.
Exhibit 595: Standalone return ratios poor due to low aluminum prices
Standalone (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
ROE 8.0 6.0 5.0 3.6 2.9 3.1 4.8 5.1 2.1 2.8 4.4
ROCE 7.1 4.7 4.6 5.1 4.8 6.0 6.2 5.1 3.9 4.4 5.2
Exhibit 596: Novelis pulls up overall consolidated return ratios

Consolidated (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
ROE 12.5 8.9 6.9 3.9 -1.0 4.4 8.5 9.8 7.0 9.1 7.0
ROCE 9.6 7.2 5.8 5.9 5.0 8.4 10.0 11.4 9.3 10.1 8.3
Source: Company, Centrum Research; *ROCE is pre tax

Hindalco (HNDL) 16 September 2021
P&L Balance sheet

Operating Expense 883,075 779,660 852,280 1,101,119 1,216,105 Reserves & surplus 572,795 580,950 663,111 751,509 850,082
Taxes 25,881 21,570 27,230 46,534 49,899 Net block 641,850 660,670 708,490 702,034 698,142
PAT 54,945 40,510 56,690 105,486 112,631 Net fixed assets 899,782 969,570 1,105,170 1,115,714 1,126,822
Extraordinary items 0 2,840 4,920 0 0 Inventories 221,940 223,840 306,680 343,894 346,157
Growth (%)
Trade payables 207,244 183,000 282,800 287,086 310,352
Revenue 13.3 (9.5) 11.7 24.5 9.0
Gross 39.7 42.2 42.0 39.5 38.5
EBITDA 11.9 12.2 13.4 14.5 14.1 Cashflow
ROE 9.8 7.0 9.1 14.9 14.0 Net Interest 32,350 41,970 37,380 0 0
ROCE 7.4 5.8 6.3 9.6 9.8 Net Change – WC (16,865) (11,780) 14,040 (22,781) 59,769
Debtors 30 32 31 31 30 Acquisitions, net 0 0 (195,240) 0 0
Inventory 61 69 73 72 70 Investments (3,136) (15,780) (27,750) 0 0
Creditors 58 60 64 63 61 Others 8,263 (160) 21,790 0 0
Solvency (x) FCF 60,076 59,580 (71,290) 72,162 161,292
Per share (Rs) Interest paid (35,766) (40,160) (36,780) 0 0
Adjusted EPS 24.8 18.3 25.6 47.5 50.8 Others (1,236) (3,410) (66,790) 0 0
Dividend payout (%) 4.8 5.1 10.8 6.3 5.9
Valuation (x)
P/E 19.5 26.5 18.9 10.2 9.5
P/BV 1.9 1.8 1.6 1.4 1.3
EV/EBITDA 5.5 4.2 7.3 6.3 5.5
Dividend yield (%) 0.2 0.2 0.6 0.6 0.6

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Hindustan Zinc (HZ) Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
HZ, being a cash rich company, recorded robust OCF in the last decade, thanks to low Market data
cost of production for zinc. Net working capital has been negative since FY16, with Current price: Rs335
tight control on inventories and very low debtors. Cash conversion ratio has been Bloomberg: HZ IN
good in the last decade, with average OCF/EBITDA of 79% during FY12-21. The entire 52-week H/L: Rs362/197
capex of ~Rs224bn during FY12-21 has been funded via cash flows and HZ has not
raised any equity. HZ started paying higher dividend (sometimes higher than free cash
flows) from FY16, which led net cash to decline to Rs36/share in FY21 from Rs42/share Free float: 5.5%
in FY12 and Rs83/share in FY16. Due to higher profitability, return ratios were high, Avg. daily vol. 3mth: 1,185,589
with average RoE of 22% and RoCE of 26% over FY12-21. Source: Bloomberg
Robust cash flows from operations in last 10 years: HZ’s focus on cost control helped it to consistently improve OCF, despite
fluctuating commodity prices (zinc, lead and silver). Due to absence of debt and tight control on working capital, it generated
OCF of ~Rs689bn during FY12-21. Cash conversion ratio has remained high in the last decade (average of 79% over FY12-21).
Exhibit 597: Robust cash flows from operations due to low cost of production for zinc
140 Consistent improvement in OCF, barring FY20,
hit by lower prices
120
100 96 103
86
Rs in bn
74
80 65
55 64
60 54
45 48
40
20
0

Analysis of working capital movement: Net working capital (NWC) has been negative since FY16. Tight control on debtors,
stable inventory days, coupled with other short-term financing helped maintain consistent negative working capital since FY16.
Exhibit 598: Negative net working capital since FY16; 10-year average NWC at -67 days
50
0 5
10 6
FY12 4 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -43
No of Days
-50
-65 -56
-100
-117
-150
-167
-200
-250 -248
-300
Hindustan Zinc (HZ) 16 September 2021
Exhibit 599: OCF/EBITDA - Robust cash conversion ratio Exhibit 600: OCF/PAT at an average of 90% over FY12-21
120
97 140 129
100 88
79 80 120 106 108
74 74 76 78 95
80 73 73 89
100
81 79 79
60 80 69 67
%
%
60
40
40
20 20
0 0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Low capex, no acquisition led to healthy free cash flows over FY12-21: During FY12-21, HZ spent ~Rs224bn to expand zinc
mine capacity from 1mtpa to 1.2mtpa and silver capacity from ~180ktpa to 800ktpa. The entire capex was funded by internal
accruals. In the absence of acquisitions, it generated high cash flows. It generated free cash flows of Rs465bn during FY12-21.
Exhibit 601: Low capex, no acquisition led to healthy free cash flows
120 Increasing OCF helped to fund capex from internal accruals and generate high FCF throughout the decade
100 79
68
80 54 52
49
60 37 39
Rs in bn
28 30 28
40
20
0
-20
-40
-60

No equity raised in last 10 years; higher dividend from FY16 to support parent – net cash has declined: HZ has not raised any
equity from the market ever. Being cash rich, it started paying higher dividend from FY16 to support the ultimate parent
company, Vedanta Resources. During FY12-21, it paid ~Rs660bn dividend (Rs136.4/share), of which Rs593bn (Rs123/share)
was paid during FY16-21. This led net cash to decline to Rs159bn (Rs38/share) in FY21 from Rs179bn (Rs42/share) in FY12 and
Rs353bn (Rs83/share) in FY16.
Exhibit 602: High dividend payout since FY16 to support parent Exhibit 603: Net cash/share has declined
200 100
83
80 73
150 60 57
60 51 53 51
Rs/share
42
Rs in bn
100 40 36
40
50 20
0 0
Dividend Paid FCF Net cash/share (Rs)
Return ratios healthy: HZ’s return ratios remain healthy (average RoCE of ~26% and RoE of 22% over FY12-21) due to higher
operating profits, which in turn were due to low cost of zinc production and higher average zinc prices (USD2,293/t during
FY12-21) coupled with increase in silver production.
Exhibit 604: Return ratios healthy – 10-year average RoE at 22%, RoCE at 26.2%
ROE 22.4 23.3 19.8 20.1 19.9 24.4 27.1 22.9 18.4 22.0 22.0
ROCE* 28.2 26.5 23.0 23.5 21.1 27.3 33.5 29.3 22.1 27.3 26.2
Source: Company, Centrum Broking, *ROCE is pre tax

Hindustan Zinc (HZ) 16 September 2021
P&L Balance sheet

Taxes 25,000 15,850 25,940 40,327 40,218 Net block 146,680 162,170 164,470 175,498 159,459
Extraordinary items 0 0 0 (1,340) 0 Inventories 15,440 18,350 14,250 19,670 19,476
Growth (%)
Trade payables 11,740 14,880 15,450 12,105 11,985
Revenue (4.4) (12.1) 21.9 22.0 (1.0)
EBITDA (13.0) (17.1) 32.0 33.4 (0.4) Provisions 2,190 2,320 2,520 2,520 2,520
Adj. EPS (12.0) (14.5) 17.3 25.3 (1.6) Net current assets 162,210 198,490 193,750 207,534 222,717
Gross 100.3 101.6 98.9 100.0 100.0
EBITDA 50.5 47.7 51.6 56.4 56.7 Cashflow
ROE 22.9 18.4 22.0 30.2 28.5 Net Interest (6,880) (8,760) (5,550) 0 0
ROCE 22.3 17.9 20.6 25.5 24.1 Net Change – WC 6,710 (11,170) 6,380 (14,242) 299
Inventory 25 33 26 22 26 Investments 19,960 4,510 71,930 0 0
Creditors 18 26 24 18 16 Others 2,530 5,230 (72,010) 0 0
Solvency (x) FCF 54,400 30,030 81,400 102,318 112,283
Interest coverage ratio 94.4 79.0 30.3 43.3 47.0 Increase/(decrease) in debt 25,360 (19,240) 65,240 0 0
Net debt/EBITDA (1.6) (2.4) (1.3) (1.0) (1.1) Dividend paid (119,580) 0 (159,717) (84,506) (84,506)
CEPS 23.3 21.5 24.9 29.9 29.8 Net change in Cash (19,410) 18,790 (15,647) 17,811 27,776
Dividend payout (%) 106.2 0.0 200.0 85.6 85.8
Valuation (x)
P/E 17.8 20.8 17.7 14.1 14.4
P/BV 4.2 3.5 4.4 4.2 4.0
EV/EBITDA 9.4 5.0 10.2 8.1 8.0
Dividend yield (%) 6.0 0.0 11.3 6.0 6.0

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Jindal Stainless (JDSL) Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
JDSL, after being debt trapped while expanding capacities post FY08, narrowly Market data
escaped bankruptcy by restructuring debt twice (partly converted into equity) during Current price: Rs167
FY10-15 and demerging its businesses. Finally, with improving financials, it came out Bloomberg: JDSL IN
of corporate debt restructuring (CDR) in FY20. It managed its financials well since 52-week H/L: Rs174/39
FY18, with improving OCF and no major capex. Improving macro, efficient working
capital management, cost rationalization, and debt restructuring helped it to
overcome the crisis. Consistent deleveraging via free cash flows and equity raising Free float: 31.9%
helped reduce net debt to Rs30.6bn (Net Debt/EBITDA: 2.2x) in FY21 from Rs58.4bn Avg. daily vol. 3mth: 4,573,207
(Net Debt/EBITDA: 5.1x) in FY17. Average return ratios, however, have been poor. Source: Bloomberg
OCF improves from FY18 after restructuring of businesses: While it generated negative OCF during FY12-15, JDSL’s businesses
were demerged into different entities in FY16 as part of asset monetization plan, which was to help JDSL to get out of CDR. We
have seen consistent improvement in OCF from FY18 onwards, with debottlenecking of capacities and improvement in working
capital. Average cash conversion ratio (OCF/EBITDA) has improved since FY18 (average of 68% during FY18-21).
Exhibit 605: OCF improved from FY18 after demerger of businesses into different entities
50000 42,515 50,000
40000 40,000
30000 30,000
Rs in mn
20000 20,000
8,198 9,574 9,674
6,788
10000 10,000
0 0
-4,247 -1,680 -2,337 -3,939 75
-10000 -10,000
Consistent decline in working capital from FY18: JDSL has managed its working capital well since FY18. It took measures such
as reducing receivables (focusing more on domestic sales) and inventory days (reducing scrap purchases from US and Europe,
and focusing on sourcing from South East Asia), which helped keep net working capital low (average 16 days over FY18-21).
Exhibit 606: Working capital cycle has consistently improved since FY17
300 274
250 210
200
Days
150
99
67 64
100 60
50 22 18 12 13
0
ource: Co mpany, C ent rum Researchxxxx
Jindal Stainless (JDSL) 16 September 2021
Exhibit 607: Cash conversion cycle has improved since FY17
400 369.6
300
200
62.5 82.2 59.6 67.9
100
1.3
0
-100 (44.8) (23.7) (23.1)

(108.3)
-200
OCF/EBITDA (%)
With no major expansion, JDSL turned free cash flow positive from FY18: JDSL’s FY17 financials depicted the effect of
demerger. It started receiving benefits of fully ramped up SS capacity from FY18. Since then, with incremental OCF and limited
capex, it used its entire free cash flows for debt reduction. Post demerger, almost its entire capex was for maintenance (Rs7.5bn
during FY18-21). As a result, it has generated positive free cash flows of Rs27bn during FY18-21, which was used to deleverage
the balance sheet. JDSL also raised equity by issuing warrants to promoters and Kotak Special Situation Fund in FY21. Net debt
decreased from Rs58bn in FY17 to Rs30.7bn in FY21 (down ~Rs28bn).
Exhibit 608: Capex intensity has moderated; positive free cash flows after demerger of businesses in FY16
50000 41,931
40000
30000
Rs in mn
20000
6,176 7,517 8,050
10000 5,043
0
-10000 -2,449 -3,911 -3,916 -1,600
-20000 -13,288
Debt peaked in FY17; deleveraging since then: As JDSL demerged its businesses into different entities, restructured its loans
by partly converting into equity, the debt on its book was Rs58bn at FY17-end. It started receiving benefits of fully ramped up
SS capacity from FY18. Since then, with incremental CFO and limited capex on maintenance only, it used its entire free cash
flows for debt reduction. Net debt decreased from Rs58bn in FY17 to Rs30.7bn in FY21 (down ~Rs28bn).
Exhibit 609: On course of deleveraging since FY17; against a 10-year average of 10.5x, Net Debt/EBITDA was 2.2x in FY21
Leverage Ratios (x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
Net Debt/EBITDA 10.3 16.0 11.4 30.8 18.0 5.1 3.8 3.7 3.4 2.2 10.5
Return ratios poor in last 10 years: JDSL was a loss-making company during FY13-16. Post restructuring of businesses, it started
generating profits, but return ratios have been poor and depend on macro conditions.
Exhibit 610: Return ratios improving; profit-making company since FY17
Consolidated (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
ROE 2.3 (38.5) (135.5) (81.4) (26.2) 3.2 15.8 5.6 2.5 10.7 -24.1
ROCE* 4.8 0.0 2.7 0.1 2.2 8.8 14.0 11.7 11.1 16.3 7.2
Source: Company, Centrum Broking, *ROCE is pre-tax

Jindal Stainless (JDSL) 16 September 2021
P&L Balance sheet

Revenues 134,008 127,584 119,870 163,384 157,536 Equity share capital 958 975 975 1,051 1,051
Taxes 766 926 2,702 4,714 3,764 Net block 63,152 61,484 58,281 56,996 55,417
PAT 1,322 760 3,118 8,743 6,979 Net fixed assets 63,739 61,956 59,136 57,851 56,272
Minority/Associates 97 (92) 50 50 50 Non Current Assets 1,067 2,097 2,472 2,472 2,472
Recurring PAT 1,419 669 3,168 8,792 7,029 Investments 4,534 4,460 4,552 4,604 4,656
Extraordinary items 7 44 1,024 0 0 Inventories 24,146 27,390 27,886 29,489 33,411
Reported PAT 1,426 713 4,192 8,792 7,029 Sundry debtors 9,194 7,052 9,339 9,683 10,971
Growth (%)
Trade payables 24,883 26,596 26,319 31,259 35,416
Revenue 16.7 (4.8) (6.0) 36.3 (3.6)
EBITDA (11.2) (2.2) 25.0 43.4 (13.7) Provisions 6 9 22 22 22
Adj. EPS (58.1) (53.7) 373.7 157.3 (20.1) Net current assets 5,658 4,156 6,509 15,693 22,049
Gross 32.7 34.3 36.5 33.0 33.0
EBITDA 8.6 8.8 11.7 12.3 11.0 Cashflow
ROE 5.6 2.5 10.7 22.8 14.1 Net Interest 6,261 5,632 4,587 0 0
ROCE 7.4 5.0 8.7 16.0 12.0 Net Change – WC 3,150 (59) (1,806) 2,993 (1,052)
ROIC 7.6 5.1 9.2 18.8 15.8 Direct taxes (27) 49 115 (1,645) (967)
Inventory 65 73 83 63 72 Investments 0 (211) (67) 0 0
Solvency (x) FCF 12,129 10,058 11,453 16,090 10,303
Net debt-equity 1.7 1.4 1.0 0.3 0.1 Issue of share capital 0 286 537 1,088 0
Interest coverage ratio 1.8 1.9 3.0 6.1 6.0 Increase/(decrease) in debt (7,759) (5,138) (8,320) (5,000) (5,000)
Net debt/EBITDA 3.7 3.4 2.2 0.7 0.2 Dividend paid 0 0 0 0 0
Dividend payout (%) 0.0 0.0 0.0 0.0 0.0
Valuation (x)
P/E 56.5 122.0 25.7 10.0 12.5
P/BV 3.1 3.0 2.5 2.0 1.6
EV/EBITDA 5.4 4.4 4.5 5.0 5.2
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Jindal Steel and Power (JSP) Research Associate, Metals & Mining
+91 22 4215 9375
[email protected]
JSP’s business dynamics changed post FY15, with de-allocation of its captive coal Market data
block. It managed its financials well and narrowly escaped bankruptcy. Efficient Current price: Rs395
working capital management, cost rationalization and debt restructuring helped it to Bloomberg: JSP IN
overcome the crisis. Consistent deleveraging via free cash flows, equity raising in FY18 52-week H/L: Rs502/160
and sale of its overseas subsidiaries in FY21 helped it to reduce net debt to Rs221bn
Market cap: Rs403bn
(Net Debt/EBITDA: 1.5x) in FY21 from Rs461bn (Net Debt/EBITDA: 13.6x) in FY16.
While its investment in Indian assets is remunerative, its investments in overseas Free float: 39.5%
mining assets remain a drag on profitability. After recording net losses from FY16 to Avg. daily vol. 3mth: 10,542,120
FY20, it came back to profits in FY21 and now has a strong balance sheet. Source: Bloomberg
OCF has improved after falling sharply in FY15: As JSP’s captive coal was de-allocated by GoI and penalty got imposed, it
recorded negative OCF in FY15. It was on the verge of bankruptcy, as it was expanding then. With continuous release of working
capital (like lower inventory, debtors, issuing export advances, etc), it narrowly escaped bankruptcy. Thereafter, OCF improved
consistently, with incremental volumes from FY19. The crisis could have been of lower magnitude, but JSP was also adversely
affected by its overseas operations and power business. Cash conversion ratio (OCF/EBITDA) has improved since FY17 (average
of 61% during FY17-21).
Exhibit 611: OCF has improved consistently, with incremental volumes from FY19
150 Incremental volumes from FY19 led to
During FY15, JSP's captive coal was
consistent improvement in CFO
deallocated and penalty was imposed,
100 which resulted in negative CFO 97
Rs in bn
52
50 45
31 38 27 30
14 7
0
-23
-50
Consistent decline in working capital since FY17: JSP has managed its working capital well since FY17. It took measures such
as buying its major raw material, coking coal on credit, taking export advances to sell steel, etc. These have helped keep net
working capital low (<20 days) for JSP in the last two years.
Exhibit 612: Working capital cycle improving since FY17
140
130 SInce FY17, JSP managed to keep NWC
120 123 low (FY20 and FY21 <20 days)
100 108
94 92
No of Days
80
60 61 60
40 30
20 17 17
0

xxxxx
Jindal Steel and Power (JSP) 16 September 2021
Exhibit 613: Cash conversion ratio has improved in the second half of the decade
OCF/EBITDA (%) 46 23 70 -42 22 62 47 54 76 67
With no major expansion, JSP turned free cash flow positive since FY16; overseas mining investment a drag: JSP’s 5mtpa
Angul plant was commissioned in phases, with full commissioning in December 2018. Since then, with incremental CFO and
limited capex, it used its entire free cash flows for debt reduction. During FY12-21, it incurred capex of Rs470bn to set up a
2,400MW merchant power plant and a 5mtpa steel plant. As a result, it has generated negative free cash flows of Rs151bn
during FY12-21 (positive free cash flows of Rs162bn during FY17-21). JSP’s Indian entity has been servicing overseas debt for
years and had debt of ~Rs65bn in overseas subsidiaries in FY21. JSP has funded its capex via debt and internal cash flows and
raised ~Rs12bn in FY18 via QIP. Net debt increased from Rs169bn in FY12 to Rs221bn in FY21 (up ~Rs52bn).
Exhibit 614: Capex intensity has moderated; no acquisitions in last 10 years – positive free cash flows since FY16
Incremental OCF from FY17 and

FCF until FY16 remained negative limited capex helped FCF to turn
150 owing to high capex to set up steel positive 100
88
100 and power plant
36 50
30
50 2 5
0 0
Rs in bn
-50 -50
-100 -34 -32
-70 -74
-104 -100
-150
-200 -150
CFO Capex Acquisition Net FCF (RHS)
Overseas acquisitions non-remunerative: JSP acquired a steel business in Oman in CY20 at USD500mn. It developed the plant
and put up a 2mtpa long steel mill, and finally sold it to a group company at ~USD750mn in FY21. This business was financially
self-sustainable but could not add value to JSP. Besides this, JSP’s investment in mining assets overseas (Australia, South Africa,
Mozambique) remains a drag, with nil contribution to operating earnings.
Debt peaked in FY16; on course of deleveraging since then: The de-allocation of coal blocks and penalty of Rs295/t on coal
extracted till September 2014 (~Rs30.9bn) by the Supreme Court hit JSP’s profitability in FY15. It narrowly escaped
bankruptcy. Since then, JSP’s focus has been to deleverage the balance sheet, which it has managed to do by improving cash
flows, restricting capex, and monetizing the Oman business in FY21.
Exhibit 615: Debt peaked in FY16 – against 10-year average of 6.3x, Net Debt/EBITDA was 1.5x in FY21
Net Debt/EBITDA 2.5 4.1 6.5 7.9 13.6 10.4 6.6 4.7 5.3 1.5 6.3
Return ratios poor in last 10 years: JSP has revalued its assets and inflated equity by ~Rs165bn in FY15. In addition to that, it
was making losses till FY19 and started generating profits only from FY20. No operating earnings from overseas subsidiaries
and underutilization of power assets (operating at <50% PLF) drag its overall return ratios.
Consolidated FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
ROE 25.3 15.2 8.6 1.0 -8.3 -6.9 -3.4 3.6 0.0 14.9 5.0
ROCE* 17.4 11.2 6.9 4.1 -0.6 0.9 3.5 5.9 4.9 18.0 7.2

Jindal Steel and Power (JSP) 16 September 2021
P&L Balance sheet

Revenues 392,202 304,646 389,886 498,410 402,106 Equity share capital 968 1,020 1,020 1,020 1,020
Others 22,602 21,812 0 23,986 12,157 Minority Interest (5,261) (7,764) (8,777) (8,777) (8,777)
Other income 1,676 262 5,389 0 0 Gross block 840,996 883,559 764,653 675,653 703,653
PBT (367) (3,559) 84,365 124,605 86,388 Less: acc. Depreciation (171,086) (211,373) (245,906) (270,290) (295,355)
Taxes (3,902) 1,085 17,687 32,802 22,349 Net block 669,910 672,186 518,747 405,363 408,298
Effective tax rate (%) 1,062.6 30.5 21.0 26.3 25.9 Capital WIP 29,055 19,745 8,903 32,903 64,903
PAT 3,535 (4,643) 66,678 91,803 64,039 Net fixed assets 730,668 725,071 560,612 471,228 506,164
Minority/Associates 7,662 4,645 (18,934) 0 0 Non Current Assets 14,788 11,009 13,159 15,989 13,478
Recurring PAT 11,196 2 47,744 91,803 64,039 Investments 1,452 1,430 1,443 1,443 1,443
Reported PAT (16,453) (1,092) 36,336 91,803 64,039 Sundry debtors 30,285 35,493 27,944 35,503 28,643
Revenue 40.4 (22.3) 28.0 27.8 (19.3) Other current liab. 64,422 86,506 60,799 71,417 61,918
EBITDA 28.3 (17.4) 112.0 15.8 (30.5)
Provisions 1,218 976 822 822 822
Adj. EPS nm (100.0) NM 92.3 (30.2)
Net current assets 25,418 16,756 101,187 167,094 122,708
Margins (%)
Total assets 772,326 754,267 676,401 655,753 643,792
Gross 29.5 32.5 39.4 40.1 34.1
EBITDA 21.0 22.4 37.0 33.5 28.9 Cashflow
Adjusted PAT 2.9 0.0 12.2 18.4 15.9 Profit Before Tax (28,017) (4,652) 72,956 124,605 86,388
ROE 3.6 0.0 14.9 25.1 14.4 Net Interest 42,642 37,679 30,933 0 0
ROCE (56.4) 3.4 14.2 17.8 11.8 Net Change – WC 4,654 18,204 (26,846) (31,219) 20,443
ROIC (54.6) 3.4 14.5 21.1 14.2 Direct taxes 296 861 515 (29,027) (22,349)
Inventory 53 77 58 52 66 Investments (159) (1,252) (10,311) 0 0
Creditors 44 65 45 34 42 Others 6,171 1,899 50 95,000 0
Net working capital 24 20 95 122 111 Net cash from investing (8,321) (14,756) (18,842) 65,000 (60,000)
Solvency (x) FCF 75,936 72,740 111,028 62,518 49,546
Net debt/EBITDA 4.7 5.3 1.5 0.4 0.1 Dividend paid (18) (18) 0 0 0
CEPS 54.9 33.6 80.7 113.9 87.4 Net change in Cash (666) (21) 55,373 19,304 (31,201)
Dividend payout (%) nm nm 0.0 0.0 0.0
Valuation (x)
P/E 34.1 nm 8.4 4.4 6.3
P/BV 1.2 1.3 1.3 1.0 0.8
EV/EBITDA 6.8 6.5 4.0 2.8 3.6
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
[email protected]
SECTOR: METALS & MINING
Kunal Kothari
Research Associate, Metals & Mining
JSW Steel (JSTL) +91 22 4215 9375

[email protected]
JSTL’s cost efficiencies, superior working capital management, and low capex cost/t Market data
have helped it to grow despite the absence of raw material integration. It has been Current price: Rs689
aggressive in capacity building and almost its entire expansion of ~16mtpa has been Bloomberg: JSTL IN
funded by internal cash flows and debt – it has had negative free cash flows 52-week H/L: Rs777/258
throughout the decade. Though JSTL’s debt remains on the higher side, it has
managed its debt well and has not defaulted even during downturns in the last 10
years. Low cost expansion has kept its return ratios superior to its Indian competitors. Free float: 55.9%
Its incremental overseas exposure (US, Italy) has not succeeded so far, but as less Avg. daily vol. 3mth: 7,192,022
capital is involved, it is not significantly impacting overall return ratios. Source: Bloomberg
OCF fluctuates due to cyclicality: JSTL’s operating cash flows fluctuate with steel prices. However, with improvement in cost
efficiencies and volume growth, JSTL has been able to keep increasing OCF in the last decade, despite being a non-integrated
steel producer. Working capital management is strong – most of its coking coal purchases is via creditors, which has helped
keep its net working capital negative in most years during the last decade.
Exhibit 617: OCF fluctuates due to cyclicality
During FY12-21, OCF fluctuated amid steel price

200 volatility, but remained positive throughout the 160
cycle with consistent volume growth 144 140
150
120
108
100 100
Rs in bn
89 83 80
50 60
53
43 38 43 40
0
24 20
-50 2 0

Negative working capital, thanks to higher acceptances: JSTL manages its working capital well. It buys most of its major raw
material, coking coal, on credit. It buys coking coal from its group company, JSW International Trade Corp, which in turn buys
from global coking coal producers. Buying on credit helps keep working capital negative for JSTL.
Exhibit 618: Negative working capital cycle; 10-year average NWC at -22 days
150 JSTL managed NWC best in the industry. During FY12-21, NWC remained largely negative.
100
No of Days
50
0
-50 -27 -25 3 8 -4
-42 -41 -14 -33
-43
-100
xxxxx
JSW Steel (JSTL) 16 September 2021
74 350 325
80 72
68 288
70 300
59 60 57
57 229
60 250
201
50 40 174 181
200
35
40 139 144
%
%
150 125
30
20 100
10 2 50 8
0 0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Growth-focused; negative free cash flows amid continuous capex: JSTL has been continuously expanding its steel capacities.
In the last 10 years, it has added steel capacity of ~16mtpa via organic/inorganic route. All its organic expansion (11.5mtpa)
has been brownfield; hence, capital cost has been low. On inorganic expansions, its strategy is to acquire companies under a
JV, ramp up profitability, and then merge it with itself. Therefore, acquisitions do not bloat JSTL’s balance sheet. It recently
acquired Monnet Ispat (~Rs29bn) and Bhushan Power and Steel (at Rs193bn) in a JV. Over FY12-21, it spent ~Rs770bn in
maintenance, capacity expansion and acquisitions via JV. With continuous expansion, JSTL delivered negative free cash flows
of ~Rs143bn during FY12-21. Net debt increased from Rs169bn in FY12 to Rs523bn in FY21, an increase of ~Rs353bn.
Exhibit 621: Negative free cash flows amid continuous capex
200
Despite improving OCF, JSTL’s continuous
150 expansion has resulted in negative FCF
100
38
50
Rs in bn
0
-50 -13 -12 -14 -2 -8 -14
-17
-56 -46
-100
-150

Overseas acquisitions a drag, Indian acquisitions remunerative: JSTL’s major acquisition after Ispat Industries in December
2010 is the acquisition of Bhushan Power & Steel (NCLT case) in March 2021. Ispat Industries’ profitability got into sync with
JSTL’s overall profitability and the acquisition has proved to be value accretive. However, its overseas acquisitions (US, Italy)
remain a drag and need continuous support from Indian operations.
Leverage has remained high: The fluctuating steel cycle, continuous expansion via organic/inorganic route, and support to
overseas operations have kept JSTL’s leverage high. While average Net Debt/Equity has been comfortable at 1.5x, Net
Debt/EBITDA has remained high throughout the decade. However, with sharp increase in profitability in FY21, Net Debt/EBITDA
fell to a comfortable level of 2.5x.
Exhibit 622: Leverage remains high; 10-year average Net Debt/EBITDA at 3.6x
Net Debt/EBITDA 2.9 3.1 3.8 4.1 6.4 3.4 2.6 2.4 4.5 2.5 3.6
Return ratios higher than peers: JSTL has managed its return ratios well and RoE has been relatively high (11-25%) in the last
five years. Its continuous debt-funded capex keeps its RoCE low, but better than its peers.
Exhibit 623: Return ratios higher than peers; 10-year average RoE at 14.1%, RoCE at 12.7%
ROE 8.5 7.9 11.3 8.9 8.4 16.7 25.2 24.0 11.5 19.2 14.1
ROCE* 12.2 11.4 12.7 10.3 5.3 14.0 17.4 19.8 8.1 15.5 12.7

JSW Steel (JSTL) 16 September 2021
P&L Balance sheet

Revenues 824,990 711,160 780,590 1,324,357 1,263,337 Equity share capital 2,417 2,400 2,410 2,410 2,410
Others 131,050 130,960 119,600 37,797 44,959 Minority Interest (4,500) (5,750) (6,190) (6,190) (6,190)
Other income 2,040 5,460 5,920 5,730 5,230 Gross block 763,520 795,270 846,630 1,071,630 1,251,630
Taxes 36,440 (9,060) 41,420 87,347 67,410 Net block 616,040 612,290 626,730 796,530 920,740
PAT 75,540 40,980 79,550 203,810 157,290 Net fixed assets 745,330 891,850 974,830 1,044,630 1,168,840
Minority/Associates (300) 210 390 15,883 7,976 Non Current Assets 48,970 48,090 64,090 64,090 64,090
Growth (%)
Trade payables 161,590 179,180 152,430 258,614 246,699
Revenue 17.7 (13.8) 9.8 69.7 (4.6)
EBITDA 28.1 (41.1) 80.5 92.9 (16.1) Provisions 1,340 1,610 2,740 10,584 9,704
Adj. EPS 18.0 (44.9) 93.3 174.8 (24.8) Net current assets 92,870 75,810 28,700 157,618 168,976
Gross 50.8 47.8 60.9 50.9 48.5
EBITDA 22.4 15.4 25.2 29.0 25.4 Cashflow
ROE 24.0 11.5 19.2 38.2 21.6 Net Interest 34,480 34,850 32,640 0 0
ROCE 13.4 5.8 10.2 20.4 14.8 Net Change – WC (15,810) 16,390 12,640 (20,788) 22,108
Debtors 26 29 21 17 22 Acquisitions, net (14,270) (640) (66,620) 0 0
Inventory 58 71 64 53 70 Investments 2,510 2,490 60 0 0
Creditors 69 86 76 56 72 Others (490) (70,040) 77,440 0 0
Solvency (x) FCF 30,440 (460) 29,200 136,514 73,164
Interest coverage ratio 4.8 2.6 5.1 8.1 6.4 Increase/(decrease) in debt 66,540 114,700 16,740 0 0
Adjusted EPS 31.1 17.2 33.2 91.2 68.6 Others (1,530) (5,660) 390 0 0
CEPS 47.8 34.9 52.6 114.1 91.7 Net change in Cash 49,990 (16,120) 75,600 124,464 61,114
Dividend payout (%) 13.2 11.9 19.8 5.5 7.3
Valuation (x)
P/E 22.1 40.2 20.8 7.6 10.1
P/BV 4.8 4.5 3.6 2.4 2.0
EV/EBITDA 6.1 7.7 7.7 5.2 6.0
Dividend yield (%) 0.6 0.3 0.9 0.7 0.7

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
NMDC Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
NMDC, a net cash company, has been generating moderate to low operating cash Market data
flows over FY12-21 due to cyclicality. Cash conversion ratio remained moderate Current price: Rs152
throughout the decade, with average OCF/EBITDA of 60%. We observe, NWC days Bloomberg: NMDC IN
turn better during an upturn and worsen in a downturn. The entire capex of ~Rs214bn 52-week H/L: Rs213/76
(~85% on steel plant) during FY12-21 was funded via internal cash flows. NMDC has
been continuously paying higher dividend (paid Rs82.6/share during FY12-21), which
led net cash to decline to Rs19.8/share from Rs51/share in FY12. High statutory Free float: 31.7%
duties, high iron ore CoP and investment in steel plant led to its return ratios being Avg. daily vol. 3mth: 19,715,900
low (for a miner), with average RoE of 19% and RoCE of ~29% during FY12-21. Source: Bloomberg
Moderate cash flows from operations during FY12-21; hit by higher debtors since FY16: NMDC’s muted volume growth and
fluctuating profitability amid cyclicality (except for FY21), led it to generate moderate to low OCF throughout the cycle. We
observe NWC turns poor in a downturn (FY12-16) compared to an upturn (FY17-21). Receivables have remained relatively high
since FY16. Cash conversion ratio remained moderate in the last decade, with average OCF/EBITDA of 60% during FY12-21.
Exhibit 624: OCF has remained moderate throughout the decade
OCF remained moderate to low amid muted
100
volume growth and cyclicality throughout FY12-21
80
73.1
60
45.9 40.1 40.1
Rs in bn
40 37.2 33.1 33.4

30.9
21.1
20 20.4
-20
-40
Analysis of working capital movement: Due to delay in payments from RINL, NMDC’s receivable days were elevated
throughout FY13-21. Inventory has largely been stable at an average of 21 days. However, net working capital is on the higher
side (average 55 days during FY12-21).
Exhibit 625: Net working capital remains lumpy amid cyclicality; 10-year average NWC at 55 days
120 111
97 96 NWC turns poor in commodity downturn
100 (FY12-16) and improves in upturn (FY17-21)
No of Days
80
54 57 53
60 49 46 52
40 44 40
38 35 38
40 26 31
20 17
20 10
0
xxxxx
NMDC 16 September 2021
140
120 140
120 114 117
120
100 100 91 86
83 82
80 80
59 63 58 61
58
%
58
%
51 52 55
60 48 60 49
42
34 40
40
20
20
0
0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Capex on steel plant led to poor free cash flows: During FY12-21, NMDC incurred capex of ~Rs214bn, of which ~Rs180bn was
spent on upcoming 3mtpa steel plant, which is yet to be commissioned. Almost the entire capex has been funded via internal
accruals. As a result, while it generated OCF of Rs375bn, net free cash flow during FY12-21 was Rs161bn.
Exhibit 628: Capex on steel plant led to poor free cash flows
80 Moderate OCF, steel capex funded through internal accruals; FCF
remained low for most of FY12-21, barring FY21 57.2
60
Rs in bn
40 30.8
14.4 13.6 20.1
20 11.1 12.9
6.6
(2.0) (3.6)
0
-20
-40
No equity raised in last 10 years; dividend/buyback payout higher than FCF – net cash has declined: NMDC has not raised
any equity from the market. Being a net cash company, it has been continuously rewarding shareholders with higher dividend
and buybacks (even higher than free cash flows over the entire decade, except FY12 and FY21). Overall, it paid ~Rs297.7bn
dividend (Rs82.6/share) and did buyback worth Rs102.5bn, much higher than free cash flows of ~Rs161.1bn. This led net cash
to decline from Rs202bn (Rs51.1/share) in FY12 to Rs58bn (Rs19.8/share) in FY21, down Rs144.5bn.
Exhibit 629: Dividend/buyback payout higher than FCF Exhibit 630: Net cash/share has declined
100 60
90.0 51.1 53.0
50 47.1 46.5
80
58.0 37.2
60 58.7 57.2 40
Rs/share
Rs in bn
40 30.8 31.4 39.7 30

34.5 19.8
25.3 19.5
20 13.6 6.6 23.9 20 16.7 17.2 15.0
19.1 11.1 20.1
14.4 12.9 7.8
0 10
(2.0)
(3.6)
-20 0
FCF Dividend & Buyback payout Net cash (Rs/share)
Return ratios poor for a mining company: Though NMDC’s return ratios seem good (average RoCE of ~28.8% and RoE of 19%
over FY12-21), these are poor for a mining company.
Exhibit 631: Return ratios (10-year average RoE of 19%, RoCE of 28.8%) poor for a mining company
ROE 33.5 24.4 22.2 21.0 9.4 10.0 15.6 18.5 13.9 21.8 19.0
ROCE 49.6 36.5 33.8 31.7 13.8 16.2 25.6 28.3 22.9 29.8 28.8

NMDC 16 September 2021
P&L Balance sheet

Taxes 25,565 25,126 26,485 30,553 17,606 Net block 25,545 26,168 26,773 224,449 230,946
Growth (%)
Trade payables 2,027 2,256 3,603 5,948 17,120
Revenue 4.9 (3.7) 31.5 65.2 (1.5)
Gross 100.5 100.4 101.0 99.9 100.0
EBITDA 57.0 51.4 57.2 46.6 31.4 Cashflow
ROE 18.5 13.9 21.8 27.6 14.1 Net Interest 403 99 168 0 0
ROCE 18.2 13.6 20.9 26.6 14.0 Net Change – WC (8,629) (21,433) 5,277 (13,633) (9,374)
Inventory 19 22 20 17 33 Investments (1,529) (463) (30,347) 0 0
Creditors 5 7 7 7 17 Others 14,114 21,680 2,412 0 0
Solvency (x) FCF 20,497 (3,461) 57,325 44,380 21,386
Net debt-equity (0.2) (0.1) (0.1) (0.1) (0.1) Issue of share capital (10,067) 0 (17,006) 0 0
Interest coverage ratio 171.9 608.3 523.3 872.6 220.3 Increase/(decrease) in debt (1,359) 2,014 13,993 0 0
Per share (Rs) Interest paid (401) (97) (166) 0 0
CEPS 16.1 13.1 22.1 31.7 22.4 Net change in Cash 124 225 3,478 15,070 (7,924)
Dividend payout (%) 36.4 42.6 36.4 32.3 56.1
Valuation (x)
P/E 10.0 12.6 7.1 4.9 8.5
P/BV 1.8 1.7 1.5 1.2 1.2
EV/EBITDA 4.0 3.8 4.1 3.7 5.7
Dividend yield (%) 3.6 3.5 5.1 6.6 6.6

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Steel Authority of India (SAIL) Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
SAIL’s high cost base and inefficiency has led to lower operating profits. This along Market data
with poor working capital management and delays in capacity expansion caused a Current price: Rs120
deterioration in the company’s balance sheet in the last decade – so much so that it Bloomberg: SAIL IN
was on the verge of default in FY17. SAIL remained FCF negative over FY12-20 till its 52-week H/L: Rs151/33
major expansion program was completed. Gradual ramp-up and a favorable steel
Market cap: Rs494bn
cycle has led to its highest-ever positive FCF of Rs166bn in FY21. One or two years of
good steel cycle in a decade can offset the poor free cash flows of earlier years. This Free float: 35.0%
happened for SAIL in FY21, as it deleveraged its balance sheet significantly, with Net Avg. daily vol. 3mth: 53,884,560
Debt/EBITDA at 2.9x, and is now preparing itself for the next phase of expansion. Source: Bloomberg
OCF muted due to cyclicality and inefficiency: During FY12-21, SAIL recorded negative OCF in FY17 and FY20 amid weak steel
prices. High cost structure and poor volume uptick kept its OCF dependent on steel prices. Moreover, higher working capital
requirements pulled down OCF further throughout the last decade. OCF averaged at Rs33bn over FY12-21. Yet, it recorded OCF
of Rs205bn in FY21, suggesting one or two years of good steel cycle in a decade can offset the poor cash flows of earlier years.
Exhibit 632: OCF muted – has averaged at Rs33bn over the decade
150 250
Muted operating performance due to high 205
100 CoP and high working capital resulted in poor 200
OCF generation
150
50
Rs bn
100
0
50
-50 50
33 39 0
4 17 13 15
-100 -4 -50
-43
-150 -100
Operating profit before Wcap changes Change in WC CFO
Working capital cycle stretched due to multiple plant locations, high proportion of sales to government entities: Except for
FY17-19, when its NWC averaged 14 days, SAIL’s average NWC during FY12-21 was 44 days. This was largely on account of high
inventory days, which averaged at four months over FY12-21 due to multiple plant locations and poor inventory management.
Its receivable days too remained high relative to industry due to higher proportion of sales to government entities.
Exhibit 633: Working capital cycle stretched – has averaged at 44 days over the decade
NWC remained high on account of poor inventory management due to multi-plant locations, high receivables
149
150 130 128
122 122 125
114
No. of Days
99 104 99
100
50
0
-50 Inventories Receivables Payable Net Working Capital cycle

xxxxx
Steel Authority of India (SAIL) 16 September 2021
250 226 600 540
200 161 400 327

150 127 154 193
200 70 59
100 76 11 14
0
%
41
%
36 28
50 7
-200 -37
0
-50 -400
-100 -52 -436

-83 -600
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Poor operating cash flows, continuous capex led to negative free cash flows during FY12-20; FY21 a game changer: During
FY12-21, SAIL added steel capacity of ~7.5mtpa via brownfield expansion. Due to this, it delivered negative free cash flows
during FY12-20 (-Rs488bn), though in FY21, it delivered positive free cash flows of Rs166bn. Against OCF of Rs329bn over FY12-
21, SAIL incurred maintenance and expansion capex of Rs651bn. Its expansions have proved to be both costly and time
consuming – the capacity additions have cost Rs86.8bn/t and have taken a decade. SAIL has funded its capex via debt and
internal cash flows, and has not raised any equity from the market. Net Debt increased from Rs99bn (Net Debt/EBITDA: 1.6x)
in FY12 to Rs367bn (Net Debt/EBITDA: 2.9x) in FY21, an increase of ~Rs268bn.
Exhibit 636: Capex intensity high, but no acquisitions over the years – negative free cash flows till FY20
250
200 166
Low OCF, time delays and costly capex led to negative FCF during FY12-20
150
100
Rs in bn
50
0
-50 (0)
(39) (34)
-100 (50) (52) (59)
(90) (75) (90)
-150
CFO Capex Acquisition & Investment FCF
Leverage has remained high: Fluctuating steel cycle, continuous expansion via organic route, and inefficient working capital
management have kept SAIL’s leverage high. Average Net Debt/Equity has been comfortable at below 1x, but Net Debt/EBITDA
has remained high throughout the decade. With sharp increase in profitability in FY21, though, Net Debt/EBITDA fell to 2.9x.
Exhibit 637: Leverage high; 10-year average Net Debt/EBITDA of 5.7x
(x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
Net Debt/EBITDA 1.6 3.8 5.7 6.2 -12.0 -229.8 10.3 4.6 10.3 2.9 5.7
Return ratios poor: SAIL’s RoE has been very low, as profitability depends on steel prices. RoE has fluctuated between -9.7%
and +9.9% over FY12-21 and has averaged at 1.6%. Also, RoCE has been low, with average of 2.9% over FY12-21 due to low
operating profits and continuous expansion and modernization.
Exhibit 638: Return ratios poor in last decade; 10-year average RoE at 1.6%, RoCE at 4.3%
ROE 9.9 5.8 3.6 5.2 -9.7 -7.5 -2.1 7.0 -5.7 9.1 1.6
ROCE* 10.8 7.0 4.7 5.5 -6.3 -3.1 2.3 8.4 2.7 11.1 4.3

Steel Authority of India (SAIL) 16 September 2021
P&L Balance sheet

Other income 5,328 9,852 10,117 5,517 5,517 Gross block 995,269 1,107,552 1,134,521 1,189,521 1,229,521
PBT 37,274 (10,770) 68,206 224,189 141,732 Less: acc. Depreciation (396,196) (431,807) (472,827) (515,597) (559,367)
Taxes 11,591 11,491 30,290 56,047 35,716 Net block 599,073 675,745 661,694 673,924 670,154
PAT 25,683 (22,261) 37,916 168,142 106,015 Net fixed assets 773,727 777,706 764,782 777,012 813,242
Recurring PAT 25,683 (22,261) 37,916 168,142 106,015 Investments 15,848 15,850 15,950 15,950 15,950
Extraordinary items (3,894) (7,718) 584 0 0 Inventories 194,418 237,472 195,083 295,162 278,647
Reported PAT 21,789 (29,979) 38,500 168,142 106,015 Sundry debtors 44,951 88,124 71,240 67,082 63,329
Growth (%)
Trade payables 72,648 63,204 70,144 101,965 96,260
Revenue 16.5 (7.9) 12.2 43.0 (5.6)
Adj. EPS nm nm nm 343.5 (36.9) Net current assets 48,839 152,098 73,511 183,087 157,446
Gross 56.4 54.1 60.9 63.3 58.6
EBITDA 14.5 8.4 18.4 28.4 20.9 Cashflow
Adjusted PAT 3.8 (3.6) 5.5 17.1 11.4 Profit Before Tax 33,379 31,707 68,790 224,189 141,732
ROE 7.0 (5.7) 9.1 32.5 16.7 Net Interest 29,865 31,608 23,938 0 0
ROCE 5.8 (0.2) 6.1 21.6 13.3 Net Change – WC (26,258) (106,806) 100,367 (16,331) 7,451
ROIC 5.4 (0.1) 5.6 22.8 14.3 Direct taxes 357 (871) (224) (17,935) (35,716)
Turnover (days) Net cash from operations 73,016 (6,506) 234,004 232,693 157,237
Inventory 99 128 114 91 112 Investments (457) (133) 72 0 0
Creditors 40 40 35 32 39 Others 2,691 4,494 4,292 0 0
Solvency (x) FCF 33,225 (53,229) 195,731 177,693 77,237
Interest coverage ratio 3.1 1.5 4.5 15.2 13.3 Increase/(decrease) in debt (2,387) 89,074 (163,350) (100,000) (60,000)
Net debt/EBITDA 4.6 10.3 2.9 0.7 0.8 Dividend paid 0 (2,481) (4,131) (42,035) (31,805)
Adjusted EPS 6.2 (5.4) 9.2 40.7 25.7 Others 0 0 0 0 0
CEPS 14.4 3.7 19.1 51.1 36.3 Net change in Cash (449) 1,188 3,194 35,657 (14,568)
Dividend payout (%) 9.5 nm 30.0 25.0 30.0
Valuation (x)
P/E 19.2 nm 13.0 2.9 4.7
P/BV 1.3 1.2 1.1 0.8 0.7
EV/EBITDA 6.9 12.2 5.4 2.5 3.3
Dividend yield (%) 0.4 0.0 2.3 8.5 6.4

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Tata Steel (TATA) Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
TATA’s incremental focus on its fully-integrated Indian operations over the last 10 Market data
years helped it to tide over business cyclicality. It managed its working capital well, Current price: Rs1,437
keeping average net working capital below 30 days. It expanded domestic steel Bloomberg: TATA IN
capacity by ~12mtpa during FY12-21, funding the expansion through debt and equity 52-week H/L: Rs1,535/343
in the ratio 2:1. The Indian entity continues to support European operations (bought
in FY07), dragging overall return ratios. However, the acquisition of Bhushan Steel
assets in FY19 is proving to be remunerative. A year or two of good steel cycle in a Free float: 65.6%
decade offsets the poor free cash flows of earlier years. This happened for TATA in Avg. daily vol. 3mth: 12,916,900
FY21, when it significantly reduced its Net Debt/EBITDA to 2.7x. Source: Bloomberg
Despite cyclicality, TATA has history of robust cash flows from operations: Due to 100% iron ore integration in domestic
business, focus on domestic operations, and reducing exposure to Europe, we observe average annual operating cash flows of
Rs70bn during FY12-18. In the last three years (FY19-21), besides higher operating profits, efficient working capital
management (receiving export advances, reducing debtors) led to strong operating cash flows.
Exhibit 639: Despite cyclicality, has robust cash flows from operations
Improvement in steel prices, focus on
400 India operations led to improved CFO 375
300 since FY19
200 106
76 92 65 60 182 127
100 61 29
Rs in bn
0
-100
-200

Working capital movement – cash outflow in 3 out of 10 years: During FY12-21, we observe sizeable reduction in debtors (20
days in FY21 v/s average of 35 days over FY12-21), which could be due to incremental focus on domestic operations, where
debtor days are low. We have not seen any material change in inventory (75 days in FY21 v/s average of 72 days over FY12-21)
and payable days (55 days in FY21 v/s average of 56 days). During the 10-year period, we witnessed cash outflow due to working
capital only in three years (FY14, FY17 and FY18). TATA managed its working capital well throughout the cycle, keeping average
net working capital below 30 days.
Exhibit 640: NWC on downward trend
TATA managed its working capital well throughout

100
the cycle, keeping average NWC at ~25 days
80
No of Days
60
34 30 33 30
40 27 26 25 25
21
20
3
0
Tata Steel (TATA) 16 September 2021
Exhibit 641: Cash conversion cycle fluctuates
(%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
OCF/EBITDA 62 86 56 51 75 36 13 62 72 123
Continuous expansion led to negative free cash flows during FY12-20; FY21 was a game changer: During FY12-21, TATA
expanded steel capacity by ~12mtpa via organic/inorganic route. Due to this, it delivered negative free cash flows during FY12-
FY20. As against CFO of Rs1,173bn over FY12-21, TATA incurred capex of Rs1,051bn and invested Rs412bn in acquiring new
assets. This led to negative FCF of Rs291bn over this period, despite FY21 recording positive free cash flows of Rs310bn. TATA
has essentially funded its capex via debt and internal cash flows over time, but has also raised equity of ~Rs182bn since FY11.
As a result, Net Debt increased from Rs499bn in FY12 to Rs836bn in FY21, up Rs337bn.
Exhibit 642: Capex intensity high, on acquisition spree since FY19
FY20: Acquisition of
FY19: Acquisition of Usha Martin
600
FY13: Completion of FY16: Completion of Bhushan Steel @Rs44bn (1mtpa)
400 3mtpa Jamshedpur KPO Phase 1 @Rs352bn (5.6mtpa)
expansion (3mtpa) expansion
Rs in bn
200
-200
-400
Corus acquisition poor, but acquisition of Bhushan Steel assets remunerative: We observe that TATA’s decision to acquire
Corus in FY07 (near the peak of the cycle in a mature market) still drags overall profits and return ratios. However, the
acquisition of Bhushan Steel assets in FY19 at an EV of ~Rs352bn has proven to be remunerative. The performance of Bhushan
Steel has improved significantly since TATA acquired it – in FY21, it generated ~11% RoCE (pre-tax) for TATA.
Exhibit 643: Tata Steel BSL (renamed Bhushan Steel) – significant RoCE expansion in FY21
FY19 FY20 FY21
ROCE (%) 7 2.8 12.1
TATA's ROCE on acquisition price (%) 0.5 2.0 11.2
Leverage remained high till FY20; steel upcycle helped reduce it to <3x in FY21: The fluctuating steel cycle, continuous
expansion via organic/inorganic route, and support to European operations kept TATA’s leverage high till FY20. The steel
upcycle and controlled capex helped to reduce leverage significantly in FY21. While average Net Debt/Equity was comfortable
at 1.5x, Net Debt/EBITDA remained high till FY20. With strong free cash flows in FY21, Net Debt/EBITDA fell to comfortable
level of 2.7x.
Exhibit 644: Leverage ratios remain high; 10-year average Net Debt/EBITDA at 4.8x
(x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Average
Net Debt/EBITDA 4.0 4.7 4.4 5.5 9.2 4.4 3.3 3.3 6.0 2.7 4.8
Return ratios low due to loss in European operations: TATA’s RoE was very low during FY12-16 (0-5%), but improved since
then (10-17%). However, as profitability depends on steel prices, RoE keeps fluctuating. Also, RoCE has been low (2.5-15%) due
to continuous expansion and drag from European operations.
Exhibit 645: Return ratios fluctuate; higher in second half of the decade than in the first half
ROE 5.2 0.9 9.7 0.0 -4.5 10.4 16.9 16.6 9.4 11.8 7.6
ROCE* 9.3 6.9 9.6 5.9 2.5 9.5 12.0 14.4 6.0 12.1 8.8
Source: Company, Centrum Broking; Note: *ROCE is pre-tax

Tata Steel (TATA) 16 September 2021
P&L Balance sheet

Operating Expense 1,013,931 1,050,024 987,172 1,042,736 936,949 Reserves & surplus 655,051 701,564 722,662 1,199,115 1,405,293
Employee cost 187,589 191,522 199,088 180,562 185,889 Shareholders fund 666,501 713,013 734,638 1,211,895 1,418,073
EBITDA 293,833 178,276 305,043 768,228 450,485 Total debt 1,030,912 1,186,032 966,148 808,398 733,398
Taxes 67,184 (25,529) 56,539 110,618 66,151 Net block 1,184,510 1,280,538 1,284,545 1,241,206 1,195,867
Minority/Associates 13,209 5,721 (3,722) (20,100) (13,500) Non Current Assets 302,179 369,545 295,054 309,593 301,553
Growth (%)
Trade payables 217,170 213,809 259,675 322,633 262,676
Revenue 26.9 (5.6) 4.9 50.6 (18.6)
Gross 62.6 58.4 64.8 61.2 57.6
EBITDA 18.6 12.0 19.5 33.0 23.8 Cashflow
Adjusted PAT 6.6 4.4 5.5 21.0 11.8 Profit Before Tax 158,071 (13,804) 138,437 619,022 304,278
ROE 16.6 9.4 11.8 50.2 17.1 Net Interest 67,040 75,807 76,067 64,445 59,445
ROCE 8.3 1.4 7.4 29.5 13.2 Net Change – WC 25,905 41,962 164,913 (59,685) 9,371
Debtors 28 24 20 19 25 Acquisitions, net (352,825) (44,327) 0 0 0
Creditors 49 53 55 46 56 Others 140,394 (853) (27,889) 0 0
Solvency (x) FCF (185,708) 57,237 377,927 486,503 282,282
Net debt-equity 1.4 1.4 1.1 0.3 0.1 Issue of share capital 0 1,875 32,390 0 0
BVPS 582.1 622.8 613.4 948.3 1,109.6 Net cash from financing (6,727) (16,946) (370,897) (246,395) (166,395)
Dividend payout (%) 14.5 73.6 40.0 6.5 14.2
Valuation (x)
P/E 15.8 25.4 20.2 3.8 8.2
P/BV 2.5 2.3 2.3 1.5 1.3
EV/EBITDA 5.3 7.7 2.7 0.5 0.5
Dividend yield (%) 0.9 0.7 1.7 1.7 1.7

16 September 2021
Ashish Kejriwal
+91 22 4215 9855
Kunal Kothari
Vedanta (VEDL) Research Associate, Metals & Mining

+91 22 4215 9375
[email protected]
VEDL’s low cost status and presence across commodities helped improve OCF since Market data
FY14 (business in current form, as Sterlite merged with Sesa Goa in FY14; Current price: Rs309
subsequently, Cairn India got merged in VEDL in FY17), largely due to HZ. Net working Bloomberg: VEDL IN
capital was negative throughout the decade. Cash conversion ratio remained 52-week H/L: Rs341/91
moderate. Though consolidated debt is at the lower end (Net Debt/EBITDA of 1.3x
Market cap: Rs1149bn
during FY14-21), ex-HZ, net debt remains high (ex-HZ Net Debt/EBITDA of 4.2x during
FY14-21) due to continuous capex in oil and aluminum. It spent ~Rs592bn over FY14- Free float: 34.8%
21, largely funded via internal accruals. It has not raised any equity in the last decade. Avg. daily vol. 3mth: 15,760,620
VEDL can access HZ’s cash only via dividend payout. Source: Bloomberg
Robust cash flows from operations from FY14: VEDL’s focus on cost control across commodities helped it to consistently
improve OCF from FY14, despite fluctuating commodity prices. On an average, ~55% of OCF has been generated by HZ. VEDL
maintained tight control on working capital, and as a result, it had negative net working capital cycle throughout the decade.
Cash conversion ratio has remained moderate during the last decade (average of 65% during FY14-21).
Exhibit 646: Robust cash flow from operations since FY14
250 On an average, HZ contributed 55% of VEDL's OCF, which helped maintain
consistency in OCF throughout the cycle from FY14
200 177
186
146 140
150 115 119 124
109
Rs in bn
100
50
20 (2)
0
-50
-100
Note: Financials before FY14 only for Sesa Goa; hence, not comparable
Analysis of working capital movement: Net working capital (NWC) has been negative throughout the cycle. Tight control on
debtors and stable inventory days coupled with short-term financing helped VEDL to consistently maintain negative working
capital (negative 52 days on an average during FY14-21). Moreover, consistent high dividend payout from HZ also helped.
Exhibit 647: Negative net working capital; 10-year average NWC of -78 days
200
100
No of Days
-100 (26) (38) (37) (43)

(50) (61) (62) (55)
(79)
-200
Net working capital negative throughout the cycle
-300 (333)
-400
xxxxx
Vedanta (VEDL) 16 September 2021
Exhibit 648: Moderate cash conversion ratio
(%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
OCF/EBITDA 58 (51) 56 52 96 56 50 77 68 68
Source: Company, Centrum Broking; Note: *ROCE is pre-tax; Financials before FY14 only for Sesa Goa; hence, not comparable
Almost 90% of free cash flows over FY14-21 due to HZ: VEDL has 64.9% stake in HZ, which generated consistent free cash
flows (Rs407bn during FY14-21). This helped VEDL to generate free cash flows of Rs465bn over the same period. VEDL’s
expansion across business segments (international zinc, aluminum, oil, etc) coupled with closure of Goa’s iron ore and copper
smelter, and interest servicing led to only ~Rs58bn free cash flows over FY14-21 for VEDL ex-HZ. Continuous high dividend from
HZ helped net debt ex-HZ to decrease by Rs135bn from Rs553bn in FY14 to Rs418bn in FY21.
Exhibit 649: 90% of free cash flows over FY14-21 due to HZ
300
200
Rs in bn
92 65 63 119
100 37 42 39
12 (11) 9
0
-100
-200
Source: Company, Centrum Broking; Note: Financials before FY14 only for Sesa Goa; hence, not comparable
Returns from Cairn India acquisition weak: VEDL successfully turned around HZ (bought in 2002; generated average margins
of 22% during FY12-21) and improved financials of Electrosteel Steel (bought in NCLT in FY19; generated ~7% RoCE in FY21).
Cairn India was acquired by its parent company, Vedanta Resources, and group company, Sesa Goa (acquired 58.5% stake in
December 2011 at ~Rs420bn), and finally merged with VEDL. This acquisition has generated 7-8% RoCE over the last six years
and needs continuous capex to maintain profitability.
Exhibit 650: High dividend payout since FY17 to meet parent, Vedanta Resources’ debt obligations
25 200
20 19
20 20 150
15 100
10
10 7 50
4 4
5 2 3 0
0
0 -50
DPS (Rs - LHS) Div payout (%)
Note: Financials before FY14 only for Sesa Goa; hence, not comparable
No equity raised in last 10 years; dividend payout high since FY17; net debt ex-HZ remains high: VEDL passes on the dividend
received from HZ to its shareholders, largely to meet its parent’s debt obligation (also benefiting minority shareholders). It has
not raised any equity from the market in the last 10 years. Capex has largely been funded via internal accruals, but VEDL has
not had sufficient free cash flows to deleverage (ex-HZ Net Debt/EBITDA was 4.4x in FY20, the same level as in FY14, before
falling to 2.7x in FY21).
Exhibit 651: Net Debt/EBITDA (VEDL ex-HZ) remains high; 10-year average at 2.2x
Net Debt/EBITDA -8.1 -4.3 4.4 3.9 6.3 3.7 4.2 4.4 4.4 3.0 2.2
Source: Company, Centrum Broking; Note: Financials before FY14 only for Sesa Goa; hence, not comparable
Return ratios healthy due to HZ: VEDL’s consolidated return ratios remain healthy (average RoCE of ~12% over FY14-21) due
to higher profitability of HZ (average RoCE of 26%) and improvement in aluminum operations since FY21.
Exhibit 652: Return ratios healthy; 10-year average RoE at 18.9%, RoCE at 13.5%
ROE 35.7 14.1 14.3 9.8 41.9 11.1 11.6 10.7 18.3 21.0 18.9
ROCE 37.8 1.6 14.1 9.6 6.5 12.4 14.3 12.7 9.7 16.7 13.5
Source: Company, Centrum Broking; Note: *ROCE is pre-tax; Financials before FY14 only for Sesa Goa; hence, not comparable

Vedanta (VEDL) 16 September 2021
P&L Balance sheet

Revenues 920,480 844,470 880,210 1,069,607 1,112,543 Equity share capital 3,718 3,720 3,720 3,720 3,720
PBT 132,400 91,270 178,910 302,384 318,800 Less: acc. Depreciation (1,176,710) (1,409,450) (1,471,490) (1,556,030) (1,642,508)
Taxes 38,620 (35,160) 21,800 77,470 79,745 Net block 955,150 880,220 894,290 871,100 797,222
Minority/Associates (26,330) (19,200) (34,300) (45,623) (45,201) Non Current Assets 124,700 116,290 167,050 167,050 167,050
Extraordinary items (3,200) 173,860 6,780 0 0 Inventories 131,980 113,350 99,230 120,582 125,422
Cash & Cash
365,660 371,600 331,330 389,724 456,006
Ratios Equivalents
YE Mar FY19A FY20A FY21A FY22E FY23E Loans & advances 820 850 20,190 20,190 20,190
Growth (%) Other current assets 60,230 62,430 76,260 76,260 76,260
Revenue 0.2 (8.3) 4.2 21.5 4.0 Trade payables 92,360 80,270 78,920 95,901 99,751
EBITDA (7.1) (10.5) 32.1 51.9 3.6 Other current liab. 273,973 235,320 238,300 267,845 274,543
Adj. EPS (6.0) 58.9 14.5 46.0 8.1 Provisions 3,870 3,550 3,530 3,530 3,530
Margins (%) Net current assets 228,308 256,060 241,170 281,901 344,178
Gross 71.6 73.4 73.1 72.5 72.4 Total assets 1,650,228 1,517,080 1,536,220 1,626,711 1,718,060
EBITDA 25.1 24.5 31.0 38.8 38.6
EBIT 16.2 13.7 22.4 30.9 30.9 Cashflow
YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Adjusted PAT 7.3 12.7 14.0 16.8 17.4
Returns (%) Profit Before Tax 135,600 (82,590) 172,130 302,384 318,800
ROE 10.7 18.3 21.0 27.3 26.5 Depreciation & Amortisation 82,200 91,520 76,620 84,540 86,478
ROCE 9.0 5.9 14.4 17.7 17.4 Net Interest 41,460 48,740 51,230 0 0
ROIC 9.6 6.7 16.3 22.2 22.7 Net Change – WC 21,280 (9,390) (15,710) 17,663 4,004
Turnover (days) Direct taxes (26,130) (11,350) (21,080) (77,470) (79,745)
Gross block turnover ratio (x) 0.4 0.4 0.4 0.4 0.5 Net cash from operations 237,540 192,980 239,800 327,117 329,538
Debtors 16 14 13 13 14 Capital expenditure (88,170) (76,690) (67,180) (134,300) (115,550)
Inventory 50 53 44 38 40 Acquisitions, net (50,750) (330) (450) 0 0
Creditors 35 37 33 30 32 Investments 230 49,810 81,700 0 0
Net working capital 91 111 100 96 113 Others 32,750 (31,730) (81,570) 0 0
Solvency (x) Net cash from investing (105,940) (58,940) (67,500) (134,300) (115,550)
Net debt-equity 0.5 0.4 0.4 0.3 0.1 FCF 98,620 115,960 172,170 192,817 213,988
Interest coverage ratio 4.1 4.2 5.2 8.7 9.8 Issue of share capital 40 0 0 0 0
Net debt/EBITDA 1.6 1.5 1.2 0.6 0.3 Increase/(decrease) in debt 76,990 29,060 73,720 (22,823) (36,106)
Per share (Rs) Dividend paid (117,920) (14,440) (35,190) (111,600) (111,600)
Adjusted EPS 18.1 28.8 33.0 48.2 52.1 Interest paid (60,090) (53,220) (53,480) 0 0
BVPS 167.6 146.9 167.4 185.6 207.7 Others (1,440) (117,180) (160,700) 0 0
CEPS 40.2 53.3 53.5 70.9 75.4 Net cash from financing (102,420) (155,780) (175,650) (134,423) (147,706)
DPS 18.8 3.9 9.5 30.0 30.0 Net change in Cash 29,180 (21,740) (3,350) 58,394 66,282
Dividend payout (%) 109.0 5.2 27.3 62.2 57.6 Source: Company, Centrum Broking
Valuation (x)
P/E 17.0 10.7 9.4 6.4 5.9
P/BV 1.8 2.1 1.8 1.7 1.5
EV/EBITDA 4.6 2.7 1.2 0.6 0.3
Dividend yield (%) 6.1 1.3 3.1 9.7 9.7

16 September 2021
Probal Sen
Research Analyst, Oil & Gas
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
BPCL
BPCL has seen the scope and scale of profitability, and hence, cash flows improve Market data
dramatically post FY15, when the subsidy regime was completely done away with. Current price: Rs439
Since then, its annual OCF (pre WC) has nearly doubled to ~Rs127bn vs ~Rs73bn over Bloomberg: BPCL IN
FY12-15. Working capital has also shown the same trend, negative over FY12-14 due 52-week H/L: Rs503/325
to higher liabilities from the government and then turning positive from FY15.
Cumulative CFO of Rs1,138bn has been used for capex of Rs683.5bn and investments
of Rs23bn – we note that the investments number is supressed by the large NRL Free float: 40.2%
divestment done in FY21 (~Rs98bn), excluding which investments total Rs71-75bn. Avg. daily vol. 3mth: 5,131,573
Source: Bloomberg
Operating profits have picked up sharply post FY15: Operating profits, and hence, operating cash flows have picked up
dramatically post FY15, with the removal of the subsidy regime. Working capital has also followed a largely similar route from
FY15 onwards, boosting overall CFO vs being a drag over FY12-15. FY20 saw the metrics slip again due to weak profitability,
but the trend has picked up again FY21 onwards.
Exhibit 653: Cash flows from operations – a structural change post FY15
Scale and scope of the business changed dramatically post FY15, when the
250,000 subsidy system was done away with
200,000
150,000
Rsmn
100,000
50,000
Analysis of working capital movement: Working capital has traditionally been a drag on the business cash flows pre-FY15,
with large subsidy-related receivables impacting NWC. Over the last decade, NWC has stayed at an average of 15-20 days.
Exhibit 654: On an average, NWC was at 15-20 days over the last decade – FY21 has seen a spike
NWC days have been volatile, but absolute impact of working

60 capital on cash flows has not been material post FY15 35
50 30
40 25
# of days
# of days
20
30
15
20 10
10 5
0 0

xxxxx
BPCL 16 September 2021
Exhibit 655: OCF/PAT averaged at ~2x over FY12-21 Exhibit 656: OCF/EBITDA at ~1x over FY12-21
5.0 3.0
4.5
2.5
4.0
3.5 2.0
3.0
2.5 1.5
x
x
2.0
1.0
1.5
1.0 0.5
0.5
0.0 0.0
Step change in operations post FY15 reflects in FCF, though trends remain volatile: In the initial years of our review period,
FCF conversion was weak, with capex outweighing core OCF. In the later years, while both capex and investments increased
dramatically, FCF still rose over FY15-18, before dipping once again, as capex jumped even more and investments in various
JVs/other business segments ramped up.
Exhibit 657: Capex intensity, acquisitions and free cash flows – upstream entry, JV refineries key investments over FY12-21
NRL divestment to facilitate the
Bina Refinery equity contribution ramped up
divestment process of BPCL
250,000 300,000
200,000 250,000
150,000 200,000
100,000 150,000
Rsmn
Rsmn
50,000 100,000
0 50,000
-50,000 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0
-100,000 -50,000
-150,000 Initiating purchase of Mozambique Area 1 -100,000
Return ratios have steadily improved, barring a weak FY20: While BPCL’s RoE/RoCE have consistently improved (barring a
weak FY20), leverage has been relatively more volatile, fluctuating in line with capex and investment trends. Overall FCF
conversion has been weak, particularly over the last three years after growing at a healthy pace over FY15-18.
Exhibit 658: Return ratios and leverage trends – FY20 a bad year, FY21 has seen a recovery
BPCL’s return ratios have consistently improved post FY15, barring FY20, when large inventory losses dragged down profitability
6.0 35.0%
5.0 30.0%
25.0%
4.0
20.0%
3.0
x
15.0%
2.0
10.0%
1.0 5.0%
0.0 0.0%

BPCL 16 September 2021
P&L Balance sheet

Operating Expense 2,795,919 2,695,999 2,110,766 2,974,495 3,126,345 Reserves & surplus 347,708 312,475 524,516 573,983 631,451
Other income 29,836 30,813 43,445 40,106 40,356 Gross block 561,555 701,821 811,062 916,062 1,016,062
Taxes 33,076 (122) 35,759 22,384 26,005 Net block 468,512 573,477 642,939 706,965 763,942
Extraordinary items 0 (4,670) 45,142 0 0 Inventories 215,447 204,211 267,568 316,793 317,977
EBITDA 9.2 (35.1) 105.4 (14.4) 16.5 Provisions 35,123 34,379 42,849 44,992 47,241
Adj. EPS (10.6) (55.8) 361.2 (18.0) 16.2 Net current assets 63,215 87,104 49,469 (45,549) (55,703)
Gross 10.9 10.0 15.8 11.0 11.4
ROE 20.1 9.0 33.1 20.9 22.2 Net Interest 13,190 21,819 13,284 (34,146) (34,616)
Inventory 29 30 43 37 39 Investments (236) 991 (9,793) 13,066 0
Creditors 51 54 77 73 86 Others 15,039 702 91,577 34,146 34,616
Net working capital 8 11 8 (5) (6) Net cash from investing (75,366) (92,640) 20,714 (57,788) (65,384)
Solvency (x) FCF (13,720) (30,755) 140,215 118,540 135,481
Net debt-equity 0.7 1.3 0.3 0.1 (0.1) Issue of share capital 0 0 55,195 0 0
Net debt/EBITDA 1.8 5.0 0.9 0.4 (0.2) Dividend paid (41,883) (57,378) (42,613) (69,730) (81,010)
CEPS 49.3 33.1 88.4 76.5 86.7 Net change in Cash (871) 204 65,776 6,023 81,759
Dividend payout (%) 57.8 133.4 86.8 50.0 50.0
Valuation (x)
P/E 12.9 29.2 6.3 7.7 6.6
P/BV 2.5 2.8 1.7 1.5 1.4
EV/EBITDA 9.2 16.3 6.4 6.8 5.3
Dividend yield (%) 4.5 3.9 18.0 6.5 7.5

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
GAIL India (GAIL)

GAIL’s cash flows have been variable, with both profitability and volatile working Market data
capital impacting operating cash flow generation. Overall, net OCF has steadily Current price: Rs157
grown at a CAGR of 5% over FY12-21. Cumulative OCF of Rs727bn has been utilized Bloomberg: GAIL IN
in capex of Rs413bn and investments/acquisitions of Rs39bn, leaving FCF of Rs353bn 52-week H/L: Rs170/81
over the period. Steadily improving profitability, reflecting in higher cash flows, has
reflected in lower leverage (Net DER down to 0.1x in FY21 from 0.2x in FY12) but a
steady expansion in asset base has led to moderation in return ratios. Free float: 41.2%
Source: Bloomberg
years. Working capital intensity in the business has been high, but the cumulative impact of working capital on cash flows has
been positive (cumulative positive impact of Rs6bn over FY12-21). As a result, the company has generated strong operating
cash flows, albeit the trend has been a bit inconsistent.
120,000
A one-way trend for cash flows barring FY15-16, when KG D6 decline was not completely offset by higher LNG volumes
100,000
80,000
60,000
Rsmn
40,000
20,000
0
(20,000)
(40,000)
Analysis of working capital movement: Working capital has traditionally not been a drag on the business cash flows, with net
working capital (NWC) sustaining at an average of 15-18 days over most of the last decade. The company has seen average
working capital levels mostly favoring on the upside, helping boost net operating cash flows.
Exhibit 660: NWC has varied between 10 and 15 days post FY15
40 NWC has varied between 10 and 15 days post FY15, but has not been a material component of OCF 25
35
20
30
25
# of days
# of days
15
20
15 10
10
5
5
0 0
GAIL India (GAIL) 16 September 2021
300% 160%
140%
250%
120%
200%
100%
150% 80%
%
%
60%
100%
40%
50%
20%
0% 0%
Conversion of operating cash flow to FCF has been volatile: Conversion of OCF to FCF has been patchy, with steadily rising
organic capex and the need to fund multiple subsidiaries specially in the CGD/LNG/Petchem spaces, dragging down the net
FCF to CFO ratio (particularly, GAIL Gas and BCPL have dragged). FCF as a % of OCF has ranged wildly from -10% to as high as
80% over the last decade.
150,000 Investments in GAIL Additional equity in GAIL Gas/ 80,000
Additional equity in GAIL
Gas/BCPL/OPAL and fresh investments in Konkan
Gas and BCPL
Ratnagiri Power LNG/Ramgundam Fertilizer
100,000 60,000
50,000 40,000
Rsmn
Rsmn
10,455 4,134 4,563 6,720 3,418 6,000
886 685 1,811 0
0 20,000
-50,000 0
-100,000 CFO Capex Acquisition/Investments FCF -20,000
Return ratios have moderated somewhat; leverage remains a non-issue: Sustained improvement in profitability and mostly
positive working capital impact have meant that the balance sheet has consistently remained relatively free of leverage over
the last decade. With capex intensity higher over FY12-21, return ratios have moderated somewhat.
2.0 Leverage has been a non-issue post FY17 and reflects in improving return ratios over the last five years 20.0%
1.5
15.0%
1.0
10.0%
x
0.5
5.0%
0.0
-0.5 0.0%

GAIL India (GAIL) 16 September 2021
P&L Balance sheet

Taxes 30,592 13,227 14,956 24,769 27,254 Net block 310,861 336,450 364,979 378,654 395,609
Extraordinary items (659) 6,887 0 0 0 Inventories 23,219 29,601 26,038 31,401 30,860
Revenue 39.6 (3.8) (21.3) 20.6 (1.7) Other current liab. 45,120 47,544 53,395 53,609 53,725
Gross 21.4 20.4 20.4 20.4 20.4
EBITDA 12.5 11.9 11.4 15.2 17.3 Cashflow
ROE 14.4 13.5 10.8 15.0 15.0 Net Interest (3,066) (2,027) (6,305) (2,020) (1,228)
ROCE 14.1 14.4 9.9 13.9 13.9 Net Change – WC (3,282) 3,073 22,210 (6,490) (849)
Creditors 24 26 34 31 33 Others 17,656 (13,944) 11,158 12,719 12,723
Solvency (x) FCF 6,741 14,536 30,872 8,327 (1,158)
Net debt-equity 0.0 0.1 0.1 0.1 0.1 Issue of share capital 0 0 (12,810) 0 0
Interest coverage ratio 67.3 78.9 41.3 34.3 30.3 Increase/(decrease) in debt (11,348) 45,196 4,564 1,521 14,846
Adjusted EPS 13.7 13.4 11.0 16.6 18.2 Others (3,894) (9,344) (1,575) 1,682 1,732
CEPS 17.2 17.5 15.3 21.4 23.4 Net change in Cash (13,147) (4,109) 6,639 (4,560) (4,042)
Dividend payout (%) 28.8 43.6 45.4 35.0 35.0
Valuation (x)
P/E 11.5 11.8 14.3 9.5 8.6
P/BV 1.6 1.6 1.5 1.4 1.2
EV/EBITDA 7.5 8.7 11.5 7.2 6.6
Dividend yield (%) 2.5 4.1 3.2 3.7 4.1

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
Gujarat Gas (GGL)

GGL’s cash flows have closely approximated fluctuations in operating profits, with Market data
very little impact of working capital on the company’s cash flow generation. Barring Current price: Rs682
a couple of weak years over FY16-17, operating cash flows have averaged ~Rs12bn Bloomberg: GUJGA IN
over FY14-21 (company was merged and formed only in FY14). Cumulative OCF of 52-week H/L: Rs787/281
Rs89bn has been utilized in capex of Rs41bn and investments/acquisitions of
Rs4.6bn, leaving FCF of Rs43.5bn. Steadily improving profitability, reflecting in higher
cash flows, has reflected in lower leverage (Net DER down to 0.1x in FY21 from 2x in Free float: 25%
FY14) and higher return ratios (RoE up 830bp in 7 years, RoCE up 1,280bp). Avg. daily vol. 3mth: 2,326,603
(*Period under review FY14 onwards, as consolidated data for the entity post merger with GSPC Gas Source: Bloomberg
only available from then)
expanded over the last 8 years, barring FY16-17. Working capital intensity in the business has been low, and over the last two
years, there has been a very sharp expansion in cash flows, driven by higher profitability. As a result, the company has
consistently generated strong operating cash flow.
Exhibit 665: OCF has consistently expanded over the last 8 years
25,000
20,000
15,000
Rsmn
10,000
5,000
0
-5,000
working capital (NWC) being in the range of -1 to +8 days over the period under observation. This trend has remained fairly
constant despite a marked change in the scale of operations.
Exhibit 666: NWC has been in the range of -1 to +8 days
35 10
30 8
25 6
No of Days
4
# of days
20
2
15
0
10 -2
5 -4
0 -6
xxxxx
Gujarat Gas (GGL) 16 September 2021
400% 115%
350% 110%
300%
105%
250%
100%
%
200%
%
150% 95%
100%
90%
50%
0% 85%
Conversion of operating cash flow to FCF has been steady: The initial years of operations pre-merger of erstwhile Gujarat
Gas with GSPC Gas (FY14-15) are not really representative of normal business operations. Post the initial adjustments,
conversion of OCF to FCF has been relatively unobtrusive and steady. Capex has been going up over the last few years, as
GGL has been aggressively expanding its operations; hence, FCF as a % of OCF has reduced materially over FY19-21.
25,000
20,000
15,000
10,000
Rsmn
5,000
0
-5,000
-10,000
-15,000
Return ratios have expanded steadily; leverage has reduced materially: The sustained improvement in profitability and no
material impact of working capital-related issues has meant that return ratios have expanded meaningfully over the last 8
years. Balance sheet has also seen a steady improvement in leverage over this period.
6 40%
35%
5
30%
4
25%
3 20%
x
15%
2
10%
1
5%
0 0%

Gujarat Gas (GGL) 16 September 2021
P&L Balance sheet

Revenues 77,544 1,03,003 98,543 1,53,211 1,77,333 Equity share capital 1,377 1,377 1,377 1,377 1,377
Operating Expense 60,830 78,818 69,898 1,16,576 1,35,252 Reserves & surplus 20,463 31,529 43,450 58,809 76,724
Interest expenses 1,962 1,922 1,163 243 198 Total liabilities 54,787 60,895 60,589 70,948 88,363
Other income 1,113 837 740 1,193 1,547 Gross block 68,417 74,263 81,470 89,970 98,470
Taxes 1,768 145 4,292 6,095 7,110 Net block 52,891 55,847 59,646 64,381 68,767
Extraordinary items (120) 2,776 0 0 0 Inventories 694 463 522 812 940
Other current assets 634 1,074 1,849 1,942 2,039
Adj. EPS 47.2 113.5 39.3 42.0 16.6 Net current assets (5,484) (3,086) (9,097) (5,972) 4,557
Gross 21.6 23.5 29.1 23.9 23.7
EBITDA 12.7 16.0 21.2 17.6 17.5 Cashflow
ROE 21.3 33.5 32.8 34.5 30.6 Net Interest 976 1,341 747 243 198
ROCE 13.2 28.9 25.9 31.7 29.7 Net Change – WC (289) 413 (537) 9,808 2,809
ROIC 12.9 32.1 29.1 39.9 48.0 Direct taxes 0 (2,801) (4,166) (6,095) (7,110)
Inventory 4 3 3 2 2 Investments (1,696) 711 998 (2,500) (2,500)
Net working capital (26) (11) (34) (14) 9 Net cash from investing (6,042) (4,668) (6,083) (9,807) (9,453)
Solvency (x) FCF 4,257 8,266 9,040 22,238 18,201
Interest coverage ratio 5.0 8.6 18.0 111.2 156.6 Increase/(decrease) in debt (1,139) (2,322) (11,150) (5,000) (500)
Net debt/EBITDA 1.9 0.8 0.2 (0.5) (0.9) Dividend paid (408) (837) (863) (2,755) (3,214)
Per share (Rs) Interest paid (1,947) (1,864) (1,163) (243) (198)
CEPS 10.4 17.9 23.5 31.8 36.7 Net change in Cash 25 4,528 (2,708) 12,933 13,337
Dividend payout (%) 19.9 8.4 10.8 15.2 15.2
Valuation (x)
P/E 109.5 51.3 36.8 25.9 22.2
P/BV 21.5 14.3 10.5 7.8 6.0
EV/EBITDA 49.6 29.2 22.7 16.9 14.3
Dividend yield (%) 0.2 0.2 0.3 0.6 0.7

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
Gujarat State Petronet (GSPL)

GSPL’s cash flows have closely approximated fluctuations in operating profits, with Market data
relatively little impact of working capital on the company’s cash flow generation Current price: Rs335
(FY17 an exception). Operating cash flows have consistently grown at a CAGR of 5% Bloomberg: GUJS IN
over FY12-21. Cumulative OCF of Rs114bn has been utilized in capex of Rs20.4bn and 52-week H/L: Rs383/177
investments/acquisitions of Rs52bn, leaving FCF of Rs49bn over the period. Steadily
Market cap: Rs189bn
improving profitability, leading to higher cash flows, has reflected in lower leverage
(Net DER down to 0.1x in FY21 from 0.4x in FY12), but a steady expansion in the Free float: 39.9%
asset base has reflected in moderating return ratios over the period. Avg. daily vol. 3mth: 1,220,073
Source: Bloomberg
years. Working capital intensity in the business has been low, except in FY17. There has been a very sharp expansion in cash
flows, driven by higher profitability. As a result, the company has consistently generated strong operating cash flows.
Exhibit 671: OCF has improved steadily over the last decade
Rising demand for gas in Gujarat and access to LNG drive cash flows higher
20000
15000
10000
Rsmn
5000
0
-5000
working capital (NWC) days steadily declining post FY16, as operational scale transformed. This trend has steadily solidified
over the last 4-5 years, with a consistent decline in net working capital days over FY16-21.
Exhibit 672: NWC days have consistently declined over FY16-21
Contrary to usual trends, higher scale of operations has reduced working capital intensity
100 120
80 100
80
# of days
# of days
60
60
40
40
20 20
0 0
Gujarat State Petronet (GSPL) 16 September 2021
2.5 1.4
1.2
2
1
1.5 0.8
x
x
1 0.6
0.4
0.5
0.2
0 0
Conversion of operating cash flow to FCF has been volatile: Conversion of OCF to FCF has been patchy, despite relatively
moderate capex. This is due to consistent investments in various subsidiaries to fund their requirements and the acquisition
of a controlling stake in Gujarat Gas from parent, GSPC Group in FY18, acquisition of Swan LNG in FY20 and increase of stake
in Sabarmati Gas in FY16. GSPL has also been annually increasing equity contribution to subsidiaries, GSPL India Gasnet and
GSPL India Transco.
20,000 20,000
10,000
10,000
0
-10,000 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0
Rsmn
Rsmn
-20,000 -10,000
-30,000 GSPL distribution
network equity -20,000
-40,000 Sabarmati Gas
stake increase Controlling stake
-50,000 in Gujarat Gas -30,000

Return ratios have moderated somewhat; leverage remains a non-issue: The sustained improvement in profitability and no
over the last decade. With capex intensity higher over FY12-17, return ratios have moderated somewhat.
Similar to GAIL, volumes and profitability took a hit, as KG started to decline from FY14 – higher LNG
2.5 volumes post FY17 helped 25.0%
2
20.0%
1.5
15.0%
1
x
10.0%
0.5
5.0%
0
-0.5 0.0%

Gujarat State Petronet (GSPL) 16 September 2021
P&L Balance sheet

Depreciation & Amortisation 1,800 1,966 2,030 2,127 2,295 Non Current Liabilities 457 975 1,101 1,112 1,123
Interest expenses 2,192 1,645 929 546 403 Total liabilities 86,784 88,585 88,268 95,089 1,02,513
Taxes 4,081 1,699 3,160 3,529 3,786 Net block 36,075 35,857 34,668 36,041 37,745
Cash & Cash Equivalents 1,583 957 877 1,382 2,235
Ratios Loans & advances 604 1,785 1,985 2,191 2,364
Growth (%) Trade payables 238 410 620 671 710
Adj. EPS 18.9 39.8 (15.7) 11.8 7.3 Net current assets 2,831 3,197 284 1,165 2,316
Margins (%) Total assets 86,784 88,585 88,268 95,089 1,02,513
Gross 100.0 100.0 100.0 100.0 100.0
EBITDA 82.2 66.5 70.9 70.9 71.2 Cashflow
ROE 14.7 17.8 13.1 13.1 12.6 Net Interest 1,983 1,491 837 546 403
Inventory 187 66 90 87 90 Investments 1,476 (2,594) (3,846) (4,568) (4,568)
Net working capital 55 49 5 19 36 Net cash from investing (80) (3,102) (4,379) (8,068) (8,568)
Solvency (x) FCF 8,764 12,536 11,293 9,283 9,611
Per share (Rs) Interest paid (2,299) (1,678) (924) (546) (403)
CEPS 17.3 23.2 20.2 22.3 24.0 Net change in Cash 475 203 (57) 504 853
Dividend payout (%) 14.0 10.0 12.1 16.0 16.0
Valuation (x)
P/E 23.8 17.0 20.1 18.0 16.8
P/BV 3.3 2.8 2.5 2.2 2.0
EV/EBITDA 13.7 13.0 13.3 12.1 11.2
Dividend yield (%) 0.6 0.6 0.6 0.9 1.0

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
HPCL
HPCL has seen the scope and scale of profitability, and hence, cash flows improve Market data
Since then, annual OCF (pre WC) has doubled to ~Rs117bn vs Rs55-56bn over FY12- Bloomberg: HPCL IN
15. Working capital has also shown a similar trend – negative over FY12-14 due to 52-week H/L: Rs312/163
higher liabilities from the government and then turning positive from FY15 onwards.
Cumulatively, OCF of Rs1,014bn has been utilized for capex of Rs694bn and
investments of Rs66.5bn. We note that the trajectory of both capex and investments Free float: 41.7%
has picked up sharply over FY19-21, dragging down FCF. Avg. daily vol. 3mth: 4,200,257
Source: Bloomberg
dramatically post FY15, with the removal of the subsidy regime. Working capital has also followed a largely similar trend from
FY15 onwards, boosting overall OCF vs being a drag over FY12-15.
Exhibit 677: Since FY15, WC changes have not been a drag on OCF
250,000 Working capital has become a non-material part of cash flows post FY15
200,000
150,000
Rsmn
100,000
50,000
-50,000
Analysis of working capital movement: Working capital has traditionally been a drag on the business cash flows pre-FY15,
with large subsidy-related outstanding impacting NWC. Over the last decade, NWC has stayed at an average of 15-20 days.
Exhibit 678: NWC has stayed at an average of 15-20 days over the last decade
60 35
50 30
25
40
# of days
# of days
20
30
15
20
10
10 5
0 0
nxxxxx
HPCL 16 September 2021
1000% 450%
900% 400%
800% 350%
700% 300%
600%
250%
500%
%
%
200%
400%
300% 150%
200% 100%
100% 50%
0% 0%
Conversion of operating cash flow to FCF has been volatile: In the initial years of our review period, FCF conversion was
weak, with capex outweighing core OCF. In the later years, while both capex and investments increased dramatically, FCF still
rose over FY15-18 before dipping again, as capex jumped even more and investments in various JVs/other business segments
ramped up.
250,000 FY17-18 saw bigger CGD investments and start of work at Ramp up of Rajasthan refinery equity funding 200,000
200,000 the Rajasthan Barmer refinery and HMEL refinery expansion by 1.7mt
150,000
150,000
100,000 100,000
Rs,mn
50,000
Rsmn
50,000
0
-50,000 0
-100,000
-50,000
-150,000
FY12-13 saw HMEL Bhatinda refinery set up
-200,000 -100,000
Return ratios have improved: While RoE has consistently improved for HPCL (barring a weak FY20), leverage has been far
more volatile, fluctuating in line with capex and investment trends. Overall FCF conversion has been weak, particularly over
the last three years after growing at a healthy pace over FY15-18.
RoE has expanded steadily over FY15-20 and has improved in FY21 as well post the FY20 weakness
7 40.0%
6 35.0%
5 30.0%
25.0%
4
20.0%
x
3
15.0%
2 10.0%
1 5.0%
0 0.0%

HPCL 16 September 2021
P&L Balance sheet

Operating Expense 2,602,861 2,571,691 2,185,872 3,539,748 3,518,923 Reserves & surplus 266,506 274,382 347,337 376,155 422,302
Taxes 33,100 (10,647) 35,829 20,448 32,745 Net block 409,793 482,904 492,609 478,530 460,543
EBITDA 13.2 (48.4) 155.8 (35.5) 52.2 Provisions 22,272 29,986 31,965 48,106 48,545
Adj. EPS (5.2) (69.5) 479.7 (42.9) 60.1 Net current assets 54,934 48,295 (36,712) (90,583) (99,080)
Gross 9.9 8.3 14.0 7.5 9.1
ROE 23.1 6.4 32.7 16.2 23.6 Net Interest 3,460 7,154 5,348 (17,604) (16,774)
Net working capital 7 7 (6) (9) (10) Net cash from investing (113,834) (141,657) (127,282) (132,396) (133,226)
Solvency (x) FCF (28,074) (83,314) 65,453 22,558 (17,600)
Net debt-equity 0.8 1.3 1.0 0.9 0.9 Issue of share capital 0 0 (19,135) 0 0
Interest coverage ratio 16.6 5.8 17.4 11.6 15.8 Increase/(decrease) in debt 51,336 114,340 5,693 25,000 50,000
CEPS 62.3 35.4 97.9 68.8 96.7 Net change in Cash (10,830) 175 6,011 33,378 (1,861)
Dividend payout (%) 40.2 56.3 31.0 45.0 45.0
Valuation (x)
P/E 6.8 22.3 3.8 6.7 4.2
P/BV 1.5 1.4 1.1 1.1 0.9
EV/EBITDA 5.2 12.4 4.8 7.3 5.2
Dividend yield (%) 5.9 3.6 8.1 6.7 10.7

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
IOCL
IOCL has seen the scope and scale of profitability, and hence, cash flows improve Market data
Since then, annual OCF (pre WC) has nearly doubled to ~Rs282bn vs ~Rs152bn over Bloomberg: IOCL IN
FY12-15. However, working capital has remained a drag on cash flows (post a brief 52-week H/L: Rs119/71
period of improvement over FY14-16), given the requirement of higher inventories
due to its landlocked refineries in the North/North East. Cumulatively, OCF of
Rs2,572bn has been used for capex of Rs1,676bn and investments of Rs247bn, Free float: 17.3%
leaving FCF of Rs649.2bn. Avg. daily vol. 3mth: 11,300,610
Source: Bloomberg
dramatically post FY15, with the removal of the subsidy regime. Working capital also followed a largely similar trend over
FY14-16, but has been a drag owing to much higher inventory days post FY16.
Scale and scope of business changed dramatically post FY15, when the subsidy system was done away
with. NWC has still gone up due to higher inventory days driven by landlocked refinery requirements.
500,000 600,000
400,000 500,000
300,000 400,000
200,000 300,000
Rsmn
Rsmn
100,000 200,000
0 100,000
-100,000 0
-200,000 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -100,000
Analysis of working capital movement: Average net working capital days have been increasing steadily despite the
elimination of subsidies from FY15, largely due to steady ramp-up of capacity utilization at the Panipat and North East
refineries, which being landlocked, require higher inventories.
Exhibit 684: NWC has remained high due to higher inventory requirements
100 Despite the reduction of subsidy, NWC has remained at high levels owing to higher inventory 70
requirements across IOCL's refining portfolio
90
60
80
70 50
60
# of days
# of days
40
50
40 30
30 20
20
10
10
0 0
Inventory Trade receivables Trade payables NWC RHS

xxxxx
IOCL 16 September 2021
Exhibit 685: OCF/PAT averaged 204% over FY12-21 Exhibit 686: OCF/EBITDA averaged at 109%
1400% 500%
1200% 450%
400%
1000%
350%
800% 300%
250%
600%
200%
400% 150%
200% 100%
50%
0%
0%
-200% -50% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Aggressive capex and investments in subsidiaries have kept FCF at low levels: The sharply higher levels of profitability and
cash flows have been utilized for aggressive buildout of refining, petchem and marketing infrastructure, as well as
investments in multiple associated businesses like LNG/upstream assets and even renewables. As a result, FCF conversion has
been fairly weak over the review period.
600,000 CFO Russian Taas and Vankor 400,000

Investment ramped up in LNG
Capex asset investments
subsidiary
Acquisition/Investments 300,000
400,000
FCF 200,000
200,000 100,000
Rsmn
Rsmn
0 0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -100,000
-200,000
E&P investment in Pacific North West LNG
-200,000
Project, Canada, and in Lower Zakum, Abu Dhabi Additional investment in CPCL
-400,000 -300,000
Return ratios have steadily improved barring a weak FY19-20: While IOCL’s RoE/RoCE have consistently improved (barring a
weak FY19-20), leverage has been relatively more volatile, fluctuating in line with capex and investment trends. Overall FCF
conversion has been weak, particularly over the last three years, after growing at a healthy pace over FY15-18.
7 25.0%
Consistent reduction in leverage, and thus,
6 improvement in return ratios post FY15, barring weak
performance in FY19-20 20.0%
5
4 15.0%
x
3 10.0%
2
5.0%
1
0 0.0%

IOCL 16 September 2021
P&L Balance sheet

Employee cost 98,357 87,927 1,07,120 1,15,690 1,24,945 Shareholders fund 10,86,575 9,37,689 11,05,000 11,46,364 11,88,300
Others 80,148 1,07,870 88,112 96,923 1,04,677 Minority Interest 0 0 0 0 0
EBITDA 3,50,903 1,79,337 3,92,586 3,15,911 3,27,904 Total debt 8,63,587 11,65,450 9,65,808 10,85,808 12,05,808
Depreciation & Amortisation 75,143 87,661 98,043 1,03,926 1,10,161 Non Current Liabilities 22,141 28,321 34,236 35,948 37,745
EBIT 2,75,760 91,676 2,94,543 2,11,985 2,17,743 Def tax liab. (net) 1,58,231 1,14,131 1,29,647 1,40,833 1,52,019
PBT 2,51,269 (36,941) 2,97,157 2,35,033 2,38,278 Less: acc. Depreciation (2,51,710) (3,36,659) (4,34,702) (5,38,627) (6,48,788)
Taxes 82,328 (50,073) 78,796 62,323 63,183 Net block 12,01,463 13,52,855 14,09,161 15,70,651 17,20,905
Effective tax rate (%) 32.8 14.8 26.5 26.5 26.5 Capital WIP 2,21,605 2,81,341 3,16,006 3,16,006 3,16,006
PAT 1,68,942 13,132 2,18,360 1,72,710 1,75,094 Net fixed assets 14,23,068 16,34,196 17,25,168 18,86,657 20,36,911
Recurring PAT 1,60,426 74,887 2,09,576 1,72,710 1,75,094 Investments 4,66,764 3,83,871 5,15,524 5,15,524 5,15,524
Extraordinary items 8,515 (61,754) 8,785 0 0 Inventories 7,14,704 6,36,776 7,81,880 12,46,586 12,22,533
Reported PAT 1,68,942 13,132 2,18,360 1,72,710 1,75,094 Sundry debtors 1,54,480 1,28,441 1,33,977 2,24,285 2,30,956
Cash & Cash Equivalents 85,072 86,755 1,07,285 23,965 1,46,244
Ratios Loans & advances 3,12,990 2,40,867 76,707 64,707 52,707
Growth (%) Trade payables 3,86,790 2,52,516 3,38,746 5,83,284 6,17,791
Revenue 25.3 (8.0) (22.1) 84.6 (1.9) Other current liab. 5,29,538 5,07,934 6,65,128 8,12,043 8,48,118
EBITDA (4.9) (48.9) 118.9 (19.5) 3.8 Provisions 1,10,216 1,04,865 1,01,975 1,57,445 1,55,094
Adj. EPS (30.8) (53.3) 179.9 (17.6) 1.4 Net current assets 2,40,702 2,27,524 (6,000) 6,772 31,436
Gross 15.5 13.6 22.0 11.2 12.1
EBITDA 6.6 3.6 10.2 4.5 4.8 Cashflow
Adjusted PAT 3.0 1.5 5.5 2.5 2.6 Profit Before Tax 2,51,269 (36,941) 2,97,157 2,35,033 2,38,278
Returns (%) Depreciation & Amortisation 75,143 87,661 98,043 1,03,926 1,10,161
ROE 14.7 7.4 20.5 15.3 15.0 Net Interest 26,146 40,622 21,609 (23,048) (20,534)
ROCE 11.4 5.4 12.0 8.9 8.5 Net Change – WC (1,43,945) 35,303 1,07,680 (96,092) 97,615
Turnover (days) Net cash from operations 1,34,895 86,394 4,90,958 1,68,681 3,73,522
Gross block turnover ratio (x) 3.6 2.9 2.1 3.3 2.9 Capital expenditure (2,23,556) (2,96,970) (2,12,585) (2,65,415) (2,60,415)
Net working capital 17 17 (1) 0 2 Net cash from investing (2,18,390) (2,68,774) (2,21,540) (2,42,368) (2,39,881)
Solvency (x) FCF (88,661) (2,10,576) 2,78,373 (96,734) 1,13,107
Interest coverage ratio 8.1 3.0 12.7 12.3 11.4 Increase/(decrease) in debt 2,81,899 2,98,393 (1,43,218) 1,20,000 1,20,000
Net debt/EBITDA 2.2 6.0 2.2 3.4 3.2 Dividend paid (1,16,353) (58,023) (83,832) (1,31,346) (1,33,159)
Adjusted EPS 17.5 8.2 22.8 18.8 19.1 Others (44,199) 5 0 1,712 1,797
BVPS 118.3 102.1 120.4 124.9 129.4 Net cash from financing 83,574 1,87,358 (2,71,638) (9,634) (11,362)
CEPS 25.7 17.7 33.5 30.1 31.1 Net change in Cash 79 4,978 (2,219) (83,320) 1,22,279
Dividend payout (%) 57.2 297.1 50.5 65.0 65.0
Valuation (x)
P/E 6.8 14.5 5.2 6.3 6.2
P/BV 1.0 1.2 1.0 0.9 0.9
EV/EBITDA 5.4 12.2 5.0 6.9 6.6
Dividend yield (%) 8.9 3.6 10.1 10.3 10.5

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
Indraprastha Gas (IGL)

IGL’s cash flows have closely approximated fluctuations in operating profits, with Market data
(FY21 an exception). Operating cash flows have averaged ~Rs11.5bn over FY12-21. Bloomberg: IGL IN
Cumulative OCF of Rs115bn has been utilized in capex of Rs49.4bn and 52-week H/L: Rs604/364
investments/acquisitions of Rs26.7bn, leaving FCF of Rs38.8bn over the period.
Steadily improving profitability, reflecting in higher cash flows, has reflected in lower
leverage (Net DER down to negative 0.2x in FY21 from 0.2x in FY12), albeit return Free float: 42.9%
ratios have moderated somewhat owing to gradually higher capex over FY12-21. Avg. daily vol. 3mth: 2,914,322
Source: Bloomberg
expanded over the last 10 years. Working capital intensity in the business has been low, and over the last two years, there
has been a very sharp expansion in cash flows, driven by higher profitability. As a result, the company has consistently
generated strong operating cash flow. FY21 has seen some additional benefits from payables, driving large negative NWC.
Exhibit 689: OCF has consistently expanded over the last decade
20000
16000
12000
Rsmn
8000
4000
0
Analysis of working capital movement: Working capital has traditionally not been a drag on the business cash flows with net
working capital (NWC) being in the negative territory for most years in our reference period. This trend has remained fairly
constant despite a marked change in the scale of operations. In fact, FY21 saw a sharp expansion in payable days, helping to
boost cash flows for the year.
Exhibit 690: NWC negative for most of the decade
80 10
70
0
60
-10
50
# of days
Days #
40 -20
30
-30
20
-40
10
0 -50

xxxxx
Indraprastha Gas (IGL) 16 September 2021
250% 140%
120%
200%
100%
150% 80%
%
%
100% 60%
40%
50%
20%
0% 0%
Conversion of operating cash flow to FCF has been volatile: Conversion of OCF to FCF has been volatile, with the last
material inorganic investment being the 50% stake taken in Central UP Gas (FY14) and 50% stake taken in Maharashtra
Natural Gas (MNGL) in FY15. Since FY16, there has not been any meaningful acquisition or investment in any subsidiary;
hence, FCF is a direct function of OCF less capex for the period.
20000 CUGL MNGL
acquisition acquisition
15000
10000
5000
Rsmn
-5000
-10000
-15000
CFO Capex Acquisition/ Asset investment FCF
Return ratios have moderated somewhat; leverage has reduced materially: The sustained improvement in profitability and
no material impact of working capital-related issues has meant that balance sheet has consistently remained free of leverage
over the last decade. However, the higher capex intensity over FY18-21 has reflected in return ratios relatively moderating
over the last five years.
1.0 30.0%
20.0%
0.5
10.0%
0.0 0.0%
-10.0%
x
-0.5 -20.0%
-30.0%
-1.0
-40.0%
-1.5 -50.0%


Indraprastha Gas (IGL) 16 September 2021
P&L Balance sheet

Taxes 4,133 2,791 3,258 4,617 5,120 Net block 28,769 35,569 43,209 51,666 57,623
Other current assets 13,591 942 16,493 16,493 16,493
EBITDA 12.7 20.9 (2.4) 32.2 14.1 Provisions 224 2,808 3,727 4,735 5,680
Gross 41.1 43.3 54.9 54.6 52.4
EBITDA 21.8 23.4 30.0 31.2 29.7 Cashflow
ROE 20.6 24.7 18.4 21.8 20.8 Net Interest (1,242) (1,275) (948) (2,066) (2,312)
ROCE 20.6 24.7 18.3 21.6 20.7 Net Change – WC 2,642 1,720 3,473 5,943 5,699
Inventory 6 5 8 6 6 Investments (4,891) 3,973 (10,783) 0 0
Creditors 145 152 290 292 286 Others 490 452 1,349 2,170 2,417
Solvency (x) FCF 4,764 3,975 6,631 9,271 12,789
Per share (Rs) Interest paid (4) 0 0 (105) (105)
Adjusted EPS 11.2 16.2 14.4 19.8 21.9 Others 0 (409) (1,010) 0 0
Dividend payout (%) 21.4 17.2 25.1 25.1 25.1
Valuation (x)
P/E 50.8 35.1 39.7 28.8 26.0
P/BV 9.7 7.9 6.8 5.8 5.1
EV/EBITDA 31.3 24.9 26.2 19.5 16.6
Dividend yield (%) 0.4 0.5 0.6 0.9 1.0

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
Mahanagar Gas (MGL)

MAHGL’s cash flows have closely approximated fluctuations in operating profits, Market data
with relatively little impact of working capital on the company’s cash flow Current price: Rs1,175
generation (FY21 an exception). Operating cash flows have consistently grown at a Bloomberg: MAHGL IN
CAGR of 7% over FY12-21. Cumulative OCF of Rs76bn has been utilized in capex of 52-week H/L: Rs1,284/780
Rs27bn and investments/acquisitions of Rs9.5bn, leaving FCF of Rs39.7bn. Steadily
Market cap: Rs116bn
improving profitability, reflecting in higher cash flows, has reflected in lower
leverage (Net DER down to negative 0.5x in FY21 from negative 0.3x in FY12), albeit Free float: 41.2%
return ratios have moderated somewhat due to gradually higher capex over FY12-21. Avg. daily vol. 3mth: 526,861
Source: Bloomberg
expanded over the last 10 years. Working capital intensity in the business has been low, and over the last 3-4 years, there has
been a very sharp expansion in cash flows, driven by higher profitability. As a result, the company has consistently generated
strong operating cash flow. FY21 has seen some additional benefits from payables, driving large negative NWC.
Exhibit 695: OCF has consistently expanded over the last decade
14,000
12,000
10,000
8,000
Rsmn
6,000
4,000
2,000
0
constant, despite a marked change in the scale of operations. In fact, FY21 saw a sharp expansion in payable days, helping
boost cash flows for the year.
Exhibit 696: NWC has been negative for most of the decade – has reduced sharply over the last 2-3 years
80 20
70 10
60 0
50
# of days
-10
# days
40
-20
30
20 -30
10 -40
0 -50
xxxxx
Mahanagar Gas (MGL) 16 September 2021

2.5 1.25
2 1.2
1.5 1.15
x
x
1 1.1
0.5 1.05
0 1
Conversion of operating cash flow to FCF has been volatile: Conversion of OCF to FCF has been >60% for most years, with
limited acquisitions made by the company during the last decade. Since FY16, there has not been any meaningful acquisition
or investment in any subsidiary; hence, FCF is a direct function of OCF less capex for the period.
15,000 10,000
10,000 8,000
5,000 6,000
Rsmn
Rsmn
0 4,000
-5,000 2,000
-10,000 0
Return ratios have moderated somewhat; leverage remains a non-issue: Sustained improvement in profitability and no
over the last decade. However, the higher capex intensity over FY18-21 has reflected in return ratios relatively moderating
over the last five years.
0 35.0%
30.0%
-0.5
25.0%
20.0%
-1
x
15.0%
10.0%
-1.5
5.0%
-2 Net Debt/Equity Net Debt/EBITDA ROE ROCE 0.0%

Mahanagar Gas (MGL) 16 September 2021
P&L Balance sheet

Employee cost 709 806 875 963 1,011 Shareholders fund 23,989 29,527 32,324 36,851 41,984
Taxes 2,905 1,900 2,140 3,019 3,422 Net block 17,634 20,492 21,693 26,056 29,089
Minority/Associates 0 0 0 0 0 Non Current Assets 1,321 871 1,172 1,172 1,172
Reported PAT 5,464 7,935 6,196 8,739 9,906 Sundry debtors 995 684 1,275 801 916
Gross 50.2 54.0 65.8 64.6 63.5
EBITDA 31.7 35.4 43.4 44.4 43.8 Cashflow
ROE 24.3 27.5 20.0 25.3 25.1 Net Interest (264) (264) (312) 50 50
ROCE 24.3 29.9 20.2 25.4 25.2 Net Change – WC 418 1,374 602 (4,378) 920
Inventory 6 5 10 6 5 Investments 473 (4,316) 1,287 (1,025) (1,127)
Creditors 200 232 498 295 194 Others (1,234) 1,026 (2,331) 892 1,134
Solvency (x) FCF 3,222 5,594 4,660 (845) 6,708
Interest coverage ratio 2,743.0 161.2 129.9 261.0 294.2 Increase/(decrease) in debt (12) 0 0 0 0
CEPS 68.1 91.0 80.3 110.1 125.3 Net change in Cash 115 (112) 128 (5,238) 1,892
Dividend payout (%) 36.2 24.9 36.7 40.0 40.0
Valuation (x)
P/E 21.2 15.7 18.7 13.3 11.7
P/BV 4.8 3.9 3.6 3.1 2.8
EV/EBITDA 12.0 9.7 10.8 8.0 6.9
Dividend yield (%) 1.7 1.7 2.0 3.0 3.4

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
ONGC
ONGC’s cash flows have closely approximated fluctuations in crude prices, with Market data
working capital intensity having reduced post FY15, as the participation in subsidy Current price: Rs129
for fuels was eliminated from Q4FY15, thus reducing receivables from the Bloomberg: ONGC IN
government. Post the one year of adjustment due to that, working capital has 52-week H/L: Rs131/64
benefited OCF in most years. Cumulatively, OCF of Rs4,437bn has been utilized for
capex of Rs2,783bn and significant investments of Rs334bn, leaving net FCF at just
Rs1,320bn or 30% of OCF. This low conversion has reflected in weakening return Free float: 18.7%
ratios as well, with both RoE/RoCE seeing a steady decline over the last decade. Avg. daily vol. 3mth: 18,722,480
Source: Bloomberg
Cash flows have fluctuated in line with crude prices and government policy: Given its upstream operations, ONGC’s
operating profits have followed crude price trends (adjusting for materially high government subsidies till FY15). Over FY12-
15, average crude prices dipped from USD114/bbl to USD85/bbl, driving OCF from Rs492.5bn in FY12 to Rs426bn in FY15.
Since FY16, while average crude prices have declined, removal of subsidy has helped support cash flows.
Exhibit 701: Since FY16, removal of subsidy has helped support operating cash flows
700,000 700,000
600,000 600,000
500,000
500,000
400,000
300,000 400,000
Rsmn
Rsmn
200,000 300,000
100,000
200,000
0
-100,000 100,000
-200,000 0
working capital (NWC) being at a steady 70-75 days for most years. FY15 saw unusual movement in inventory and receivables
due to changes in policy on subsidy and/or sharp changes in crude prices.
Exhibit 702: NWC largely steady at 70-75 days for most of the decade
140 Shock in FY15 owing to change in subsidy regime; 160
120 steady pattern to NWC, thereafter 140
100 120
100
# of days
80
80
60
60
40 40
20 20
0 0
xxxxx
ONGC 16 September 2021
Exhibit 703: OCF/PAT at high levels, barring FY20-21 Exhibit 704: OCF/EBITDA comfortably >5x in most years
100 8
7
80
6
60
5
40 4
x
x
20 3
0 2
-20
0
Conversion of operating cash flow to FCF has been weak, driven by aggressive acquisitions: Conversion of OCF to FCF has
reduced considerably, as both ONGC and Oil India have aggressively pursued the Indian government’s policy to reduce
dependence on imports by acquiring stake in upstream assets globally while also aggressively incurring capex just to maintain
production from 2-3 decade old wells. Given the relatively longer gestation of some of these projects and adverse tax
structure (Russia assets), cash flows from these projects have come with a lag, driving weak FCF conversion in the period.
800,000 Acquisition of participating 350,000
Vankorneft acquisition
interest in Area 1, Mozambique 300,000
600,000
250,000
400,000
200,000
Rsmn
Rsmn
200,000 150,000
100,000
0
50,000
-200,000
0
-400,000 -50,000
Return ratios have reduced sharply: Owing to the relatively weaker earnings profile and sharply higher investment and capex
spends, return ratios have declined steadily over the last decade.
1 Aggressive acquisition/capex strategy with back-ended returns and older assets combined to 45.0%
steadily reduce return profile of the business 40.0%
0.8
35.0%
0.6
30.0%
0.4 25.0%
x
0.2 20.0%
15.0%
0
10.0%
-0.2 5.0%
-0.4 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 0.0%
net Debt/Equity net Debt/EBITDA ROE ROCE

ONGC 16 September 2021
P&L Balance sheet

Employee cost 1,20,639 1,24,258 1,29,229 1,34,398 1,39,774 Shareholders fund 20,17,896 19,43,381 20,45,586 21,84,990 23,27,271
Others 1,16,213 1,19,300 59,818 1,01,911 98,898 Minority Interest 0 0 0 0 0
EBITDA 5,94,689 4,92,869 3,28,127 5,10,781 5,32,782 Total debt 2,17,443 1,91,964 2,77,517 2,57,517 2,37,517
Depreciation & Amortisation 2,42,129 2,73,005 2,27,129 2,49,777 2,72,388 Non Current Liabilities 0 0 0 0 0
EBIT 3,52,560 2,19,864 1,00,998 2,61,004 2,60,394 Def tax liab. (net) 2,74,261 2,63,441 2,74,734 2,77,734 2,80,734
PBT 4,00,291 2,03,687 1,64,028 3,12,800 3,19,253 Less: acc. Depreciation (5,58,835) (8,06,149) (9,12,691) (11,68,848) (14,41,236)
Taxes 1,32,645 69,241 51,564 98,331 1,00,360 Net block 12,19,357 12,76,991 13,06,998 12,90,841 12,82,453
Effective tax rate (%) 33.1 34.0 31.4 31.4 31.4 Capital WIP 3,50,502 3,62,255 4,09,491 4,39,491 4,72,491
PAT 2,67,647 1,34,445 1,12,464 2,14,469 2,18,893 Net fixed assets 15,69,860 16,39,246 17,16,488 17,30,332 17,54,944
Recurring PAT 2,67,647 1,67,269 1,03,252 2,14,469 2,18,893 Investments 10,29,741 9,45,822 10,47,351 10,78,772 11,11,135
Extraordinary items 0 (32,824) 9,213 0 0 Inventories 77,039 85,666 84,745 1,24,186 1,28,165
Reported PAT 2,67,647 1,34,445 1,12,464 2,14,469 2,18,893 Sundry debtors 1,93,878 1,69,394 2,26,170 3,31,433 3,42,052
Cash & Cash Equivalents 5,041 9,682 3,026 1,44,342 2,13,836
Ratios Loans & advances 1,21,522 1,16,997 1,06,756 1,07,819 1,08,882
Growth (%) Trade payables 2,10,687 2,10,748 2,02,846 2,97,254 3,06,778
EBITDA 34.1 (17.1) (33.4) 55.7 4.3 Provisions 2,52,104 2,90,367 3,19,210 4,04,659 4,08,950
Adj. EPS 34.2 (37.5) (38.3) 107.7 2.1 Net current assets (90,001) (1,86,283) (1,66,003) (88,862) (20,557)
Gross 100.0 100.0 100.0 100.0 100.0
EBITDA 54.2 51.2 48.2 51.2 51.7 Cashflow
Adjusted PAT 24.4 17.4 15.2 21.5 21.2 Profit Before Tax 4,00,291 2,03,687 1,64,028 3,12,800 3,19,253
Returns (%) Depreciation & Amortisation 2,23,616 2,56,126 2,09,884 2,43,269 2,65,750
ROE 13.5 8.4 5.2 10.1 9.7 Net Interest 8,978 15,338 11,534 (51,795) (58,859)
ROCE 12.8 8.5 5.3 9.6 9.2 Net Change – WC (63,610) 1,26,655 (24,091) 64,176 1,189
ROIC 19.9 12.2 5.6 14.4 14.5 Direct taxes (1,12,076) (66,646) (28,349) (95,331) (97,360)
Turnover (days) Net cash from operations 4,23,038 5,77,853 2,76,651 4,43,444 4,00,300
Gross block turnover ratio (x) 0.6 0.5 0.3 0.4 0.4 Capital expenditure (2,63,191) (3,33,247) (2,44,911) (3,00,000) (3,30,000)
Debtors 53 69 106 102 119 Acquisitions, net (7,721) (4,374) 2,964 0 0
Inventory 69 86 139 108 129 Investments 8,159 (7,018) 6,880 (31,421) (32,363)
Creditors 195 223 337 258 308 Others 41,878 (4,944) 28,497 1,27,743 1,34,806
Net working capital (30) (71) (89) (32) (7) Net cash from investing (2,20,876) (3,49,583) (2,06,570) (2,03,677) (2,27,557)
Solvency (x) FCF 1,59,847 2,44,606 31,741 1,43,444 70,300
Net debt-equity 0.1 0.1 0.1 0.1 0.0 Issue of share capital (40,220) 0 0 0 0
Interest coverage ratio 23.9 17.5 14.8 25.1 31.5 Increase/(decrease) in debt (44,608) (82,247) 12,860 (20,000) (20,000)
Net debt/EBITDA 0.4 0.4 0.8 0.2 0.0 Dividend paid (1,09,595) (87,504) (22,053) (75,064) (76,613)
BVPS 160.4 154.5 162.6 173.7 185.0 Net cash from financing (2,07,249) (2,23,628) (76,738) (98,450) (1,03,248)
CEPS 40.5 35.0 26.3 36.9 39.1 Net change in Cash (5,086) 4,642 (6,657) 1,41,316 69,495
Dividend payout (%) 32.9 46.8 40.3 35.0 35.0
Valuation (x)
P/E 6.0 9.7 15.7 7.5 7.4
P/BV 0.8 0.8 0.8 0.7 0.7
EV/EBITDA 3.1 3.7 5.8 3.4 3.1
Dividend yield (%) 5.4 3.9 2.8 4.6 4.7

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
Oil India (OIL)

OIL’s cash flows have closely approximated fluctuations in crude prices, with working Market data
capital intensity having reduced post FY15, as participation in subsidy for fuels was Current price: Rs212
eliminated from Q4FY15, thus reducing receivables from the government. Barring Bloomberg: OINL IN
the one year of adjustment due to that, NWC has averaged at 80 days during the 52-week H/L: Rs213/83
decade and has had limited impact on net OCF. Expansions have been the bigger
absorber of available OCF over the period – cumulative OCF of Rs391bn has been
used for organic capex of Rs224bn and for acquisitions (mostly overseas upstream Free float: 21.6%
assets) of Rs216bn, driving negative FCF of Rs50bn and very low return ratios. Avg. daily vol. 3mth: 1,620,343
Source: Bloomberg
Cash flows have fluctuated in line with crude prices and government policy: Given its upstream operations, operating
profits have followed crude price trends (adjusting for materially high government subsidies till FY15). Over FY12-15, average
crude prices dipped from USD114/bbl to USD85/bbl, driving OCF from Rs46bn in FY12 to Rs38.86bn in FY15. Since FY16, while
average crude prices have declined, removal of subsidy has helped support CF. Working capital has been relatively small,
except for FY15 and FY18.
OCF has largely followed crude price trends and working capital has been a relatively small component
80,000 except for FY15-16, when subsidy was done away with
60,000
40,000
Rsmn
20,000

working capital (NWC) being at a steady 80 days for most years. FY15 saw unusual movement in inventory and receivables
due to changes in policy on subsidy and/or sharp changes in crude prices.
Exhibit 708: NWC days have remained fairly steady for most of the decade
140 Barring FY15, NWC days have remained fairly steady at 80-90 days for most years 160
120 140
100 120
100
# of days
# of days
80
80
60
60
40 40
20 20
0 0

xxxxx
Oil India (OIL) 16 September 2021

700% 140%
600% 120%
500% 100%
400% 80%
%
%
300% 60%
200% 40%
100% 20%
0% 0%
Conversion of operating cash flow to FCF has been weak, driven by aggressive acquisitions: Conversion of OCF to FCF has
reduced considerably, as both ONGC and OIL India have aggressively pursued the Indian Government’s policy to reduce
dependence on imports by acquiring stake in upstream assets globally while also aggressively spending capex just to maintain
production from 2-3 decade old wells. Given the relatively long gestation of some of these projects and adverse tax structure
(Russia assets), cash flows from these projects have come with a lag, driving negative FCF for the period. FY21 put additional
pressure on FCF, driven by government-mandated purchase of NRL stake from BPCL to facilitate the BPCL divestment
process.
100,000
50,000
Rsmn
0
-50,000
Purchase of Area 1, TAAS and Vankor assets of Russia Purchase of NRL stake
-100,000 Mozambique acquired; US operations started from BPCL

Return ratios have reduced sharply: Owing to the relatively weaker earnings profile and the sharply higher investment and
capex spends, return ratios have steadily declined over the last decade.
Exhibit 712: Return ratios have steadily declined over the last decade
12 Acquisitions of Russian upstream assets (FY19) and refiner NRL (FY21) have 25.0%
10 materially impacted leverage and return ratios
20.0%
8
15.0%
6
4 10.0%
x
2
5.0%
0
0.0%
-2
-4 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 -5.0%

Oil India (OIL) 16 September 2021
P&L Balance sheet

EBIT 39,875 24,280 (2,723) 22,957 24,312 Def tax liab. (net) 34,127 24,929 25,279 25,279 25,279
Taxes 13,261 (4,640) (10,185) 5,301 5,938 Net block 121,280 128,210 127,575 141,110 157,422
Extraordinary items (6,879) 17,107 8,577 0 0 Inventories 12,199 12,750 12,580 18,941 19,323
Gross 90.4 90.3 81.1 87.0 87.3
EBITDA 41.7 35.5 16.1 34.4 34.8 Cashflow
EBIT 29.0 20.0 (3.2) 17.7 18.4 YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
ROE 11.8 3.4 3.5 5.9 6.4 Net Interest (7) (3,105) 648 (8,037) (10,206)
ROCE 8.2 6.0 (1.3) 5.3 5.5 Net Change – WC 3,893 2,989 (10,368) (30,251) (1,520)
ROIC 31.8 20.4 0.8 10.2 9.1 Direct taxes (9,631) (3,805) 8,929 (5,301) (5,938)
Debtors 36 36 48 41 49 Acquisitions, net (223) (34) 0 0 0
Solvency (x) FCF 25,747 25,267 (7,398) (36,087) (10,413)
Net debt-equity 0.0 0.2 0.6 0.7 0.7 Issue of share capital (10,923) (8) 0 0 0
Interest coverage ratio 11.9 8.6 2.8 4.5 4.2 Increase/(decrease) in debt 21,268 (35,018) 70,706 30,000 5,000
BVPS 255.9 224.9 241.7 249.7 258.6 Net cash from financing (7,775) (55,544) 59,819 22,919 (2,931)
CEPS 46.3 25.4 23.4 34.5 36.3 Net change in Cash 35,467 (31,545) 5,510 (5,131) (3,138)
Dividend payout (%) 42.9 44.5 31.1 45.0 45.0
Valuation (x)
P/E 7.0 26.3 26.0 14.6 13.0
P/BV 0.8 0.9 0.9 0.8 0.8
EV/EBITDA 4.2 6.5 27.0 9.2 9.1
Dividend yield (%) 4.8 5.0 2.4 3.1 3.5

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
Petronet LNG (PLNG)

PLNG’s cash flows have closely approximated fluctuations in operating profits, with Market data
(FY16 an exception). Operating cash flows have consistently grown at a CAGR of 11% Bloomberg: PLNG IN
over FY12-21. Cumulative OCF of Rs273bn has been utilized in capex of Rs56bn and 52-week H/L: Rs,275/201
investments/acquisitions of just Rs0.7bn, leaving FCF of Rs216bn over the period.
Steadily improving profitability, reflecting in higher cash flows, has reflected in lower
leverage (Net DER down to negative 0.5x in FY21 from 0.7x in FY12), with return Free float: 46%
ratios also staying strong over the period. Avg. daily vol. 3mth: 3,682,083
Source: Bloomberg
History of robust and consistent cash flows from operations: Operating profits have been robust and have mostly expanded
over the last 10 years. Working capital intensity in the business has been low, and over the last 3-4 years, there has been a
very sharp expansion in cash flows, driven by higher profitability. As a result, the company has consistently generated strong
operating cash flows.
Exhibit 713: Consistent generation of strong operating cash flows
50,000 Sudden change in volume mix in favor of long-term volumes
from third party due to renegotiation with RasGas
40,000
30,000
Rsmn
20,000
10,000
Source: Company; Centrum Broking
constant despite a marked change in the scale of operations. FY16 saw the renegotiation of volumes/pricing arrangements
with RasGas, which led to long-term volumes shooting up in Q4FY16 and helped drive sharply higher positive WC.
Exhibit 714: Net working capital has ranged between 10 days and 15 days
35 NWC days have ranged between 10 and 15 days in most years – not a material impact on net OCF 20
30
25 15
# of days
# of days
20
10
15
10 5
5
0 0
Petronet LNG (PLNG) 16 September 2021
4.5 2.5
4.0
3.5 2.0
3.0
1.5
2.5
x
x
2.0
1.0
1.5
1.0 0.5
0.5
0.0 0.0
Source: Company; Centrum Broking Source: Company; Centrum Broking
Conversion of operating cash flow to FCF has been volatile: Conversion of OCF to FCF was weak due to very high capex over
FY13-17, but has improved sharply since then. Except for FY17, there has not been any meaningful acquisition or investment
in any subsidiary; hence, FCF is a direct function of OCF less capex for the period.
50,000 Early years of building the gas grid in Gujarat dragged FCF down; monetization of the same has 50,000
helped deliver stronger numbers post FY16
40,000
40,000
30,000
20,000 30,000
Rsmn
Rsmn
10,000 20,000
0
10,000
-10,000
-20,000 0
Return ratios have strengthened, leverage has declined since FY16: The sustained improvement in profitability and no
material impact of working capital-related issued has meant that balance sheet has consistently remained free of leverage
over the last decade. With capex intensity reducing post FY17, return ratios have improved post a weak period over FY14-16.
Exhibit 718: Pick-up in profitability from FY16 reflecting in lower leverage, stronger return ratios
Profitability has picked up sharply post FY16, reflecting in lower leverage and stronger return ratios
2.0 35.0%
1.5 30.0%
1.0 25.0%
0.5 20.0%
X
0.0 15.0%
-0.5 10.0%
-1.0 5.0%
-1.5 0.0%

Petronet LNG (PLNG) 16 September 2021
P&L Balance sheet

EBITDA 32,935 41,774 46,995 48,473 52,991 Total debt 7,334 1,012 230 0 0
Interest expenses 989 4,032 3,360 0 0 Total liabilities 132,216 162,973 168,273 170,468 176,661
Taxes 10,782 4,131 10,183 16,442 17,084 Net block 76,651 111,882 103,131 104,706 111,973
Effective tax rate (%) 33.3 13.3 25.7 36.9 36.9 Capital WIP 3,482 47 255 255 204
Gross 10.4 14.0 20.5 14.9 15.9
EBITDA 8.6 11.8 18.1 13.0 13.9 Cashflow
ROE 21.8 23.3 26.1 22.8 21.4 Net Interest (466) 1,271 1,332 0 0
ROCE 20.2 30.0 28.2 22.8 21.4 Net Change – WC (4,523) (3,964) (1,746) (11,860) 8,399
Inventory 6 6 7 5 6 Investments 867 7,294 (11,588) 0 0
Creditors 21 25 39 29 35 Others 1 2,524 3,043 4,507 2,706
Net working capital 48 51 89 62 60 Net cash from investing (760) 9,410 (9,273) (5,495) (13,916)
Solvency (x) FCF 19,832 28,223 34,864 10,169 27,683
Interest coverage ratio 33.3 10.4 14.0 0.0 0.0 Increase/(decrease) in debt (6,202) (6,322) (368) (10,916) (8,014)
Adjusted EPS 14.4 16.3 19.7 18.7 19.5 Others 0 (1,876) (1,407) 0 0
CEPS 17.1 21.5 24.9 24.4 25.7 Net change in Cash (4,777) 7,494 (1,267) (11,240) 7,375
Dividend payout (%) 69.6 69.5 58.5 53.4 51.4
Valuation (x)
P/E 16.2 14.3 11.8 12.4 12.0
P/BV 3.5 3.2 3.0 2.7 2.4
EV/EBITDA 9.7 7.3 6.2 6.3 5.6
Dividend yield (%) 4.3 5.4 4.9 4.3 4.3

16 September 2021
Probal Sen
+91 22 4215 9001
[email protected]
SECTOR: OIL & GAS
RIL
RIL has seen its core annual OCF grow to more than 2x FY12 levels by FY21, with OCF Market data
of Rs710bn on an average over FY17-21 vs Rs374bn over FY12-16. Aggressive Current price: Rs2,428
expansion outside of its traditional downstream and upstream oil & gas focus, Bloomberg: RIL IN
coupled with near doubling of petchem capacity has reflected in earnings and cash 52-week H/L: Rs2,480/1,746
flows. However, the relentless growth in balance sheet size with a combination of
core capex and non-core investments (Retail + Telecom) has meant that overall FCF
has remained negative, implying weak return ratios. Cumulative OCF of Rs5.4tn has Free float: 43.7%
been exceeded by capex of Rs6.1tn and investments of Rs3tn, with RoE/RoCE Avg. daily vol. 3mth: 7,466,889
compressing by 330bp/26bp over FY17-21. Source: Bloomberg
Operating profits have picked up sharply over the last decade: Operating profits, and hence, operating cash flows have
picked up dramatically over the last decade, particularly after FY14-15, as the second refinery (RPL) started delivering and the
KG D6 asset also performed well till FY14. Also, post that, the Telecom/Retail segments have also gradually supported
earnings/cash flows. Working capital has not been a major component barring FY19 and FY21, when sharp movement in
payables caused a material WC impact on cash flows.
Exhibit 719: WC has been a drag on OCF in only two of the 10 years due to higher payables
1,000 1,200
800
1,000
600
800
400
Rsbn
Rsbn
200 600
0
400
-200
200
-400
-600 0
Analysis of working capital movement: Working capital has traditionally not been a drag on the business cash flows, except
for FY19/21 when a large jump in creditors (including supplier advances) led to large negative working capital impact on OCF.
Exhibit 720: Barring a few years, NWC has been a negative 16-17 days
140 30
120 20
10
100
0
# of days
# of days
80 -10
60 -20
-30
40
-40
20 -50
0 -60

nxxxxx
RIL 16 September 2021
160% 250%
140%
200%
120%
100% 150%
80%
%
%
60% 100%
40%
50%
20%
0% 0%
Conversion of operating cash flow to FCF has been weak: The last decade saw weak FCF conversion, with capex +
investments outweighing core OCF. In the later years, while both capex and investments increased dramatically, FCF
compressed even more, with FY21 finally seeing a big jump in the other direction post value unlocking in Retail and Telecom
subsidiaries.
1,500 Significant jump in JIO Infocomm/Additional JIO Fiber and Retail investment ramp up 500.0
debentures also subscribed to
1,000 -
500
(500.0)
Rsbn
Rsbn
0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 (1,000.0)
-500
-1,000 (1,500.0)
First big jump in JIO Organic capex on downstream capacity and
-1,500 investments petcoke gasifier over FY17-20 (2,000.0)
Return ratios have been declining: Aggressive investment in multiple business expansions and the relatively longer term
gestation of the various business ventures have meant that return ratios have been subdued. Leverage, however, after
reaching very high levels over FY15-17, has shown a sustained improvement in the last four years.
4.0 Return ratios subdued due to aggressive investment in multiple business expansions 45.0%
3.5 40.0%
3.0 35.0%
30.0%
2.5
25.0%
2.0
X
20.0%
1.5
15.0%
1.0 10.0%
0.5 5.0%
0.0 0.0%
net Debt/Equity net Debt/EBITDA ROE ROCE

RIL 16 September 2021
P&L Balance sheet

Others (47,750) (46,440) (111,354) (47,657) (102,853) Minority Interest 82,800 80,160 992,600 992,600 992,600
EBITDA 841,670 882,170 807,370 932,101 1,121,388 Total debt 3,013,490 3,295,250 2,646,670 2,516,670 2,386,670
PBT 551,240 534,990 549,450 696,288 862,854 Less: acc. Depreciation (1,981,480) (2,111,300) (2,377,020) (2,651,981) (2,959,156)
Taxes 153,900 137,260 17,220 132,295 163,942 Net block 3,863,770 5,223,990 5,310,460 6,468,569 6,904,577
Effective tax rate (%) 27.9 25.7 3.1 19.0 19.0 Capital WIP 1,794,630 1,091,060 1,259,530 515,111 360,577
Minority/Associates 1,030 1,070 5,160 5,000 5,000 Non Current Assets 176,760 374,070 661,240 661,240 661,240
Recurring PAT 398,370 452,230 500,773 568,994 703,912 Investments 1,646,120 2,038,520 2,123,820 2,123,820 2,123,820
Extraordinary items 0 (53,430) 54,652 0 0 Inventories 675,610 739,030 816,720 833,607 894,308
Cash & Cash
Ratios 821,040 1,038,350 1,698,430 1,392,636 1,555,896
Equivalents
YE Mar FY19A FY20A FY21A FY22E FY23E Loans & advances 162,800 498,350 636,730 815,467 890,708
Growth (%) Other current assets 414,710 327,630 412,930 433,577 455,255
Revenue 45.3 4.8 (21.8) 28.6 9.3 Trade payables 1,083,090 967,990 1,088,970 1,094,109 1,207,316
EBITDA 31.2 4.8 (8.5) 15.4 20.3 Other current liab. 1,432,510 2,204,410 1,060,860 1,075,911 1,075,911
Adj. EPS 12.9 13.5 10.7 13.6 23.7 Provisions 41,820 36,800 51,290 58,802 68,568
Margins (%) Net current assets (182,370) (409,280) 1,553,830 1,493,172 1,700,552
Gross 25.7 28.1 30.2 30.1 31.4 Total assets 7,418,880 8,420,950 11,011,000 11,364,031 11,852,886
EBITDA 14.8 14.8 17.3 15.5 17.1
EBIT 11.1 11.1 11.6 10.9 12.4 Cashflow
YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Adjusted PAT 7.0 7.6 10.7 9.5 10.7
Returns (%) Profit Before Tax 552,270 536,060 554,610 696,288 862,854
ROE 11.7 10.8 8.7 7.9 9.0 Depreciation & Amortisation 209,340 222,030 265,720 274,961 307,175
ROCE 8.6 8.0 7.4 6.3 7.2 Net Interest 115,390 115,630 106,610 34,291 28,295
ROIC 10.5 10.5 9.0 7.4 8.6 Net Change – WC (287,820) 219,040 (507,310) (245,136) (44,120)
Turnover (days) Direct taxes (121,910) (83,860) (32,130) (135,917) (166,659)
Gross block turnover ratio (x) 1.0 0.8 0.6 0.7 0.7 Net cash from operations 423,460 980,740 261,850 559,752 919,573
Debtors 15 15 15 13 14 Capital expenditure (927,770) (755,530) (1,035,180) (688,650) (588,650)
Inventory 55 60 87 72 70 Acquisitions, net 0 0 0 0 0
Creditors 93 87 115 95 93 Investments (38,240) (17,290) (465,420) 60,122 63,129
Net working capital (12) (25) 121 91 95 Others 14,730 15,650 84,260 114,239 113,315
Solvency (x) Net cash from investing (951,280) (757,170) (1,416,340) (514,289) (412,206)
Net debt-equity 0.6 0.5 0.1 0.1 0.1 FCF (504,310) 225,210 (773,330) (128,898) 330,923
Interest coverage ratio 5.1 4.0 3.8 6.5 8.2 Issue of share capital 2,320 1,300 2,135,970 0 0
Net debt/EBITDA 2.6 2.6 1.2 1.2 0.7 Increase/(decrease) in debt 832,940 314,910 (884,120) (130,000) (130,000)
Per share (Rs) Dividend paid (42,820) (45,920) (39,210) (77,340) (77,340)
Adjusted EPS 61.8 70.2 77.7 88.3 109.2 Interest paid (233,380) (285,080) (183,400) (143,917) (136,767)
BVPS 600.6 703.4 1,086.4 1,161.9 1,258.3 Others 0 (10,620) (10,220) 0 0
CEPS 94.3 104.6 118.9 130.9 156.9 Net cash from financing 559,060 (25,410) 1,019,020 (351,257) (344,107)
DPS 5.5 6.0 7.0 10.0 10.0 Net change in Cash 31,240 198,160 (135,470) (305,794) 163,260
Dividend payout (%) 8.9 9.7 8.4 11.3 9.2 Source: Company, Centrum Broking
Valuation (x)
P/E 39.3 34.6 31.3 27.5 22.2
P/BV 4.0 3.5 2.2 2.1 1.9
EV/EBITDA 21.5 20.6 20.9 18.3 14.9
Dividend yield (%) 0.2 0.2 0.3 0.4 0.4

16 September, 2021
Cyndrella Carvalho
Research Analyst, Pharmaceuticals
+91 22 4215 9643
SECTOR: PHARMACEUTICALS [email protected]
Aarti Drugs (ARTD)

Operating cash flows have grown at a CAGR of 17% over the last 10 years. Net working Market data
capital days have by-and-large been within a range of 80-100 days since FY15. Current price: Rs617
Inventory volatility in FY18 and FY21 was driven by industry-wide raw material supply Bloomberg: ARTD IN
chain disruption. ARTD has been consistently incurring capex of about Rs750mn per 52-week H/L: Rs1,027/580
year on an average. While capex intensity has reduced amid the pandemic, the
management has announced Rs6bn capex, which it intends to finance through
internal accruals. Return ratios have averaged at about 20% over the decade. Free float: 35.1%
Source: Bloomberg
Operating cash flows have grown at a CAGR of 17% over FY12-21: ARTD’s operating profits have been improving consistently
over 10 years. Working capital has been inconsistent due to raw material inventories, which take 1-2 years to normalize. While
there have been dips in FY18 and FY21, operating cash flows have grown at a CAGR of 17% over FY12-21.
Exhibit 725: OCF has grown at a CAGR of 17% over FY12-21, despite high working capital
4,000
3,000
2,000
Rs in mn
1,000
(1,000)
(3,000) Operating profit before wcap changes Wcap changes CFO
Analysis of working capital movement: Rising share of exports in the API business has led to higher debtor days. Inventory
levels have stretched amid the pandemic to sustain demand dynamics. Net working capital days have been at similar levels for
the last four years.
Exhibit 726: Working capital cycle impacted by high debtor days
120
100
80
Days
60
40
20
0
Debtors Inventory Payable Net working capital
Aarti Drugs (ARTD) 16 September 2021
Exhibit 727: Cash conversion ratios

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
OCF/PAT 2% 28% 47% 381% 194% 214% 85% 170% 182% 55% 136%
OCF/EBITDA 2% 37% 32% 84% 75% 91% 35% 68% 94% 35% 55%
Rapid capacity expansion has subdued conversion of operating cash to free cash: ARTD has consistently spent on capacity
expansion. The API business needs to sustain capex. While capex intensity is lower amid the pandemic, the management has
announced Rs6bn capex.
Exhibit 728: High capex spend has affected FCF generation
3,000
2,500
2,000
1,500
Rs in mn
1,000
500
-
(500)
(1,000)
CFO Capex Net FCF

Asset turn (x) 1.6 1.6 1.5 1.2 1.1 1.0 1.0 1.1 1.2 1.3
Deployment of FCF: ARTD has repaid debt whenever possible from the FCF generated and unlocked value for the shareholders
via buyback.
Exhibit 730: Deployment of FCF
2,500
2,000
1,500
1,000
Rs in mn
500
-
(1,000)
(1,500)
(2,000) FCF Inflow from equity raise/Outflow from Buyback Increase/ (decrease) in debt

Return Ratios (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
RoE 12.67 23.48 26.56 9.8 20.7 21.3 19.0 16.9 23.0 35.8 20.1
RoCE 12.67 23.47 26.92 13.8 17.6 17.5 16.3 15.5 19.4 32.1 19.5

Net Debt/Equity 1.5 1.4 1.3 1.3 1.3 1.1 1.1 0.9 0.5 0.3
Net Debt/EBITDA 0.2 1.0 1.2 3.3 2.6 2.4 2.6 2.3 1.3 0.7

Aarti Drugs (ARTD) 16 September 2021
P&L Balance sheet

Employee cost 609 694 805 966 1,159 Shareholders fund 5,434 6,525 9,134 12,320 16,775
Taxes 436 439 886 1,043 1,482 Net block 6,249 6,351 6,595 8,280 9,739
Recurring PAT 837 1,369 2,802 3,250 4,566 Investments 124 134 173 173 173
Reported PAT 874 1,414 2,804 3,250 4,566 Sundry debtors 4,585 4,886 5,552 4,531 5,867
Cash & Cash Equivalents 56 76 98 3,073 4,371
Revenue 25.5 15.7 19.3 18.1 29.5 Other current liab. 829 1,328 1,054 1,115 1,444
Gross 32.1 34.7 38.7 36.5 37.4
EBITDA 13.5 14.7 20.3 19.7 20.6 Cashflow
ROE 16.8 22.9 35.8 30.3 31.4 Net Interest 435 374 230 141 117
ROCE 11.2 16.3 26.6 24.7 27.7 Net Change – WC (292) 338 (1,856) 2,103 (1,099)
Inventory 90 89 102 90 76 Investments (17) (9) (39) 0 0
Creditors 86 89 91 80 75 Others 0 (87) 28 (28) 0
Net working capital 107 88 105 103 107 Net cash from investing (710) (481) (825) (2,334) (2,136)
Solvency (x) FCF 822 2,042 816 3,780 2,125
Net debt-equity 0.9 0.5 0.3 0.0 (0.1) Issue of share capital 0 (3) 699 0 0
Interest coverage ratio 4.8 7.1 19.0 35.7 57.9 Increase/(decrease) in debt (380) (1,295) (370) (600) (600)
Net debt/EBITDA 2.3 1.3 0.7 (0.1) (0.4) Dividend paid (28) (56) (112) (112) (112)
BVPS 57.6 70.0 98.0 132.2 180.0 Net cash from financing (809) (2,021) (795) (804) (828)
CEPS 13.4 19.9 35.4 41.5 56.3 Net change in Cash 13 21 21 2,975 1,298
DPS (0.3) (0.3) (1.0) (1.0) (1.0) Source: Company, Centrum Broking
Dividend payout (%) (2.7) (1.6) (3.3) (2.9) (2.0)
Valuation (x)
P/E 69.5 42.0 20.5 17.7 12.6
P/BV 10.7 8.8 6.3 4.7 3.4
EV/EBITDA 29.3 22.8 13.8 11.3 8.1
Dividend yield (%) 0.0 0.0 -0.2 -0.2 -0.2

16 September, 2021
Cyndrella Carvalho
+91 22 4215 9643
Abbott
Abbott remains a cash flow compounder; its operating cash flows have grown Market data
consistently at a CAGR of 20% over the last decade. Its strong marketing platform Current price: Rs21,004
enables its domestic business to grow at 2.5x IMP on an average. Given the domestic Bloomberg: BOOT IN
market presence, working capital remains in favor of the company. Expansion of 52-week H/L: Rs21,870/13,835
products and consistent cost efficiencies have driven operating leverage and
consistent margin expansion. With minimal capex, almost all its operating cash flows
are converted to free cash flows. On an average, RoE has been 24% and RoCE has been Free float: 23.4%
21%. Abbott has increased dividend payout, and given its stellar cash flows, dividends Avg. daily vol. 3mth: 17,048
should continue to increase. Source: Bloomberg
History of robust and consistent cash flows from operations: Operating profits have grown at a CAGR of ~20% over the last
decade. With very low working capital adjustment, this has translated to cash flow from operations.
Exhibit 733: Consistent growth in cash flow from operations
14,000
12,000
10,000
8,000
Rs in mn
6,000
4,000
2,000
-
(2,000) CY11 CY12 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
(4,000)
Operating profit before wcap changes (Rsbn) Wcap changes CFO
Analysis of working capital movement: Favorable payable and debtor days along with strong control on inventory have helped
Abbott to maintain a short working capital cycle. This trend has been observed with all the domestic players.
Exhibit 734: Working capital cycle has improved over the years
100
80
60
Days
40
20
0
CY11 CY12 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-20
xxxxx
Abbott 16 September 2021
With minimal capex, almost the entire OCF is converted to FCF: Abbott has not incurred any major capex over the last decade.
The little capex it has incurred can be majorly attributed to debottlenecking and upkeep of existing facilities.
Exhibit 735: Almost 100% conversion of OCF to FCF
14,000
12,000
10,000
8,000
Rs in mn
6,000
4,000
2,000
-
(2,000)
CFO Capex Net FCF
Dividend distribution: The company has consistently been distributing dividends to its shareholders from the free cash
available. In FY21, it distributed a dividend of Rs275/share.
Exhibit 736: Dividend distributed has grown at a CAGR of 36% over the last decade to Rs275/share
15,000
10,000
5,000
Rs in mn
-
(5,000)
(10,000)
FCF Dividend/buyback
Exhibit 737: Earnings and dividend per share

(Rs/share) CY11 CY12 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Cash EPS 64 77 104 115 127 138 196 220 307 350
Dividend yield 1.2 1.1 1.3 0.8 0.7 0.9 1.0 0.9 1.6 1.8
Dividend per share 17 17 23 31 35 40 55 65 250 275

Return Ratios (%) CY12 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
RoE 24.3 29.4 26.5 21.4 19.9 23.7 22.4 24.3 26.3 24.2
RoCE 36.1 25.1 23.1 18.8 17.4 19.4 18.9 21.1 24.5 21.0
RoIC 76.1 29.1 25.1 24.2 62.2 142.2 271.1 376.9 125.9

(%) CY12 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 AVG
OCF/PAT 5% 7% 8% 180% 213% 226% 140% 225% 183% 136%
OCF/EBITDA 5% 8% 8% 135% 149% 157% 107% 167% 143% 101%

Abbott 16 September 2021
P&L Balance sheet

Others 1,245 911 924 1,866 1,720 Minority Interest 0 0 0 0 0
Depreciation & Amortisation 169 596 581 620 620 Non Current Liabilities 754 2,240 2,074 2,074 2,074
Other income 1,133 1,144 809 1,513 1,720 Gross block 1,219 1,607 1,630 1,551 1,551
Taxes 2,485 2,112 2,315 3,210 3,841 Net block 1,050 1,011 1,048 931 931
PAT 4,503 5,915 6,845 9,280 11,104 Net fixed assets 1,057 1,028 1,055 938 938
Revenue 11.2 11.3 5.1 17.3 13.7 Other current liab. 894 826 1,019 1,019 1,019
Gross 43.2 43.4 44.4 46.7 46.7
EBITDA 16.4 18.5 21.2 23.2 24.3 Cashflow
ROE 24.3 26.6 27.2 33.0 33.8 Net Interest 23 85 183 96 109
ROCE 24.4 26.9 27.7 33.2 34.1 Net Change – WC 3,577 884 473 (2,661) (616)
Solvency (x) FCF 7,897 6,900 7,440 6,832 10,597
Adjusted EPS 211.9 278.3 322.1 436.7 522.5 Others 312 (26) 1,872 2 2
BVPS 945.2 1,144.3 1,224.5 1,425.5 1,666.0 Net cash from financing (1,368) (1,769) (5,323) (5,105) (6,103)
Dividend payout (%) 30.7 23.4 85.4 45.0 45.0
Valuation (x)
P/E 99.1 75.5 65.2 48.1 40.2
P/BV 22.2 18.4 17.2 14.7 12.6
EV/EBITDA 71.0 56.1 46.3 36.0 29.8
Dividend yield (%) 0.3 0.3 1.3 0.9 1.1

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Aurobindo Pharma (ARBP)

ARBP has seen consistent improvement in cash flow generation from FY18. In the last Market data
two years, its cash flows have been well ahead of the historical range, as the business’ Current price: Rs755
ability to generate cash has improved. Net working capital has been steady for the Bloomberg: ARBP IN
last five years, though inventory cycle remains heavy. The nature of the business 52-week H/L: Rs1,064/660
necessitates high working capital, but its size now ensures significant cash flow
generation. The stark improvement in balance sheet from leverage-driven to net-
cash, also aided by Natrol divestment, is a key highlight. Return ratios indicate better Free float: 43.4%
asset utilization, with the 10-year average at ~20%. ARBP’s return ratios have been Avg. daily vol. 3mth: 3,199,356
better than peers, with better acquisitions. R&D spend is controlled, at ~4% of sales. Source: Bloomberg
History of robust and consistent operating profits: ARBP’s cash flows from operations have grown at a CAGR of 29% in the last
decade. In the last five years, operating profit before working capital changes has grown at 13%, whereas cash flows from
operations have been almost flat.
Exhibit 740: Cash flows from operations have grown at a CAGR of 29% over FY12-21
50,000
40,000
30,000
Rs in mn
20,000
10,000
(10,000)
Operating profit before wcap changes Wcap changes CFO
Analysis of working capital movement: We observe an improvement in working capital cycle over the decade, led by decrease
in debtor days, though inventory days remain high. Since FY18, the working capital cycle has been flattish at ~35 days.
Exhibit 741: Working capital cycle has been improving over the decade
200
150
Days
100
50
0
Aurobindo Pharma (ARBP) 16 September 2021

OCF/PAT -128% 454% 55% 75% 71% 142% 81% 70% 155% 103% 108%
OCF/EBITDA 68% 44% 30% 48% 45% 95% 52% 42% 91% 62% 58%
Rapid capacity expansions and acquisitions from operating cash: Historically, FCF generation has been poor due to higher
capex and frequent acquisitions. In the past two years, FCF generation has increased significantly.
50,000 79 products Natrol sale: USD50mn
Acquired Generis from Magnum Capital: EUR135mn
from TEVA
40,000 and Shreya Life's Russia business: USD100mn
30,000
20,000
Rs in mn
10,000
-
(20,000)
(30,000) Dermatology & oral solid brands acquired from Novartis: USD900mn+
CFO Capex Acquisitions Net FCF 7 oncology drugs from Sectrum Pharma: USD160mn
Generic drug business from Mallinckrodt PLC: USD900mn

Asset turn (x) 0.8 0.9 1.0 1.1 1.0 0.9 0.9 0.8 0.8 0.8 0.9
Dividend distribution: The company has been consistently distributing dividends to its shareholders.
Exhibit 745: Consistently distributing dividends to shareholders
50,000
40,000
30,000
Rs in mn
20,000
10,000
-
(10,000)

RoE -10.6 2.4 36.9 35.9 31.8 27.6 23.0 18.5 18.4 16.6 20.1
RoCE 6.6 7.4 26.9 27.7 29.0 26.1 23.0 18.4 17.9 18.5 20.2

Net Debt/Equity 1.1 1.2 0.9 0.6 0.5 0.3 0.3 0.3 0.2 (0.0)
Net Debt/EBITDA 5.2 5.1 1.6 1.3 1.1 0.7 0.9 1.2 0.6 (0.1)
Exhibit 748: Cumulative R&D spend of Rs56bn (4% of sales) over FY14-21
(Rs in mn) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
R&D 2,750 3,460 4,640 5,430 6,670 8,680 9,580 15,100 -
% of sales 3.4 2.9 3.4 3.7 4.0 4.4 4.1 6.1 4.01

Aurobindo Pharma (ARBP) 16 September 2021
P&L Balance sheet

Others 24,982 29,841 38,129 31,791 35,120 Minority Interest 16 1 (9) (9) (9)
Depreciation & Amortisation 6,680 9,667 10,554 11,196 13,104 Non Current Liabilities 465 1,622 2,507 2,758 3,034
Other income 1,553 862 3,808 2,088 2,083 Gross block 83,103 94,472 100,001 86,188 92,032
Taxes 7,269 9,135 20,098 13,743 15,200 Net block 76,423 84,805 89,447 74,992 78,927
Minority/Associates 27 (152) (554) (554) (554) Non Current Assets 5,864 5,768 7,115 7,265 7,431
Extraordinary items (881) (261) 28,146 0 0 Inventories 72,456 76,999 90,266 91,717 90,790
Ratios Loans & advances 14,083 695 1,272 1,459 1,637
Gross 55.5 57.9 60.0 59.6 59.8
EBITDA 20.2 20.9 21.5 22.8 22.8 Cashflow
ROE 19.2 18.6 13.0 15.6 15.0 Net Interest 2,626 1,598 745 619 687
Gross block turnover ratio (x) 2.4 2.4 2.5 3.1 3.2 Capital expenditure (27,075) (22,058) (21,081) 3,259 (17,040)
Inventory 274 280 308 309 278 Investments (487) (1,945) (363) 0 1,598
Creditors 106 98 98 79 55 Others (740) 354 (1,070) 0 0
Net working capital 185 165 206 230 247 Net cash from investing (28,301) (23,649) (22,514) 3,259 (15,442)
Solvency (x) FCF (11,614) 20,421 34,268 34,090 36,862
Interest coverage ratio 15.0 30.2 71.6 98.0 98.9 Increase/(decrease) in debt 22,706 (10,665) (4,494) (18,000) 0
Net debt/EBITDA 1.2 0.6 0.0 (0.5) (0.9) Dividend paid (1,317) (2,093) (2,093) (2,093) (2,093)
Per share (Rs) Interest paid (2,626) (1,598) (745) (619) (687)
Adjusted EPS 41.9 48.8 43.0 62.5 69.2 Others (200) 2,781 (615) (3,390) (554)
Dividend payout (%) 4.7 6.2 3.3 4.8 4.3
Valuation (x)
P/E 18.0 15.5 17.6 12.1 10.9
P/BV 3.2 2.6 2.0 1.8 1.5
EV/EBITDA 12.4 9.7 8.2 6.8 5.6
Dividend yield (%) 0.3 0.4 0.4 0.4 0.4

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Biocon
Rs
Biocon is the only meaningful play in the biosimilar space. Its cash flows from Market data
operations have grown at a CAGR of 8% over the last decade. It has been in heavy Current price: Rs377
investment mode, with cumulative capex of Rs99bn over the last 10 years. To fund its Bloomberg: BIOS IN
capex, besides internal accruals, Biocon has also relied on debt and has recently raised 52-week H/L: Rs488/328
equity (Rs13bn in FY20/21). Being present in first wave biosimilar launches, Biocon’s
FCF generation has been lagging and its return ratios are constrained. R&D spend has
been extensive at five-year average of 9% of sales. Cash flow improvement is Free float: 36.6%
dependent on market share gains in the developed market for key products and Avg. daily vol. 3mth: 2,303,194
partner commercial strategy. Insulin glargine interchangeability is one hope. Source: Bloomberg
Improving cash flows from operations: In the past decade, cash flows from operations grew at a CAGR of 8%, with a negative
growth of 10% in the first five years. Since FY15, cash flows from operations have grown at a CAGR of ~33%.
Exhibit 749: Cash flows from operations have grown at a CAGR of 8% over the decade
20,000
15,000
10,000
CAGR FY12-16: -10%
Rs in mn
5,000
(10,000)
Analysis of working capital movement: Biocon’s working capital cycle decreased from 84 days in FY12 to 61 days in FY21. Over
the last four years, working capital cycle has been maintained at ~60 days.
Exhibit 750: Working capital cycle maintained at ~60 days since FY17
120
100
80
Days
60
40
20
0

Biocon 16 September 2021

(%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
OCF/PAT 167% 142% 136% 48% 70% 105% 141% 157% 209% 85% 126%
OCF/EBITDA 109% 89% 82% 29% 58% 65% 101% 103% 102% 76% 81%
Exhibit 752: High capex spend constrained FCF generation

15,000
10,000
5,000
Rs in mn
-
(5,000)
(10,000)
(15,000)
(20,000)
CFO Capex Investing in Subsidary/ Acquistion Net FCF


FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
Asset turn (x) 0.6 0.5 0.4 0.4 0.4 0.5 0.5 0.4 0.5
Exhibit 754: Negative FCF funded by debt and by raising equity capital
25,000
20,000
15,000
Rs in mn
10,000
5,000
-
(5,000)
FCF Inflow from equity raise/Outflow from Buyback Increase/ (decrease) in debt

RoE 15.0 13.3 14.5 13.8 14.5 13.9 9.4 12.9 9.2 18.7 13.5
RoCE 13.1 12.3 13.3 11.7 9.6 11.2 7.9 11.8 11.1 10.2 11.2

Net Debt/Equity - (0.3) (0.2) (0.0) 0.0 0.0 0.1 0.1 0.1 0.1
Net Debt/EBITDA - (1.7) (0.9) (0.1) 0.1 0.2 0.4 0.5 0.6 0.7
Exhibit 757: Cumulative R&D spend of Rs31bn (7.4% of sales) during the decade
(Rs in mn) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
R&D 1,366 1,640 1,310 1,688 1,310 4,019 3,804 4,796 5,270 6,270 -
% of sales 7.1% 6.8% 4.6% 5.6% 4.0% 10.5% 9.6% 8.9% 8.5% 8.7% 7.4%

Biocon 16 September 2021
P&L Balance sheet

Interest expenses 709 660 577 1,622 1,573 Total liabilities 94,151 111,034 149,064 132,703 149,820
Taxes 2,123 3,151 1,966 3,461 5,967 Net block 42,527 53,964 55,573 62,416 66,228
Minority/Associates (715) (2,173) 2,145 (1,450) (1,450) Non Current Assets 910 1,844 2,678 1,145 1,145
Extraordinary items 1,946 675 0 0 0 Inventories 10,316 14,359 18,666 14,815 17,688
Ratios Loans & advances 1,665 1,774 3,276 570 570
Adj. EPS 57.0 (58.2) 122.2 (36.6) 84.5 Net current assets 22,777 21,588 43,131 21,461 34,765
Gross 67.2 69.5 71.1 71.9 72.6
EBITDA 20.4 19.8 20.7 25.0 27.6 Cashflow
ROE 13.0 9.6 19.1 11.0 18.0 Net Interest 709 660 577 1,622 1,573
ROCE 10.7 9.9 11.3 9.2 14.0 Net Change – WC (3,308) 59 (8,516) 19,526 5,591
Inventory 169 219 273 254 194 Investments (3,573) 168 (8,205) 0 0
Creditors 212 224 235 197 150 Others 2,996 187 (355) 0 0
Solvency (x) FCF (10,520) (9,841) (10,579) 22,786 20,785
Net debt-equity 0.1 0.1 0.2 0.2 0.0 Issue of share capital 139 2,067 381 0 0
Interest coverage ratio 15.9 19.1 26.3 13.2 19.5 Increase/(decrease) in debt (1,335) 1,030 16,660 (300) (300)
Net debt/EBITDA 0.6 0.7 1.0 0.8 (0.1) Dividend paid (351) (702) (600) 0 (600)
Per share (Rs) Interest paid (709) (660) (577) (1,622) (1,573)
Adjusted EPS 12.3 5.1 11.4 7.2 13.3 Others 10,120 7,488 4,928 (22,408) 584
BVPS 101.6 55.9 63.6 67.5 80.3 Net cash from financing 7,864 9,223 20,792 (24,330) (1,890)
CEPS 15.2 6.8 14.4 13.4 20.1 Net change in Cash (2,656) (618) 10,213 (1,544) 18,895
DPS (0.5) (0.5) (0.5) (0.5) (0.5) Source: Company, Centrum Broking
Dividend payout (%) (3.2) (8.8) (4.4) (6.9) (3.8)
Valuation (x)
P/E 30.7 73.4 33.1 52.2 28.3
P/BV 3.7 6.7 5.9 5.6 4.7
EV/EBITDA 20.8 18.7 15.9 11.3 7.3
Dividend yield (%) (0.1) (0.1) (0.1) (0.1) (0.1)

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Cipla
Cipla’s cash flows from operations have grown at a CAGR of 9% over FY12-21. Market data
However, in the first half of the decade, there was little growth. Growth improved Current price: Rs954
from FY19, driven by key inhaler asset monetization in the US market. Domestically, Bloomberg: CIPLA IN
its strong Covid drugs basket is aiding growth well ahead of the IPM. The company is 52-week H/L: Rs997/706
focusing on the Indian market and the inhaler pipeline in the US. Net working capital
is on an improving trajectory from FY19. The Invagen acquisition in FY16 at USD550mn
saw meaningful impairment of ~Rs8.5bn in FY17/18. RoE has been steady at ~10% for Free float: 58.6%
the last five years. R&D spend at 7% of sales is in line with peers. Avg. daily vol. 3mth: 2,742,953
Source: Bloomberg
Cash flows from operations have grown at a CAGR of 36% over FY18-21: Cash flows from operations have grown at a CAGR
of 9% over FY12-21. However, the trend was flattish in the first half of the decade. Over FY18-21, cash flows from operations
have grown at a CAGR of 36%.
40,000
30,000
CAGR FY12-16: 0%
20,000
Rs mn
10,000
(10,000)
Analysis of working capital movement: We observe an improving trend in working capital cycle, aided largely by a decline in
inventory days.
Exhibit 759: Working capital cycle has by-and-large improved over the decade
160
140
120
100
Days
80
60
40
20
0

xxxxx
Cipla 16 September 2021

OCF/PAT 133% 92% 113% 99% 126% 187% 109% 108% 198% 156% 132%
OCF/EBITDA 95% 64% 73% 54% 70% 96% 52% 54% 96% 88% 74%
Rapid capacity expansions and acquisitions from operating cash: The company periodically acquires brands from other players
to improve its foothold in the market. In FY16, it acquired InvaGen Pharmaceuticals and Exelan Pharmaceuticals for USD550mn.
The acquisitions were impaired over the next two years to the extent of Rs8.5bn.
Exhibit 761: FCF consistently improving from FY17
50,000 Brands Vysov & Vysov M for Rs308mn
40,000 Brands CPink, CDense, Productiv and Folinine under WHC for Rs829mn
30,000
20,000
Rs mn
10,000
-
(20,000)
(30,000) InvaGen Pharma and Exelan Pharmac for 100% stake in Mirren (an OTC
OTC brand
(40,000) USD550mn through debt funding manufacturer and distributor in SA)
Dentopain for
Rs654mn
CFO Capex Investment in subsidary/ Acquisition Net FCF
Source: Company, centrum

Asset turn (x) 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.7 0.8
Source: Company, centrum
Exhibit 763: Consistently paying dividends to shareholders

40,000
30,000
20,000
10,000
Rs mn
-
(20,000)
(30,000)
(40,000) FCF Dividend/buyback
Source: Centrum, company

RoE 18.0 18.2 14.6 11.4 12.5 10.6 10.1 10.7 10.1 14.1 13.0
RoCE 21.1 22.8 18.3 14.7 12.4 7.7 10.2 11.6 11.9 17.2 14.8

(x) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity (0.1) (0.1) 0.1 0.1 0.3 0.2 0.1 0.1 0.1 (0.1)
Net Debt/EBITDA (0.6) (0.6) 0.3 0.3 1.5 1.1 0.7 0.5 0.2 (0.5)
Exhibit 766: R&D spend for the decade was Rs83bn, 6.3% of sales
R&D spend 3,238 4,251 5,292 6,789 8,906 10,853 10,473 11,819 11,750 9,240 -
% of sales 4.6% 5.3% 5.4% 6.2% 6.6% 7.6% 7.1% 7.4% 7.0% 6.0% 6.3%

Cipla 16 September 2021
P&L Balance sheet

EBIT 18,070 20,313 31,848 35,758 43,649 Def tax liab. (net) 2,239 1,254 (181) 2,500 2,500
Interest expenses 1,684 1,974 1,607 1,481 656 Total liabilities 204,766 194,768 205,804 226,871 252,061
Taxes 5,695 6,312 8,888 9,633 12,086 Net block 70,225 67,054 64,464 68,835 69,737
Minority/Associates 181 (5) 36 49 63 Non Current Assets 6,224 7,547 7,196 7,534 7,635
Gross 66.2 66.7 62.2 62.1 63.8
EBITDA 19.1 18.7 22.2 21.9 23.5 Cashflow
ROE 10.7 10.1 14.1 13.7 15.1 Net Interest 1,684 1,974 1,607 1,481 656
Inventory 253 254 225 219 225 Investments (13,561) 6,979 (12,519) (200) (200)
Creditors 128 129 108 111 133 Others (2,326) (1,293) 357 0 0
Solvency (x) FCF 1,134 31,075 17,685 25,604 29,061
Net debt/EBITDA 1.2 0.6 0.0 (0.4) (0.8) Dividend paid (2,828) (4,717) (2,831) (2,831) (2,831)
Per share (Rs) Interest paid (1,684) (1,974) (1,607) (1,481) (656)
Adjusted EPS 19.4 19.2 29.8 33.2 41.6 Others (2,597) (5,811) 3,515 0 0
Dividend payout (%) 15.5 26.1 10.1 9.0 7.2
Valuation (x)
P/E 49.1 49.7 32.0 28.7 22.9
P/BV 5.1 4.9 4.2 3.7 3.2
EV/EBITDA 25.7 24.6 18.1 16.1 13.0
Dividend yield (%) 0.3 0.5 0.3 0.3 0.3

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Dr Reddy’s Laboratories (DRRD)

After a declining trend over FY16-18, driven by the US generic business, DRRD’s cash Market data
flows from operations have grown at a strong CAGR of 26% over FY18-21. Working Current price: Rs4,932
capital cycle has stabilized at 130-135 days. RoCE has averaged at ~16% over the Bloomberg: DRRD IN
decade and has been on an improving trajectory in the last three years. R&D spends 52-week H/L: Rs5,650/4,135
have rationalized to 8-9% of sales from a peak of 13-14%, driven by management
focus on better R&D productivity. DRRD has impaired nearly the entire Teva-Actavis
brand basket acquisition, including brands like Nuvaring and Suboxone. The recent Free float: 67.3%
acquisition of Wockhardt is on faster sales ramp-up, with better strategic fit. Key Avg. daily vol. 3mth: 704,454
management change has firmed well for shareholders. Source: Bloomberg
Cash flows from operations have grown at a CAGR of 9% over FY12-21: Cash flows from operations have grown consistently
over the past decade, barring FY17 and FY18. After the decline over FY16-18, driven by the US generic business, cash flows
from operations have grown at a strong CAGR of 26% over FY18-21, aided by lower working capital.
Exhibit 767: After a declining trend over FY16-18, cash flows from operations grew at a CAGR of 26% over FY18-21
50,000
40,000
30,000
Rs in mn
20,000
10,000
-
(10,000)
(20,000)
Analysis of working capital movement: Net working capital days increased in the first half of the decade, with a significant rise
in FY17, and have stagnated thereafter at 130-135 days. The increase in working capital cycle has largely been led by rising
inventory days.
Exhibit 768: NWC has been rising, led by increase in inventory
160
140
120
100
Days
80
60
40
20
0
xxxxx
Dr Reddy’s Laboratories (DRRD) 16 September 2021

OCF/PAT 105% 86% 95% 119% 145% 178% 158% 153% 117% 146% 130%
OCF/EBITDA 66% 49% 61% 72% 76% 85% 76% 87% 82% 78% 73%
Large expansions/acquisitions have impacted FCF generation: DRRD has been spending a significant part of its cash from
operations to expand either organically or inorganically. It has periodically acquired brands/companies to fuel growth. In FY21,
it acquired some brands from Wockhardt to expand its domestic business. Other notable acquisitions include brands from Teva
(Actavis acquisition fallout), brands from Glenmark for CIS markets in FY20, and brands from UCB in FY15.
40,000 OctoPlus acquisition: Brands from Glenmark for CIS markets
Rs1.8bn
20,000
-
Rs in mn
(20,000)
Brands from UCB: Brands from

(40,000)
Rs8bn Wockhardt for India
and Nepal: Rs18.5bn
(60,000)
CFO Capex Acquisitions Net FCF

Asset turn (x) 0.9 0.9 0.8 0.8 0.8 0.7 0.6 0.7 0.8 0.8
Dividend distribution: DRRD has been consistently paying dividends to its shareholders.
Exhibit 772: Consistently paying dividends to shareholders
30,000
20,000
10,000
Rs in mn
(20,000)
(30,000)

RoE 29.6% 24.5% 25.4% 21.1% 18.8% 9.5% 9.1% 14.1% 17.3% 14.8% 18.4%
RoCE 25.1% 22.8% 21.4% 19.4% 18.5% 7.6% 6.4% 11.1% 12.8% 16.7% 16.2%

Net Debt/Equity 0.2 0.2 0.1 0.0 (0.1) 0.3 0.2 0.1 (0.0) (0.0)
Net Debt/EBITDA 0.6 0.5 0.3 0.1 (0.1) 1.2 1.3 0.4 (0.1) (0.1)
Exhibit 775: Cumulative R&D spend of Rs147mn (10% of sales) in the last decade
R&D spend 5,910 7,670 12,400 17,450 17,830 19,550 18,260 15,610 15,410 16,540 -
% of sales 6.0% 7.0% 9.4% 11.8% 11.5% 13.9% 12.9% 10.1% 8.8% 8.7% 10%

Dr Reddy’s Laboratories (DRRD) 16 September 2021
P&L Balance sheet

Interest expenses (2,280) (2,461) (2,636) (1,882) (1,523) Total liabilities 177,852 175,868 208,275 231,400 258,697
Other income (725) (917) (503) (1,532) (2,141) Gross block 110,645 92,463 104,905 103,869 103,154
Taxes 3,648 (1,466) 9,175 9,294 10,491 Net block 98,455 79,991 92,109 89,257 86,463
Extraordinary items 0 (7,671) (6,768) 0 0 Inventories 33,579 35,066 45,412 41,590 47,507
Gross 60.9 56.3 59.3 59.0 59.1
EBITDA 21.2 20.5 24.0 25.5 25.7 Cashflow
ROE 14.1 18.4 15.6 17.0 16.6 Net Interest (1,117) (983) (1,653) (183) 785
ROCE 9.6 12.6 12.7 14.2 14.6 Net Change – WC (467) (6,579) (784) (10,049) (14,323)
Gross block turnover ratio (x) 1.4 1.9 1.8 2.1 2.4 Capital expenditure (8,111) 5,992 (24,914) (11,760) (13,897)
Inventory 184 155 188 175 158 Investments (2,888) (907) (1,299) (3,620) (5,413)
Creditors 90 71 81 70 63 Others (1,023) (3,000) 405 (1,747) (2,357)
Solvency (x) FCF 15,370 18,465 3,312 19,241 17,629
Net debt-equity 0.2 0.1 0.1 0.0 (0.1) Issue of share capital 421 285 (8,495) 0 0
Interest coverage ratio (14.5) (14.9) (17.4) (29.7) (42.3) Increase/(decrease) in debt (16,430) (16,380) 11,699 (5,126) (5,123)
Net debt/EBITDA 1.0 0.4 0.3 0.0 (0.3) Dividend paid (3,320) (3,324) (4,155) (4,155) (4,155)
Per share (Rs) Interest paid 2,280 2,461 2,636 1,882 1,523
Adjusted EPS 113.2 163.2 155.9 194.9 219.9 Others 1,269 (1,682) 7,779 16 17
BVPS 844.6 932.5 1,061.5 1,231.3 1,426.3 Net cash from financing (15,780) (18,640) 9,464 (7,383) (7,739)
CEPS 186.7 238.3 232.9 282.8 320.4 Net change in Cash (410) (175) 12,776 11,858 9,890
Dividend payout (%) 17.7 17.1 21.7 12.8 11.4
Valuation (x)
P/E 43.6 30.2 31.6 25.3 22.4
P/BV 5.8 5.3 4.6 4.0 3.5
EV/EBITDA 25.8 22.8 18.3 14.6 12.5
Dividend yield (%) 0.4 0.4 0.5 0.5 0.5

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
FDC
Operating cash flow generation has improved over the last two years. Working capital Market data
intensity has been steady, though it was marginally impacted by raw material Current price: Rs365
inflation in the recent past. FDC has a fast-moving working capital cycle despite being Bloomberg: FDCLT IN
inventory-heavy. Free cash flow generation has also improved significantly over the 52-week H/L: Rs405/255
last two years. Domestic business revival and focus along with niche profitable
ophthalmic US business has aided cash flow generation. The company has been a
consistent dividend payer and recently adopted a combination of buyback and Free float: 30.5%
dividend to reward shareholders. Return ratios have been steady. Avg. daily vol. 3mth: 403,222
Source: Bloomberg
History of robust and consistent cash flows from operations: Operating profits have significantly expanded in the last two
years. Working capital intensity in the business has been moderate, given the dominance of domestic market. The company
has been consistently generating operating cash flows in a similar range. The spurt in cash flows from operations in the last
two years is on account of increased export business and domestic growth.
4,000
3,000
2,000
Rs in mn
1,000
-1,000
Net profit Working capital changes Cash From Operating Activities
Analysis of working capital movement: FDC has a fast-moving working capital cycle despite being inventory-heavy. It has been
able to maintain its payable days and receivable days over the years. The company enjoys a long credit period from its suppliers.
Exhibit 777: Fast-moving working capital cycle despite being inventory-heavy
70
60
50
40
Days
30
20
10
0
Receivable days Inventory days Payable days Net working capital

FDC 16 September 2021

OCF/EBITDA 96% 91% 79% 74% 76% 63% 66% 49% 85% 85% 76%
OCF/APAT 117% 105% 120% 101% 103% 82% 86% 66% 104% 94% 98%
Exhibit 779: High capex has led to poor conversion of OCF to FCF
4,000
3,000
2,000
1,000
Rs in mn
-
-2,000
-3,000
-4,000 Cash From Operating Activities CAPEX FCF
Dividend distribution/buybacks: In terms of cash flows from financing activities, major chunk of the outflows has been towards
dividend payments or buybacks.
Exhibit 780: FDC has been creating value through buybacks and dividend distribution
2,500 2.2mn shares bought
3.4mn shares bought back
2,000 at Rs350/share back at Rs450/share
1,500
1,000
Rs in mn
500
-
-500 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
-1,000
-1,500 FCF Buy Back of Equity Shares Capital
3.4mn shares bought back at
Equity Dividend Paid Increase / (Decrease) in Loan Funds Rs350/share

RoE 19.9 20.4 20.6 16.6 19.4 19.0 16.3 15.3 18.8 20.9 18.7
RoCE 18.7 19.4 15.3 14.2 16.7 16.0 13.6 12.5 16.0 18.4 16.1
RoIC 29.4 27.0 20.5 19.8 23.8 25.6 22.5 21.2 28.4 34.2 25.2

Leverage ratios FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net Debt/Equity (x) -0.5 -0.4 -0.4 -0.3 -0.3 -0.3 -0.3 -0.4 -0.3 -0.3 -0.3 -0.3
Net Debt/EBITDA (x) -1.4 -1.8 -1.7 -1.2 -1.3 -1.7 -1.3 -1.9 -1.9 -1.8 -1.8 -1.7

(Rs/share) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Cash EPS 8.3 10.1 9.0 10.5 11.4 12.6 12.0 11.8 16.3
Dividend yield (%) 2.6 2.4 1.8 1.5 1.2 0 0 0 0.4 0.4
Dividend per share 366 404 400 400 400 137

FDC 16 September 2021
P&L Balance sheet

Others 798 1,234 0 1,126 1,431 Minority Interest 0 0 0 0 0
Other income 435 689 970 1,116 1,283 Gross block 7,154 6,985 7,122 10,151 11,975
Taxes 668 801 865 1,231 1,751 Net block 6,822 6,610 6,744 9,564 11,360
Extraordinary items (32) (10) (21) 0 0 Inventories 1,738 2,100 2,149 2,357 2,788
Reported PAT 1,698 2,399 3,012 3,503 4,226 Sundry debtors 875 1,237 1,105 1,543 1,880
Cash & Cash Equivalents 213 323 316 1,988 3,590
Growth (%) Trade payables 776 1,179 773 1,153 1,383
Gross 68.4 68.3 68.9 69.2 69.8
EBITDA 21.2 21.8 25.1 26.3 27.2 Cashflow
ROE 12.7 16.1 18.5 18.4 18.5 Net Interest 14 34 34 20 20
ROCE 12.8 16.3 18.6 18.5 18.6 Net Change – WC (506) (241) (480) 1 (514)
Inventory 177 165 187 166 159 Investments (1,137) (798) (1,282) 1,153 (347)
Solvency (x) FCF (57) 1,444 1,200 1,857 1,590
Net debt-equity 0.0 0.0 0.0 (0.1) (0.1) Issue of share capital (7) (4) (2) 0 0
Interest coverage ratio 160.6 85.8 97.3 211.2 266.4 Increase/(decrease) in debt (1) (1) (1) 0 0
Net debt/EBITDA (0.1) (0.1) (0.1) (0.5) (0.7) Dividend paid 0 (141) (164) (164) (164)
Adjusted EPS 9.9 14.1 18.0 20.8 25.0 Others (1) (1,153) (1,005) 0 197
BVPS 82.5 90.5 102.7 122.5 147.7 Net cash from financing (23) (1,333) (1,207) (184) 12
CEPS 11.8 16.3 20.2 24.2 28.7 Net change in Cash (80) 111 (7) 1,672 1,602
Dividend payout (%) 0.0 5.7 4.6 3.9 3.2
Valuation (x)
P/E 37.0 25.9 20.3 17.6 14.6
P/BV 4.4 4.0 3.6 3.0 2.5
EV/EBITDA 26.6 20.9 18.4 14.1 10.9
Dividend yield (%) 0.0 0.2 0.2 0.2 0.2

16 September 2021
Cyndrella Carvalho
Research Analyst , Pharmaceuticals
+91 22 4215 9643
GlaxoSmithKline Pharmaceuticals (GLXO)

GLXO’s cash flows from operations grew at a CAGR of 6% over the last decade, lower Market data
than peers. However, post the Augmentin impact, cash flows from operations have Current price: Rs1,573
steadily grown at a CAGR of 24% over FY17-21. The company had invested Rs10.8bn Bloomberg: GLXO IN
in its Vemgal plant, which was sold to Hetero Labs at Rs1.8bn before 52-week H/L: Rs1,803/1,376
commercialization, as the key product Ranitidine was globally withdrawn by the
parent. The Ranitidine impact did not affect cash flows due to land sale. After
FY16/17, return ratios have revived and have continued to improve to 32% in FY21. Free float: 18.6%
GLXO has consistently paid dividends, often exceeding earnings / FCF for the year and Avg. daily vol. 3mth: 72,198
payout has been higher than peers. Source: Bloomberg
Cash flows from operations bounced back in the second half of the decade: Operating profits have been robust and have
consistently expanded over the last five years. Working capital intensity in the business has been low to moderate due to
favorable payable days. As a result, the company has consistently generated strong operating cash flows over FY17-21.
Exhibit 784: Cash flows from operations bounced back from FY16; have grown at a CAGR of 6% in the last decade
6,000
5,000
4,000
3,000
Rs in mn
2,000
1,000
-
(1,000)
(2,000)
Analysis of working capital movement: The company enjoys higher payable days than debtor days, which helps maintain low
working capital days, despite high inventory turnover time.
Exhibit 785: Significantly higher payable days than debtor days helps to keep net working capital days in control
100
80
60
Days
40
20
0
GlaxoSmithKline Pharmaceuticals (GLXO) 16 September 2021

CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
OCF/PAT 40% 34% 62% 64% 37% 64% 140% 98% 106% 75%
OCF/EBITDA 43% 38% 53% 53% 29% 48% 93% 68% 74% 58%

8,000
6,000
4,000
Rs in mn
2,000
(2,000)
(4,000)
(6,000) Vemgal capex at Rs10.8bn; sold to Hetreo Labs for Rs1.8bn

CFO Capex Net FCF

CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Asset turn (x) 0.8 0.8 0.8 0.9 1.0 0.8 0.8 0.9 1.0
Dividend distribution: The company has been consistently distributing dividends to its shareholders from the free cash
available. In FY21, it declared a special dividend of Rs5/share along with normal dividend of Rs30/share.
Exhibit 789: Dividend payouts have often been higher than FCF for the year
6,000
4,000
2,000
Rs in mn
-
(2,000)
(4,000)
(6,000)

Return Ratios (%) CY12 CY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
ROE (%) 45.0 22.4 19.1 16.2 17.4 16.6 19.9 23.3 32.2 23.6
ROIC (%) 529.4 246.9 90.7 41.1 29.7 27.7 35.8 40.2 72.8 123.8
ROCE (%) 43.5 31.1 26.0 22.2 22.7 22.7 27.3 28.7 37.3 29.1
Exhibit 791: Dividend has often exceeded earnings for the year
Cash EPS 27 34 30 30 24 21 23 29 10 26
Dividend yield 2.3 2.3 1.7 1.8 1.3 1.1 1.7 1.5 3.2 2.1
Dividend 45 50 50 62.5 50 30 35 20 40 35

GlaxoSmithKline Pharmaceuticals (GLXO) 16 September 2021
P&L Balance sheet

Other income 1,009 762 1,106 1,029 1,262 Gross block 4,786 7,999 4,323 2,002 2,338
Taxes 2,373 1,877 1,924 2,237 2,619 Net block 4,300 7,173 3,530 1,580 1,525
Effective tax rate (%) 36.3 29.0 26.5 25.6 25.6 Capital WIP 10,026 1,201 132 132 132
Extraordinary items 287 (3,415) (1,726) 0 13,192 Inventories 4,865 4,830 5,467 2,259 2,416
Reported PAT 4,458 1,191 3,617 6,503 20,803 Sundry debtors 1,205 998 2,156 1,052 1,182
Ratios Loans & advances 900 310 257 3,782 4,248
Other current assets 1,412 779 2,567 2,471 2,553
EBITDA 18.6 9.7 5.2 17.0 20.3 Provisions 924 2,768 2,542 3,104 859
Gross 56.6 59.6 59.0 59.0 60.8
EBITDA 19.3 20.5 21.7 23.3 24.9 Cashflow
ROE 19.9 23.3 32.2 40.1 43.1 Net Interest (1,003) (699) (1,106) (1,029) (1,262)
ROCE 17.4 20.4 27.5 33.8 36.0 Net Change – WC (551) (3,318) 1,622 (194) (1,856)
Turnover (days) Net cash from operations 3,696 (2,450) 4,633 5,233 18,497
Gross block turnover ratio (x) 6.5 4.0 7.4 17.4 16.8 Capital expenditure (2,355) 4,732 4,000 1,528 (758)
Inventory 133 135 143 98 55 Investments 1 1 (1,799) 0 0
Creditors 122 107 114 100 80 Others 1,057 939 790 983 1,194
Net working capital 65 85 99 137 130 Net cash from investing (1,297) 5,673 2,991 2,511 437
Solvency (x) FCF 2,399 3,222 7,624 7,744 18,934
Net debt-equity (0.4) (0.4) (0.6) (0.6) (0.7) Issue of share capital 0 0 (7) 0 0
Interest coverage ratio 1,087.2 104.9 0.0 0.0 0.0 Increase/(decrease) in debt (4) (2) 0 0 0
Per share (Rs) Interest paid (6) (63) 0 0 0
Adjusted EPS 24.5 27.1 31.4 38.3 44.8 Others 432 4,013 (793) (203) 0
CEPS 54.8 63.9 72.2 81.5 99.1 Net change in Cash (1,251) (882) 748 2,516 1,315
Dividend payout (%) 76.0 569.0 140.5 52.1 81.4
Valuation (x)
P/E 60.0 224.5 73.9 41.1 12.9
P/BV 6.2 7.3 8.9 7.7 7.5
EV/EBITDA 0.6 0.5 0.4 0.4 0.4
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Granules India (GRAN)

GRAN’s cash flows from operations have grown at a CAGR of 37% over FY12-21, with Market data
a significant dip in FY18. FY18 was largely impacted by raw material inflation and Current price: Rs333
supply challenges from China, followed by higher receivables. After FY18, working Bloomberg: GRAN IN
capital cycle has improved with better receivables management. In FY21, inventory 52-week H/L: Rs438/295
cycle was impacted again amid supply shortages and raw material inflation. Return
ratios have improved since FY19 along with debt reduction. The management has
announced capex of Rs10bn over the coming three years, which should largely be Free float: 55.9%
internally-funded. Avg. daily vol. 3mth: 4,295,496
Source: Bloomberg
History of robust and consistent cash flows from operations: Operating profits before working capital have been growing
consistently over the last decade. With very low working capital adjustments, cash flows from operations have moved in line
with operating profits except in FY18 and FY21. Cash flows from operations have grown at a CAGR of 37% over the decade with
a significant dip in FY18.
Exhibit 792: Cash flows from operations grew at a CAGR of 37% over the last decade
8,000
6,000
4,000
Rs in mn
2,000
(2,000)
(4,000)
Analysis of working capital movement: Working capital cycle has been volatile over the years, with a decline in FY12-15
followed by a sharp rise over FY16-18 due to sharp rise in debtors. Post FY18, working capital cycle has improved aided by
better debtor management.
Exhibit 793: Working capital cycle has been improving since FY18 aided by better receivables management
140
120
100
80
Days
60
40
20
0
xxxxx
Granules India (GRAN) 16 September 2021

(%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Avg
OCF/PAT 86% 279% 143% 165% 125% 115% 0% 111% 133% 124%
OCF/EBITDA 32% 107% 68% 72% 55% 63% 0% 68% 91% 61%
Rapid capacity expansions led to poor conversion of operating cash to FCF: Over the last decade, GRAN has periodically
invested in capacity expansion, leading to negative free cash flows for most of the decade.
6,000
OmniChem JV divestment
4,000
2,000
Rs in mn
-
(2,000)
(4,000) Granules-Biocause JV
divestment: Rs1.11bn
(6,000)

Asset turn (x) 1.3 1.2 1.3 1.2 1.0 0.8 0.7 0.8 0.8 0.9
FCF utilization: With FCF being negative for most part of the decade, GRAN has had to rely on capital raising and borrowings.
In the last two years, the company has generated positive FCF and utilized it primarily to repay debt and buy back shares.
Exhibit 797: Has used positive FCF in the last two years to repay debt and buy back shares
4,000
2,000
-
Rs in mn
(2,000)
(4,000)
(6,000)
FCF Inflow from equity raise/(Outflow from Buyback) Increase/ (decrease) in debt

Return Ratios (%) FY12 FY13 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
RoE 12.9 12.6 23.9 23.1 22.2 20.9 11.8 16.7 21.2 19.2
RoCE 14.6 12.6 19.6 18.7 20.0 16.5 10.8 12.5 16.2 16.8

Net Debt/Equity 0.6 0.8 1.0 0.9 0.6 0.6 0.6 0.6 0.3 0.2
Net Debt/EBITDA 1.9 2.5 2.3 1.8 1.5 1.8 3.0 2.2 1.0 0.6

Granules India (GRAN) 16 September 2021
P&L Balance sheet

Taxes 891 1,157 1,549 1,964 2,655 Net block 7,476 9,888 10,712 14,169 16,487
Minority/Associates 0 0 0 0 0 Non Current Assets 500 821 1,264 861 912
Recurring PAT 2,364 3,571 5,494 5,590 7,557 Investments 2,104 193 190 190 190
Gross 44.9 50.7 57.0 53.0 54.0
EBITDA 16.8 20.2 26.4 24.0 25.0 Cashflow
ROE 16.7 21.2 27.4 22.9 24.5 Net Interest 285 270 263 193 177
ROCE 8.8 11.8 20.5 18.2 20.6 Net Change – WC (349) (679) (1,429) (312) (2,563)
Inventory 97 117 160 134 103 Investments (529) 1,880 40 0 0
Creditors 84 107 127 110 101 Others (59) (334) (440) 403 (51)
Net working capital 135 155 139 130 139 Net cash from investing (3,133) (403) (2,644) (5,080) (4,791)
Solvency (x) FCF 333 3,739 2,727 2,416 2,802
Net debt-equity 0.6 0.3 0.2 0.1 0.0 Issue of share capital 10 0 (7) 0 0
Interest coverage ratio 13.5 19.4 32.5 48.5 69.1 Increase/(decrease) in debt (252) (1,398) (428) (600) (600)
Net debt/EBITDA 2.2 1.0 0.6 0.3 0.0 Dividend paid (305) (306) (298) (298) 0
Adjusted EPS 9.3 14.0 22.2 22.6 30.5 Others 233 184 (1,860) (34) 53
BVPS 60.2 72.5 87.7 109.1 139.6 Net cash from financing (599) (1,790) (2,856) (1,126) (723)
CEPS 13.4 19.4 28.3 30.7 40.3 Net change in Cash (266) 1,949 (129) 1,290 2,079
Dividend payout (%) 10.7 7.6 4.5 4.4 0.0
Valuation (x)
P/E 35.8 23.7 15.0 14.8 10.9
P/BV 5.5 4.6 3.8 3.1 2.4
EV/EBITDA 23.7 16.7 10.2 9.1 6.8
Dividend yield (%) 0.3 0.3 0.3 0.3 0.0

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Lupin
Cash flows from operations have been inconsistent, peaking in FY17, with peak US Market data
sales at USD1.2bn. While cash flows from operations have grown at a CAGR of 14% Current price: Rs968
over the decade, they have been flat in the last four years. Working capital cycle has Bloomberg: LPC IN
been increasing. EBITDA to OCF conversion is the lowest among peers. The Gavis 52-week H/L: Rs1,268/855
acquisition at USD880mn (9x sales) in FY16 was later impaired to the extent of
USD560mn in two tranches. Lupin divested the Japanese business (Kyowa) in FY20 at
~2x sales. Acquisitions and investments in speciality brands have been the least Free float: 43.2%
productive. Return ratios have been stuck at ~9% over the last four years compared Avg. daily vol. 3mth: 1,654,846
to 20%+ earlier. R&D investments have averaged at 10.1% of sales over the decade. Source: Bloomberg
Cash flows from operations have been inconsistent: Over FY12-15, cash flows from operations grew linearly, followed by a
drastic fall in FY16 and an extraordinary jump in FY17. Cash flows from operations have been more-or-less flat since FY18.
Exhibit 800: Cash flows from operations have grown at a CAGR of 14% over FY12-21, but with large swings in between
50,000
40,000
1% CAGR FY18-21
30,000
20,000
Rs in mn
10,000
-
(20,000)
(30,000)
(40,000)
Rising working capital: During the decade, the working capital cycle has been increasing due to rising debtors.
Exhibit 801: Working capital cycle has risen over the decade
160
140
120
100
Day
80
60
40
20
0
xxxxx
Lupin 16 September 2021

OCF/PAT 65% 95% 109% 114% -17% 161% 132% 176% 136% 150% 117%
OCF/EBITDA 39% 55% 67% 76% -10% 92% 56% 58% 61% 71% 58%
Rapid capacity expansions and acquisitions from operating cash: FCF generation has been poor historically on account of
heavy capex and periodic costly acquisitions that not have been very profitable for the company.
Exhibit 803: Dampened FCF due to capex and acquisitions
Gavis & Novel 21 products

in Japan for Gavis Stake sale in Kyowa
60,000 acquisition: USD880mn
USD90mn impairment Criticare: Rs12.2bn
40,000 Rs15.8bn gain
20,000
Rs in mn
-
(20,000)
(40,000)
Gavis Symbiomix Therapeutics
(60,000) acquisition and Solosec
impairment
(80,000) Rs14.6bn brand: USD150mn

Asset turn (x) 1.0 1.1 1.2 1.1 0.8 0.7 0.6 0.6 0.6 0.6
Dividend distribution: The company has been consistent in distributing dividends.

Exhibit 805: Consistent dividend distribution policy
40,000
20,000
-
Rs in mn
(20,000)
(40,000)
(60,000)
(80,000)

RoE 23.8 28.5 30.3 29.8 22.2 20.7 9.8 6.9 8.2 9.2 18.9
RoCE 22.9 30.8 38.7 38 23.3 17.9 10.2 9.8 8.8 9 20.9

Net Debt/Equity 0.3 0.2 (0.1) (0.2) 0.6 0.4 0.4 0.4 0.1 0.1
Net Debt/EBITDA 0.9 0.3 (0.1) (0.4) 1.7 1.1 1.7 1.9 0.7 0.5
Exhibit 808: 10-year R&D spend at Rs130mn, 10% of sales

(Rs in mn) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
R&D spend 7,096 9,313 10,962 16,097 23,101 18,509 15,731 15,538 14,324 -
% of sales 7.5% 8.4% 8.7% 11.7% 13.5% 11.9% 9.7% 10.3% 9.6% 10.1%

Lupin 16 September 2021
P&L Balance sheet

EBIT 17,972 13,476 16,795 19,757 27,516 Def tax liab. (net) (5,736) 1,949 (828) (828) (828)
Interest expenses 3,078 3,629 1,406 (121) (246) Total liabilities 225,378 182,466 179,112 169,000 179,658
Taxes 9,017 11,571 4,485 7,064 8,247 Net block 87,064 60,866 59,183 55,826 51,794
Minority/Associates 38 39 (101) 0 0 Non Current Assets 3,073 3,640 1,496 3,691 3,989
Recurring PAT 9,466 9,996 12,165 14,430 21,207 Investments 1,856 361 781 781 781
Extraordinary items (3,400) (7,521) 0 3,734 0 Inventories 38,368 34,569 40,920 48,721 50,425
Reported PAT 6,155 (4,368) 12,165 18,164 21,207 Sundry debtors 51,498 54,459 44,743 49,411 56,276
Gross 67.3 65.7 65.7 65.1 66.2
EBITDA 17.2 15.1 16.9 17.4 20.1 Cashflow
ROE 6.9 7.6 9.2 10.5 14.7 Net Interest 3,078 3,629 1,406 (121) (246)
Gross block turnover ratio (x) 1.7 2.1 2.2 2.5 3.0 Capital expenditure (9,194) 23,496 (8,458) (8,293) (8,750)
Inventory 234 245 257 266 272 Investments (20,339) (788) (806) 0 0
Creditors 158 165 151 141 148 Others 3,038 3,957 3,710 (1,245) 1,394
Solvency (x) FCF (12,986) 40,032 11,691 31,882 17,546
Net debt-equity 0.5 0.1 0.1 0.1 0.0 Issue of share capital 516 532 713 (2) 0
Interest coverage ratio 9.4 6.4 18.3 (243.3) (155.8) Increase/(decrease) in debt 13,457 (39,359) (12,205) (8,426) (6,000)
Net debt/EBITDA 2.5 0.8 0.5 0.5 0.0 Dividend paid (2,215) (2,730) (2,730) 0 (3,730)
Adjusted EPS 20.9 22.1 26.9 31.9 46.9 Others 98 19,823 (3,180) (34,332) 389
CEPS 44.9 43.5 46.5 53.2 70.7 Net change in Cash (4,208) 14,669 (7,117) (10,757) 8,451
Dividend payout (%) 30.8 nm 18.6 17.0 20.0
Valuation (x)
P/E 46.3 43.8 36.0 30.4 20.7
P/BV 3.2 3.5 3.2 3.2 2.9
EV/EBITDA 17.8 19.7 17.6 15.5 11.5
Dividend yield (%) 0.4 0.5 0.5 0.7 1.0

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Pfizer
Pfizer has maintained consistent performance and its operating cash flows have Market data
expanded at a CAGR of 37% over the last decade. Being a domestic-focused Current price: Rs6,011
established brand-driven business, cash flow generation has been favorable. The Bloomberg: PFIZ IN
business has yielded better margins with stringent cost controls driving operating 52-week H/L: Rs6,175/4,196
leverage, leading to highest EBITDA margins from domestic segment. Working capital
Market cap: Rs275bn
intensity in the business has been negative to moderate due to favorable payable
days. Dividend payments have grown significantly in the last two years post the tax Free float: 29.1%
regime change. The business has low capex needs and its robust cash flow generation Avg. daily vol. 3mth: 82,532
enables the company to pay high dividends. Source: Bloomberg
History of robust cash flows from operations: Operating profits have been robust and have consistently expanded over the
last 10 years. Working capital intensity in the business has been negative to moderate due to favorable payable days. As a
result, the company has generated strong operating cash flows.
Exhibit 809: Cash flows from operations have grown at a CAGR of 37% over the last decade
6,000
4,000
2,000
Rs in mn
(2,000)
(4,000) Operating profit before wcap changes Wcap changes CFO
Analysis of working capital movement: The company enjoys higher payable days than debtor days, which helps maintain
lower working capital duration, despite high inventory turnover time.
Exhibit 810: Tight control over working capital cycle due to favorable payable days
150
100
Days
50
-
(50)
Pfizer 16 September 2021

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
OCF/PAT -17% 57% 63% 117% 159% 92% 23% 63% 86% 72%
OCF/EBITDA -200% 1656% 87% 597% 523% 500% 137% 313% 391% 445%
High conversion of operating cash to free cash: Over the last decade, Pfizer has not done any major capex. Its capital
expenditure can be majorly attributed to debottlenecking and upkeep of existing facilities.
Exhibit 812: High OCF to FCF conversion due to low capex
6,000
5,000
4,000
Rs in mn
3,000
2,000
1,000
-
CFO Capex Net FCF


FY15 FY16 FY17 FY18 FY19 FY20 FY21
Asset turn (x) 1.8 2.0 2.1 2.0 2.3 2.1 2.4
Dividend distribution: The company has been consistently distributing dividends to its shareholders. It declared a dividend of
Rs330/share for FY20 and Rs35/share for FY21. In FY14, the company had declared total dividend of Rs360/share on account
of sale of animal healthcare division.
Exhibit 814: Has consistently paid dividends to shareholders
10,000
5,000
-
Rs in mn
(5,000)
(10,000) Declared a dividend of Declared a dividend of Rs330/share for FY20

Rs360/share for FY14
(15,000)
(20,000)

RoE 14.9 12.1 19.1 11.5 14.6 11.1 14.1 15.1 15.9 17.2 14.6
RoCE 22.0 18.5 28.6 22.9 21.0 15.9 20.3 22.5 19.9 22.7 21.4

Cash EPS 65.1 171.3 76.7 43.9 79.3 87.4 93.2 109.4 133.9 132.7
Dividend per share 12.5 32.5 360 12.5 15 20 20 22.5 330 35
Dividend yield 1.0 3.1 28.5 0.6 0.8 1.1 0.9 0.7 8.2 0.8

Pfizer 16 September 2021
P&L Balance sheet

Others 2,202 2,247 0 2,216 2,302 Minority Interest 0 0 0 0 0
Depreciation & Amortisation 714 1,032 1,094 1,056 1,056 Non Current Liabilities 347 1,366 985 985 985
Other income 1,674 1,840 811 1,438 1,675 Gross block 9,576 10,761 10,037 7,925 7,925
PBT 6,599 6,425 6,687 9,147 9,846 Less: acc. Depreciation (714) (1,032) (1,094) (1,056) (1,056)
Taxes 2,309 1,334 1,711 2,369 2,550 Net block 8,862 9,729 8,943 6,869 6,869
Gross 64.1 63.2 64.4 66.1 65.2
EBITDA 27.2 26.6 31.8 33.5 32.8 Cashflow
ROE 15.1 15.9 17.2 27.8 26.8 Net Interest (1,661) (1,732) (660) (1,329) (1,566)
ROCE 15.1 16.2 17.6 28.2 27.1 Net Change – WC (1,456) (554) (1,200) 791 130
Gross block turnover ratio (x) 2.2 2.0 2.2 3.3 3.6 Capital expenditure (62) (2,122) (329) 1,018 (1,056)
Creditors 227 199 163 157 182 Others 1,674 1,840 811 1,438 1,675
Net working capital 318 363 182 195 245 Net cash from investing 1,612 (282) 483 2,456 619
Solvency (x) FCF 2,471 3,528 4,564 9,887 7,535
Interest coverage ratio 438.1 52.8 47.1 81.4 85.7 Increase/(decrease) in debt (25) 0 0 0 0
Adjusted EPS 93.8 111.3 108.8 148.2 159.5 Others 168 850 2,732 (3,755) (200)
Dividend payout (%) 23.5 19.8 303.4 27.0 25.1
Valuation (x)
P/E 64.1 54.0 55.3 40.6 37.7
P/BV 9.1 8.1 11.5 11.1 9.3
EV/EBITDA 45.3 44.2 37.0 29.3 27.3
Dividend yield (%) 0.4 0.4 5.5 0.7 0.7

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Sanofi India (SANL)

SANL’s cash flows from operations have grown at a CAGR of 13% over last decade. Market data
Business mix would be changing from 70% domestic to 85% domestic, given the exit Current price: Rs8,049
of Ankleshwar facility and related export business. Cash flow generation over last two Bloomberg: SANL IN
years has been significantly higher, with domestic focus becoming more dominant. 52-week H/L: Rs9,300/7,057
The company plans to exit the nutraceutical business, further concentrating the
business to top 10 brands. Lantus’ entry into NLEM would be a one-time risk – as the
Indian domestic market remains the capital of diabetes, volume growth remains Free float: 34.6%
promising. Dividend payout has increased, especially in the last two years. Avg. daily vol. 3mth: 33,392
Source: Bloomberg
expanded over the last 10 years. Working capital intensity in the business has been low to moderate due to favorable payable
days. As a result, the company has consistently generated strong operating cash flows.
Exhibit 817: Cash flows from operations have grown at a CAGR of 13% in the last decade
7,000
6,000
5,000
4,000
Rs in mn
3,000
2,000
1,000
-
(1,000)
(2,000) CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Analysis of working capital movement: The company enjoys higher payable days than debtor days. Its inventory days have
consistently declined from CY14, enabling it to have a faster working capital cycle.
Exhibit 818: Working capital cycle has improved over the years
100
80
60
Days
40
20
0
Sanofi India (SANL) 16 September 2021

CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 Avg
OCF/PAT 107% 164% 103% 100% 66% 106% 133% 98% 100% 128% 111%
OCF/EBITDA 83% 93% 69% 78% 46% 60% 81% 60% 62% 86% 72%
Low capex aids conversion of operating cash to free cash: Over the last decade, SANL has not done any major capex. Its capital
expenditure can be majorly attributed to debottlenecking and upkeep of existing facilities.
Exhibit 820: High OCF to FCF conversion, aided by low capex
10,000
8,000
6,000
Rs in mn
4,000
2,000
(2,000)
(4,000) CFO Capex Net FCF

Asset turn (x) 1.0 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.9 0.9
Dividend distribution: The company has been consistently distributing dividends to its shareholders. In CY20, it declared a
special dividend of Rs125/share on account of sale of its Ankleshwar plant along with a normal dividend of Rs240/share.
Exhibit 822: Consistently distributing dividends to shareholders
10,000
5,000
Rs in mn
(5,000)
Special dividend of Rs125/share on sale of Ankleshwar
plant along with normal dividend of Rs240/share

Return Ratios (%) CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 Avg
ROE (%) 18.1 15.4 19.0 14.0 14.7 16.7 16.7 17.9 20.3 22.8 17.6
ROCE (%) 25.5 22.0 27.4 20.6 22.9 24.9 24.8 26.9 26.9 30.2 25.2
ROIC (%) 21.3 20.9 24.8 17.7 19.6 22.3 22.8 25.6 32.2 42.8 25

Cash EPS 97 116 155 156 189 184 186 210 224 243
Dividend yield (%) 1.4 1.4 1.6 1.3 1.5 1.6 1.5 1.3 5.0 4.4
Dividend 33 33 45 45 65 68 71 84 349 365

Sanofi India (SANL) 16 September 2021
P&L Balance sheet

Depreciation & Amortisation 1,027 999 806 812 812 Non Current Liabilities 491 541 646 646 646
Other income 897 941 898 1,128 1,434 Gross block 8,355 5,986 5,447 5,012 4,531
PBT 6,098 6,592 7,205 8,628 9,466 Less: acc. Depreciation (1,027) (999) (806) (812) (812)
Taxes 2,292 1,857 1,996 2,330 2,423 Net block 7,328 4,987 4,641 4,200 3,719
Extraordinary items 0 (593) (417) 4,696 0 Inventories 4,831 4,696 3,680 4,421 4,916
Revenue 11.5 9.6 2.1 (0.3) 9.9 Other current liab. 1,513 1,963 2,153 1,998 2,195
Gross 62.6 60.6 56.8 64.4 64.8
EBITDA 22.5 21.7 24.6 26.7 26.0 Cashflow
Returns (%) Depreciation & Amortisation 1,027 999 806 812 812
ROE 17.9 20.3 22.8 28.1 29.1 Net Interest 7 3 18 18 18
ROCE 17.9 20.3 22.8 27.9 28.9 Net Change – WC (1,295) (1,230) 3,422 311 (351)
Gross block turnover ratio (x) 3.1 4.7 5.3 5.8 7.0 Capital expenditure (574) 1,379 (386) (371) (330)
Creditors 107 97 100 94 88 Others 13 20 (5) 0 0
Net working capital 136 183 145 198 200 Net cash from investing (561) 1,401 (391) (371) (330)
Solvency (x) FCF 3,567 4,840 8,503 11,764 7,192
Interest coverage ratio 890.7 2,217.7 396.2 462.8 492.3 Increase/(decrease) in debt 0 0 226 0 0
Adjusted EPS 165.3 205.6 226.2 273.5 305.8 Others (573) (29) 118 (190) 0
BVPS 963.6 1,060.5 920.1 1,024.2 1,080.0 Net cash from financing (2,552) (1,864) (7,712) (8,614) (5,776)
CEPS 209.9 249.0 261.2 308.7 341.0 Net change in Cash 1,015 2,976 791 3,150 1,416
Dividend payout (%) 43.0 36.7 167.7 76.5 81.8
Valuation (x)
P/E 48.7 39.2 35.6 29.4 26.3
P/BV 8.4 7.6 8.7 7.9 7.5
EV/EBITDA 28.4 26.2 24.3 20.5 19.1
Dividend yield (%) 0.9 0.8 4.3 4.5 3.1

16 September 2021
Cyndrella Carvalho
+91 22 4215 9643
Sun Pharma (SUNP)

SUNP compounded its operating cash flows strongly in the initial years of the decade, Market data
enabling a 12% CAGR over the period, despite the declining trend over FY17-19. Post Current price: Rs781
the Ranbaxy acquisition, US patented basket investments, and plant compliance Bloomberg: SUNP IN
issues, cash flow generation has now stabilized in the last two years. Return ratios are 52-week H/L: Rs804/452
now back to early double digits. SUNP acquired many businesses, largely in the US
market, before the Ranbaxy acquisition and has never seen any meaningful
impairment on acquired assets. Post the Ranbaxy acquisition, speciality investment, Free float: 38.4%
Taro legal settlements, the earnings trajectory has been improving, with better Avg. daily vol. 3mth: 4,588,373
speciality sales and domestic business. R&D spend has averaged at 7%. Source: Bloomberg
Cash flows from operations have stabilized in the last two years: SUNP’s cash flows from operations have grown at a CAGR
of 12% over the decade, with strong growth till FY17. After a decline over FY17-19, operating cash flows revived in FY20 and
have been stable since then.
100,000
80,000
60,000
Rs in mn
40,000
20,000
-
(20,000)
(40,000)
Analysis of working capital movement: SUNP has seen increasing inventory build-up since FY14; this combined with lower
creditor days has led to longer working capital cycle. Debtor days have also been declining in the last three years.
Exhibit 826: Net working capital days have been increasing since FY14
160
140
120
100
Days
80
60
40
20
0
Sun Pharma (SUNP) 16 September 2021
OCF/PAT 84% 94% 70% 124% 126% 102% 118% 60% 166% 104% 107%
OCF/EBITDA 70% 69% 57% 72% 79% 70% 70% 35% 95% 73% 69%
Rapid capacity expansions and acquisitions have led to poor conversion of operating cash to free cash: The company has
expanded inorganically from time to time by acquiring brands and companies to fuel its growth. Few notable acquisitions
include Ranbaxy in FY15, Dusa in FY12, URL in FY13, and Zenotech in FY18.
80,000 URL generics business Zenotech Labs (INR736mn) Pola Pharma
& JV with Intrexon Baska Plant (INR10mn) INR228mn
60,000
40,000
Rs in mn
20,000
-
(40,000)
Dusa Pharmalucence Ranbaxy Taro share buyback
(60,000) acquisition acquisition ~USD200mn
CFO Capex Investing in Subsidary/ Acquisition Net FCF


Asset turn (x) 0.6 0.6 0.7 0.7 0.6 0.5 0.4 0.4 0.5 0.5
Dividend distribution: SUNP has consistently paid dividends to shareholders. In FY17, it conducted a buyback program for the
shareholders of Taro, a US subsidiary.
Exhibit 830: Consistently paying dividends
60,000
40,000
20,000
Rs in mn
-
(20,000)

Return ratios (%) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
RoE 24.5 26.2 33.8 20.5 18.6 20.5 8.8 9.2 9.1 12.9 17.7
RoCE 28.5 33.0 34.5 22.7 19.6 20.0 9.6 10.1 9.5 12.9 19.1

Net Debt/Equity (0.4) (0.3) (0.4) (0.2) (0.2) (0.2) (0.1) (0.0) (0.1) (0.1)
Net Debt/EBITDA (1.5) (1.0) (1.0) (0.7) (0.8) (0.7) (0.7) (0.1) (0.5) (0.7)
Exhibit 833: R&D spend in the last decade was Rs167bn, ~7% of sales
Rs in bn FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Avg
R&D 7.0 10.4 19.6 23.0 23.1 22.5 19.8 19.7 21.5 -
% of sales 6.3% 6.5% 7.2% 8.3% 7.6% 8.6% 6.9% 6.1% 6.5% 7%

Sun Pharma (SUNP) 16 September 2021
P&L Balance sheet

EBIT 44,689 48,427 64,114 76,004 91,649 Def tax liab. (net) 1,043 581 445 423 402
Interest expenses 5,553 3,027 1,414 836 763 Total liabilities 557,250 580,954 539,660 571,649 640,762
Taxes 6,009 8,043 5,147 14,671 17,456 Net block 158,808 163,655 152,653 229,510 231,762
Minority/Associates (5,439) (4,285) 6,191 (3,563) (3,908) Non Current Assets 65,599 72,072 69,209 69,965 70,693
Gross 72.9 71.9 74.1 74.1 74.4
EBITDA 21.4 21.0 25.3 26.6 28.1 Cashflow
ROE 9.5 9.1 15.7 14.2 15.3 Net Interest 5,553 3,027 1,414 836 763
ROCE 9.1 8.3 12.3 13.3 14.5 Net Change – WC (14,502) 6,235 34,156 8,792 (3,411)
Inventory 342 312 354 327 302 Investments (7,597) (22,406) 5,307 5,726 5,085
Creditors 207 163 169 135 131 Others 577 (1,117) 834 (537) (590)
Solvency (x) FCF (9,817) 16,063 67,660 (4,767) 84,800
Net debt-equity 0.1 0.0 (0.1) 0.0 (0.1) Issue of share capital 4 (59) 0 0 0
Net debt/EBITDA 0.4 0.2 (0.4) 0.1 (0.5) Dividend paid (14,318) (9,597) (4,799) (9,597) (9,597)
Per share (Rs) Interest paid (5,553) (3,027) (1,414) (836) (763)
Adjusted EPS 15.8 16.4 30.0 28.3 33.8 Others 1,729 11,890 (19,515) (29,125) (3,869)
CEPS 23.1 24.9 38.6 37.4 43.4 Net change in Cash (26,538) (7,880) (421) (47,218) 67,944
Dividend payout (%) 25.6 26.1 16.5 14.1 11.8
Valuation (x)
P/E 49.5 47.7 26.1 27.6 23.1
P/BV 4.5 4.2 4.0 3.8 3.3
EV/EBITDA 30.5 27.3 21.7 19.3 15.8
Dividend yield (%) 0.4 0.5 0.3 0.5 0.5

The Blue Book 8 September 2021
Annexure: Annual capex over the last 10 years

Exhibit 834: Auto & Auto Components Exhibit 835: Cement
500000 60000 160000
400000 50000 140000
40000 120000
300000
Rs mn
30000 100000
Rs mn
200000 80000
20000
100000 60000
10000
40000
0 0
20000
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
0
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Automobiles Auto Components
Exhibit 836: Healthcare & Pharmaceuticals Exhibit 837: Metals & Mining
180000
600000
160000
140000 500000
120000 400000
Rs mn
100000 Rs mn
80000 300000
60000 200000
40000
20000 100000
0 0
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Exhibit 838: Oil, Gas & Consumable Fuels Exhibit 839: Chemicals
1400000 25000
1200000 20000
1000000
800000 15000
Rs mn
Rs mn
600000 10000
400000
200000 5000
0 0
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Exhibit 840: Utilities Exhibit 841: Total (Industrial/Mfg/Healthcare)

700000 4000000
600000 3500000
3000000
500000
2500000
400000
Rs mn
Rs mn
2000000
300000
1500000
200000 1000000
100000 500000
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Centrum Institutional Research ϯϮϮ

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Ratings definitions
Our ratings denote the following 12month forecast returns:
Buy – The stock is expected to return above 15%.
Add – The stock is expected to return 515%.
Reduce – The stock is expected to deliver 5+5% returns.
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Disclosure of Interest Statement
1 Business activities of Centrum Broking Centrum Broking Limited (hereinafter referred to as “CBL”) is a registered member of NSE (Cash, F&O and Currency Derivatives
Limited (CBL) Segments), MCXSX (Currency Derivatives Segment) and BSE (Cash segment), Depository Participant of CDSL and a SEBI registered
Portfolio Manager.
2 Details of Disciplinary History of CBL CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing /dealing in securities market.
3 Registration status of CBL: CBL is registered with SEBI as a Research Analyst (SEBI Registration No. INH000001469)
Member (NSE and BSE). Member MSEI (Inactive)
Single SEBI Regn No.: INZ000205331
Depository Participant (DP)

CDSL DP ID: 120 – 12200
SEBI REGD NO. : CDSL : INDPCDSL6612012
PORTFOLIO MANAGER
SEBI REGN NO.: INP000004383
Research Analyst
SEBI Registration No. INH000001469
Mutual Fund Distributor

AMFI REGN No. ARN 147569
Website: www.centrum.co.in
Investor Grievance Email ID: [email protected]
Compliance Officer Details:

Ashok D Kadambi
(022) 4215 9937; Email ID: [email protected]
Centrum Broking Ltd. (CIN :U67120MH1994PLC078125)
Corporate Office & Correspondence Address

Registered Office Address
Centrum House
Bombay Mutual Building ,
6th Floor, CST Road, Near Vidya Nagari Marg, Kalina, Santacruz (E), Mumbai
2nd Floor, Dr. D. N. Road,
400 098.
Fort, Mumbai 400 001
Tel: (022) 4215 9000 Fax: +91 22 4215 9344

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Institutional Research l ϭϲ September 2021

Centrum Institutional Research 2

Centrum Institutional Research 3

Findings of our cash flow analysis at a glance

Centrum Institutional Research 4

Centrum Institutional Research 5

Centrum Institutional Research ϲ

Ashok Leyland (AL)

Exhibit 3: OCF/PAT (x) Exhibit 4: OCF/EBITDA (x)

Source: Company, Centrum Broking Source: Company, Centrum Broking

Exhibit 6: Net fixed asset turnover

Exhibit 7: RoE trend mimics cyclical nature of core business – M&HCV

Centrum Institutional Research 8

P&L Balance sheet

Centrum Institutional Research 9

Bajaj Auto (BJAUT)

-30 Unrealized VAT refund

Debtors Inventory Creditors NWC

Exhibit 10: OCF/PAT (x) Exhibit 11: OCF/EBITDA (x)

1.2 0.9 0.8

Source: Company, Centrum Broking Source: Company, Centrum Broking

-20 Investment in KTM

Exhibit 13: Net fixed asset turn

Centrum Institutional Research 11

P&L Balance sheet

Centrum Institutional Research 12

Exhibit 17: OCF/PAT (x) Exhibit 18: OCF/EBITDA (x)

Source: Company, Centrum Broking Source: Company, Centrum Broking

CFO Capex Investments in JVs, Subs and Asso Net FCF

Centrum Institutional Research 14

P&L Balance sheet

Centrum Institutional Research 15

Endurance Technologies (ENDU)

OCF before WC WC Change OCF

Exhibit 23: OCF/PAT (x) Exhibit 24: OCF/EBITDA (x)

Exhibit 26: Net fixed asset turnover

Return ratios have been steady

Centrum Institutional Research 17

P&L Balance sheet

Centrum Institutional Research 18

Hero Motocorp (HMCL)

-40,000 Strong OCF despite

Exhibit 30: OCF/PAT (x) Exhibit 31: OCF/EBITDA (x)

1.6 1.5 1.2 1.1

Source: Company, Centrum Broking Source: Company, Centrum Broking

Exhibit 33: Net fixed asset turnover

Centrum Institutional Research 20

P&L Balance sheet

Centrum Institutional Research 21

Mahindra & Mahindra (MM)

affected the company’s return ratios as well.

Exhibit 36: Impact of subsidiaries/associates on OCF

Exhibit 38: OCF/PAT (x) Exhibit 39: OCF/EBITDA (x)

Exhibit 40: Standalone OCF/PAT and OCF/EBITDA

Exhibit 43: Net fixed asset turn and RoE trend

Centrum Institutional Research 23

P&L Balance sheet

Centrum Institutional Research 24

Maruti Suzuki (MSIL)