PI Industries Ltd

Sector: Agrichemical/ Small cap Initiating Coverage

Sensex 20,039 Nifty 6,064
21 January 2013

Price: INR 636

Target Price: INR 796

BUY

Background: PI Industries is one of the leading players in the Crop protection industry. Company largely operates under two main segments a) agriculture
inputs, b) custom synthesis and contract manufacturing. Company has a niche portfolio of 26 products, which includes 5-6 in-licensed products in tie up with MNCs such as Bayer, BASF & Kumiai chemicals. Company manufactures products from its three formulations & two technical facilities based in Jammu and Panoli. PI has a strong distribution network of 8,000 dealers / distributors; 35,000 retailers and 27 stock points. Company derives 80% of its agrichemical revenue from its top 10 products. Its key products are Nominee Gold, a rice herbicide which contributes ~INR1bn to PI revenue .
52 Week High/Low Bloomberg code Reuters code Issued Equity (shares in mn) Mkt. Cap in INR mn Mkt. Cap in mn USD Avg. Daily Vol. (000) Avg. Daily Vol. (mn) Shareholding Promoters(%) FII (%) DII (%) Others (%) Pledge (% of promoter holding)
Performance%
Dec11

INR 717/420 PI IN PIIL.BO 25.17 INR 16,006 $ 297 27.1 INR 17.2/$ 0.3
Sep12 Dec12

Blockbuster product portfolio & Strong product pipeline

Company derives 80% of its agrichemical revenue from its top 10 products. Its key product is Nominee Gold, a rice herbicide which contributes ~INR1bn to PI revenue. Nominee Gold is an in-licensed product launched in FY10 in tie up with Kumiai Chemicals. The other key products are Biovita (plant nutrient), Roket and Foratox (multi-crop insecticide). Biovita contributes INR0.5bn to PI revenue. To give further boost to its revenue growth, the company launched two in-licensed products, i.e. Voltage in tie up with Bayers and Clutch in tie up with BASF in FY12. In addition, the company has also filed for three molecules and signed four new agreements with respective patent holders to evaluate these products in India. We expect PI Industries revenue growth momentum to continue, supported by the blockbuster product portfolios and strong product pipeline.

Strong order book provides revenue visibility Sep12

63.35 7.67 1.60 27.08 0.00

63.35 9.21 1.34 26.10 0.00

PI Industries leverages its strong research and manufacturing capability by providing Custom Synthesis and 63.35 CRAMS to MNC clients. Currently, the company has an order book position of ~US$318mn, ~ 2X Companys 15.03 9.21 revenue (FY12) which provides revenue visibility; long-term contracts are executable within 3-4 years. 3.22 Currently, PI Industries has 13-14 molecules in the custom synthesis businesses that have reached 1.34 18.40 commercial-scale, and at any given point, there would be 25 - 30 molecules in the R&D, pilot / kilo lab. In 26.10 general, there is a 40-50% probability of R&D molecules attaining commercial-scale.
63.65 0.00 0.00

Revenues are expected to grow at CAGR of 21.4% between FY12-15

1M
9.86 3.48

3M
20.55 6.64

12M
35.05 21.81

PI Industries Sensex

We expect PI Industries revenue to grow at CAGR of 21.4% between FY12-15 and the custom synthesis business and novel agrichemicals will aid the growth. Management has guided a 30-35% growth in custom synthesis business over next 2 years.

Outlook & Valuation

PI Industries unique business model, strong relationship with global innovators, good revenue visibility in CSM business and well spread distribution network make it a compelling investment case. We initiate coverage on PI Industries with a Buy rating and with a target INR 796, valuing the stock at 12XFY15E EPS, EV/EBIDTA at 7.9XFY15E and P/BV of 3XFY15E. Risk: Pesticide demand is linked to monsoons and in years of poor monsoons demand goes down drastically. Genetically modified crops are made with inbuilt resistance towards pest that reduces the demand for agrichemicals. Execution delay in setting up new capacities would impact the growth in the custom synthesis business

800 700 600 500 400 300 200 100 0

120 100 80 60 40 20 0

Valuation Summary
Y/E March ( INRmn) Revenue EBIDTA PAT EPS EPS growth (%) FCF / Share PE P/ BV EV / EBIDTA EV / Sales Dividend Yield (%) ROCE (%) ROE (%) Net Debt / Equity 1 FY12 8,775.3 1,386.6 1,005.4 40.1 40.1 0.9 15.8 5.0 13.2 2.1 0.8 29.4 38.0 0.8 FY13E 10,956.3 1,866.3 1,055.1 41.9 4.5 9.1 15.2 3.9 9.9 1.7 0.8 26.4 28.9 0.6 FY14E 13,229.5 2,301.9 1,337.5 53.1 26.8 18.1 12.0 3.0 8.0 1.4 1.0 27.9 28.6 0.4 FY15E 15,704.1 2,826.7 1,670.6 66.4 24.9 12.4 9.6 2.4 6.5 1.2 1.3 29.2 28.0 0.3

PI Industries

Relative SENSEX (RHS)

Sathyanarayanan M +91-44-30007361 sathyanarayananm@chola.murugappa.com

Industry overview:
Pesticide Consumption in India The History of Pesticide production in India dates back to 1952 with setting up a plant for the production of Benzene Hexachloride (BHC) near Kolkata. From there on, the production of technical grade pesticides in India saw a steady growth from 5,000MT in 1958 to 72,130 MT in 1992 at a CAGR of 8.2%. The usage of pesticides remained high in the initial years of green revolution and pesticide consumption peaked in 1989. Between, 1991 to 2001 consumption of pesticides de-grew by 4.9% from 72,130MT to 43,590MT. De-growth in pesticide consumption was primarily attributed to the ban on BHC by Indian government in April 1997, which accounted for ~30% of Indias total pesticide consumption.

Chart 1: Consumption of Technical grade Pesticides in India

80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 0.60 0.50 0.40 0.30 0.20 0.10 -

Pesticide consumption (000 tonnes) Source: Department of Agriculture, CSEC Research

Pesticides (KG / hectare)

Pesticide consumption in India is skewed towards the select states and crops. Crops like Rice and Cotton accounted for 29% and 27% of pesticide consumption. In terms of states, Andhra Pradesh (23%), Punjab (12%) and Maharashtra (12%) account for ~47% of the pesticide consumption.

Chart 2: State-wise consumption of Pesticides

Chart 3: Crop-wise consumption of Pesticides

Source: Research paper, Care Research, CSEC Research

Source: Research paper, Care Research, CSEC Research

Industry is undergoing structural change

Pesticide Industry is broadly classified into five categories; insecticide, herbicide, fungicide, fumigants and Rodenticides. The Indian pesticide industry is undergoing a structural change. In 1982, pesticide market was highly dominated by Insecticides which accounted for 89.9% of the production, followed by fungicide (6.1%) and Herbicide (2.2%). Over the years, the share of Herbicide and Fungicide has increased sharply. In 2009, the share of Insecticides decreased to 55%, while the share of Herbicide and Fungicide increased to 20% each.

Chart 4: Growing consumption of Herbicides and Fungicides

100 80 % Share 60 40 20 0 FY82 FY83 FY84 FY85 FY86 FY87 FY95 FY09

Insecticides

Herbicides

Fungicides

Others

Source: Research Paper, CSEC Research

Lack of labour availability, rising labour costs and the advent of newer products are the key reasons for the shift towards the use of herbicides. India is also witnessing a shift from low value high quantity pesticides to high value low quantity pesticides. Between FY01 to FY10 pesticide consumption has decreased by 0.5% CAGR in terms of volume, while in terms of value it has increased by ~8.2%.
th

CMIE has estimated the value of Indian crop protection industry at INR137bn in FY10. India is the 4 largest manufacturer of pesticides behind the USA, Japan and China. India is also one of the most dynamic generic pesticide manufacturers in the world though highly fragmented. According to industry data, more than 60 technical grade pesticides are being manufactured indigenously by 125 producers including 60 large and medium scale enterprises.

Most Indian technical manufacturers are focusing on off-patent pesticides, which account for ~70% of the domestic market. The industry landscape includes MNCs, medium-sized companies and hundreds of regional formulators. The key demand drivers for the pesticide are to avoid crop loss and ensure higher yield, food security, higher labour costs, increasing MSP and rapid urbanisation.

Food Security: Indias land share is 2.3% in the world's total land area, while it accounts for 17.5% of world population. Food security is the key challenge faced by India, as it has to feed the growing population with limited land availability. The problem is further aggravated due to the stagnant arable land, which peaked in 1991 at 143mn hectares and from thereon it is stagnated. In 2009, the arable land stood at 141.36mn hectares, while the demand for food and processed commodities is increasing due to growing population and rising per capita income. According to Indian Council of Agricultural Research, the demand for food grains would increase from 192mn tonnes in 2000 to 345mn tonnes in 2030. On an average, between 2006 and 2010, the average food production stood at 222mn tonnes.

Chart 5: Stagnant arable land

160 140 120 100 80 60 40 20 0

Chart 6: Growing demand for food grains

Demand million tonnes 400 350 300 250 200 150 100 50 0

Million Hectare

Net Area Sown Source: Department of Agriculture, CSEC Research

2000

2030

Source: ICAR Vision 2030, CSEC Research

The food security issue to a large extent can be solved by increasing the yields of major crops and by controlling the food wastage. According to the Government of India estimates, total value of crops lost due to non-usage of pesticides is around USD17bn every year. Companies are increasingly training farmers on the right usage of agrichemicals in terms of measure of usage, the right application method and usage of the right chemicals for the identified pest problems. These measures are likely to increase the usage of agrichemicals.

Population (mn)

$3,000 $2,000 $1,000 $0

2007 2008 2009 2010 2011

Rice Millet/ Sorghum Cotton Pulses Sugar cane Vegetables

50 30 36 35 >40 30

26.7 9.6 11 30 30 30

Population (mn)

GDP Per capita - PPP current Dollar

Source: National Chemical Laboratory, 2004

Source: Bloomberg, CSEC Research

USD Dollar

Table 1: Loss in Yield due to Insect Pest Crop India World-wide (%) (%) Wheat 30 5

Chart 7: Rising population and income level fuel demand for agri-products
1220 1200 1180 1160 1140 1120 1100 1080 1060

$4,000

Crop loss in cotton, rice, wheat and millet is very high in India compared to the global average. Lower consumption of pesticide in India is attributed to the above average crop loss in India. Pesticide consumption in India is 0.39kg/hectare, compared to China at 14kg/hectare, Japan (12kg/hectare) and USA (7kg/hectare).

Chart 8: Consumption of pesticides is low in India

18 16 14 12 10 8 6 4 2 0

Chart 9: Yield of rice is 23% below global average

Rice Yield (tonnes / hectare) 5 5 4 4 3 3 2 2 1 1 0

Kg / hectare

Pesticide consumption (Kg/ha) Source: Industry estimates, Ministry of Agriculture, CSEC Research

India Source: FAO, CSEC Research

World

According to FAO, India lags behind the global average yield of rice and wheat. In 2010, Indias average yield of rice and wheat is 3.38 ton/hectare and 2.84 tons/hectare, which is 23% and 6% below the global average of 4.37 tons/hectare and 3.01 ton/hectare.

Chart 10: Yield of Wheat is 6% below global average

Wheat Yield (tonnes/ hectare) 3.20 3.10 3.00 2.90 2.80 2.70 2.60 2.50 2.40 2.30 2001 2002 2003 2004 India Source: FAO, CSEC Research 2005 2006 2007 2008 2009 2010

World

Rising labour cost & increasing urbanisation:

Rising labour cost and availability of farm workers are increasingly becoming a challenge to farm owners. Government schemes like Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) which provides people in rural areas a guaranteed hundred days of wage employment in a financial year. Moreover, India is also increasingly getting urbanised; according to McKinsey, India is likely to witness an urbanisation rate of 40% by 2030, which will make the farm labour situation even worse. We expect these factors are likely to drive a shift from manual weeding to higher use of herbicides.

Chart 11: Rapid urbanisation, reduces farm labour availability and increases labour cost
Urban Population (mn) 800 600 400 200 0 1991 2001 Urban Population - mn Source: McKinsey Global Institute, CSEC Research 2008 2030 Urbanization Rate 50% 40% 30% 20% 10% 0% Urbanisation Rate

Increasing Minimum Support Price (MSP) to spur affordability of pesticides

As India shifts towards high value pesticides the affordability will be the key driver for industry growth. In the last five years between FY07 to FY12, MSP for rice and wheat (two key pesticide consuming crops) have increased at a CAGR of 13% & 11% respectively.

Chart 12: Growing MSP will increase the affordability of pesticides

1200 1000 800 600 400 200 0

INR per quintal

MSP - Rice
Source: Government of India, CSEC Research

MSP - wheat

Chart 13: Porters Five Force Model:

Source: CSEC Research

Company Overview:
PI Industries is one of the leading players in the crop protection industry. Company largely operates under two main segments a) Agriculture Inputs and b) Custom Synthesis and Contract Manufacturing.

Agriculture Inputs: Company is offering plant protection products and specialty plant nutrient products and solutions. PI has a strong rural reach and brand equity duly backed by a robust pipeline of products, for sustained growth in the sector.

Custom Synthesis & Contract Manufacturing: Company is also providing contract research and manufacturing of agrichemicals, intermediates and other niche fine chemicals for global innovators. The company is among the early entrants in the space and leveraging their technical capabilities and strong relationship with global innovators.

Product Portfolio: The company has a niche portfolio of 26 products which includes 5-6 in-licensed products in tie up with MNCs like Bayer, BASF & Kumiai chemicals.

Common Name of Formulation

Brand Name INSECTICIDES Achephae 75 WP OVAL Buprofezin 25% SC PI BUPRO Chlorfenapyr 10% SC LEPIDO Cypermethrin 25% EC COLT Dinotefuran 20% SG OSHEEN Ethion 40% + Cypermethrin 5% EC COLFOS Ethion 50% EC FOSMITE Flubendiamide 20% WG FLUTON Imidacloprid 17.8% SL JUMBO Metaldehyde 2.5% DP SNAILKIL Phorate 10% CG FORATOX Profenofos 40% + Cypermethrin 4% EC ROKET Profenofos 50% EC CARINA Profenofos 57% EC SIMBAA Spiromecifen 22.9 SC VOLTAGE Thiamethxam 25 WG MAXIMA FUNGICIDES Dimethomorph 50% WP LURIT Iprobenfos 48% EC KITAZIN Pyraclostrobin 5% + Metiram 55% WG CLUTCH Tricyclozole 75% WP LOGIK HERBICIDES Atrazine 50% WP SOLARO Bispyribac Sodium 10% SC NOMINEE GOLD Glyphosate 41% SL PI GLYPHO Imazethapyr 10 SL INRO SPECIALITY PRODUCTS Seaweed (Ascophyllum nodusum) Granular BIOVITA Gr Seaweed (Ascophyllum nodusum) Liquid BIOVITA Lq The company manufactures products from its three formulations & two technical facilities based in Jammu and Panoli, Gujarat. PI Industries has a strong distribution network of 8,000 dealers and distributors; 35,000 retailers and 27 stock points.

Management Profile:

Mr. Salil Singhal (Chairman and Managing Director): He has been heading the company since July 1979. He was the chairman of the Pesticides Association of India for 20 years. He was later elected as Chairman Emeritus. He was also the member of the Executive committee of FICCI. In FY09 he also served as a Chairman of Northern Region of CII. Currently, he is co-chairman of the CII National Council on Agriculture, and has been a member of the National Council of CII for the past five years. Currently he is on the Boards of Wolkem India Ltd, Historic Resorts Hotels Pvt. Ltd, The Lake Palace Hotels and Motels Pvt Ltd, Secure Meters Ltd, Somany Ceramics, PILL Finance & Investment Ltd, Usha Martin Ltd and Secure International Holdings Pte. Ltd.

Mr. Maynak Singhal (Managing Director and CEO): He joined PI in 1996 and he was later appointed as Joint Managing Director in 2004. In 2009, he was appointed as Managing Director and CEO. He holds an Engineering Management degree from the UK. He is also a Director on the Boards of PI Life Science Research Ltd, PILL Finance and Investment Ltd and Samaya Investment and Trading Pvt. Ltd. Mr. Rajnish Sarna (Whole-time Director): He serves as a Compliance Officer, President of IT and Chief Financial Officer. In November 2012, he was inducted as a Whole time director of PI Industries Ltd.

Investment Rationale

Blockbuster product portfolio & Strong product pipeline:

Company derives 80% of its agrichemical revenue from its top 10 products. Its key product is Nominee Gold, a rice herbicide which contributes ~INR1bn to PI revenue. Nominee Gold is an in-licensed product launched in FY10 in tie up with Kumiai Chemicals. The other key products are Biovita (plant nutrient), Roket and Foratox (multi-crop insecticide). Biovita contributes INR0.5bn to PI revenue.

To give further boost to its revenue growth, the company launched two in-licensed products, i.e. Voltage in tie up with Bayers and Clutch in tie up with BASF in FY12. In addition, the company has also filed for three molecules and signed four new agreements with respective patent holders to evaluate these products in India. We expect PI Industries revenue growth momentum to continue supported by the blockbuster product portfolios and strong product pipeline.

Non-compete and IP driven business model to compliment CRAMS business

According to the industry data, most Indian manufacturers of pesticides focus on off-patent pesticides, which accounts for ~70% of the domestic market. As a cautious strategy, PI Industries to large extent planned to stay away from the crowded generics market, to focus on IP driven business model by entering an in-licensing agreement with MNC players to sell the molecules in domestic market, by leveraging its distribution strength and brand equity. In-licensing agreements are purchasing and sales transaction, where PI Industries purchases the technical grade products from the innovator and formulates & packs them under its own brand to sell in Indian market. Most of these deals are exclusive license lasting for a minimum 8-10 years. This non-compete business model of PI Industires also compliments their Custom synthesis and CRAMS business, as the MNC companies which use their contract research and manufacturing service feel comfortable about the security of their innovation and patented molecules.

Strong order book provides revenue visibility PI Industries leverages its strong research and manufacturing capability by providing Custom Synthesis and CRAMS to MNC clients. Currently, the company has an order book position of ~US$318mn, ~ 2X Companys revenue (FY12) which provides revenue visibility; long-term contracts are executable within 3-4 years. In the custom synthesis business, PI Industries enters into either multi-year or annual contracts with customers, while the order book doesnt include annual purchase orders. These orders are from 8-9 companies and top client accounts 15-18% of its CSM revenue and the top 5 clients contributes ~75% of CSM revenue. As a strategic decision company focuses on a balance between flexibility and revenue visibility to optimize the resources. After prolonged investment phase, custom synthesis business has reached an inflection point; companys revenue from CSM has grown at a CAGR of 51% between FY08-12 to INR 3.78bn, of which close to 60-65% of annual revenue comes from long-term contract and the remaining from annual purchase orders.

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Chart 14: Strong order book position

400 USD mn 300 200 100 0 FY10 FY11 FY12 1QFY13 2QFY13

Order Book (US$mn) Source: Company, CSEC Research

Currently, PI Industries has 13-14 molecules in the custom synthesis businesses that have reached commercial-scale, and at any given point, there would be 25 to 30 molecules in the R&D, pilot / kilo lab. In general, there is a 40-50% probability of R&D molecules attaining commercial-scale.

Commissioning of Jambusar facility to aid the growth momentum in CSM PI Industries have commissioned the first phase of Jambusar facility in Gujarat, over the last two years company has invested close to INR 1.7bn. Jambusar facility has four phases with a total capex of INR3bn and PI plans to commission the other three phases over next 3-4 years. Each phase can generate a peak sale of INR 1.5bn 2bn (3-4X asset turnover). Management expects the phase-I will have a capacity utilization of 45-50% in FY14 which would translate into revenue of INR 0.75bn 1bn. Exploring opportunity outside of pesticides

In 2011, the company inaugurated a joint research centre in Udaipur, in partnership with Sony Corporation to conduct research on synthetic organic chemicals for application in electronic industry. Though the revenue contribution from the deal is not significant, there is a huge opportunity for growth in custom synthesis space. PI Industries alliance with Sony will endorse its R&D and technical capabilities in this space.

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Financials
Revenues are expected to grow at CAGR of 21.4% between FY12-15
PI Industries revenue had grown at a CAGR of ~24% from INR3.71bn in FY08 to INR8.75bn in FY12; the growth was largely aided by realisation improvement, while the volume growth was marginally negative. Despite the weak monsoon in the 1HFY13, PI Industries revenue grew 19% y-o-y to INR 5.38bn. In the 2HFY13, we expect the custom synthesis business to contribute growth to a large extent. Management has highlighted that the CSM realisation of the order book in the 2HFY13 would be USD60-65mn. We expect PI Industries revenue to grow at CAGR of 21.4% between FY12-15 and
this growth will be aided by the custom synthesis business and novel agrichemicals. Management has guided a 30-35%

growth in custom synthesis business over next 2 years.

Chart 15: Revenue to grow at CAGR of 21.4%

20,000 15,000 10,000 5,000 0 FY11 FY12 FY13E Revenue (INR mn)
Source: Company, CSEC Research

FY14E

FY15E

Business mix coupled with operating leverage augur well for margin expansion
The company operates under two segments - Agrichemicals and CSM. CSM business margins are in the range of 18-20%, which is higher than the generic agrichemicals business which has a margin in the range of 15-16%. The company has witnessed a shift in business mix from agrichemicals to CSM, with the latters share increased from 32.2% in FY11 to ~43% in FY12 and we expect CSM share to increase further. Even in agrichemicals business, PI Industries derives ~40-45% of the revenue from in-licensing products, which has a higher margin (~25%) than generic agrichemicals business. A shift towards the profitable business mix coupled with operating leverage augur well for margin expansion. We expect PI Industries to witness EBIDTA margin expansion of 220bps between FY12-15 and EBIDTA to grow at a CAGR of 26.8% from INR 1.39bn in FY12 to INR 2.83bn in FY15.

12

Chart 16: Margins are expected to improve

3,000 2,500 2,000 1,500 1,000 500 0 FY11 FY12 EBIDTA

Source: Company, CSEC Research

18.5 18.0 17.5 17.0 16.5 16.0 15.5 15.0 14.5 FY13E FY14E FY15E

EBIDTA Margin %

Strong balance sheet and healthy return ratio

The company is consistently reducing its leverage, in FY07 PI Industries Net debt-equity ratio stood at 2.45X, which it reduced to 0.76X in FY12 with an interest cover of 6.6X. Management has indicated that its future capex will be funded through internal accrual and we expect the Net debt - equity to converge to 0.34X in FY15E. PI Industries has a healthy return ratio, RoCE of 29.4% and RoE of 38% in FY12.

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Valuation
Currently the stock is quoting at a P/E multiple of 15.2X FY13E and 12.0X FY14E EPS of INR 41.9 and INR 53.1 respectively. In terms of EV/ EBIDTA it is quoting at 9.9X & 8.0X and on P/BV basis it is quoting at 3.9X & 3.0X to FY13E&14E respectively. PI Industries unique business model, strong relationship with global innovators, good revenue visibility in CSM business and well spread distribution network make it a compelling investment case. We initiate coverage on PI Industries with a Buy rating and with a target of INR 796, valuing the stock at 12XFY15E EPS, EV/EBIDTA at 7.9XFY15E and P/BV of 3XFY15E.

Chart 18: P/E band chart

PE Band - PI Industries Ltd.

900.00 800.00 700.00 600.00 500.00 400.00 300.00 200.00 100.00 0.00 Oct-08 Jan-09 Oct-09 Jan-10 Oct-10 Jan-11 Oct-11 Jan-12 Oct-12

Apr-10

Apr-08

Apr-09

Apr-11

Apr-12

Price
Source: CSEC Research

8x

10x

12x

14x

16x

Relative Valuation:
Company PI Industries* Rallis Insecticides India Dhanuka Agritech OPM 17.03% 16.76% 11.77% NPM 9.63% 9.54% 6.28% P/E 15.2 20.71 13.21 9.66 P/BV 3.9 4.61 2.43 2.41 EV/EBIDTA 9.9 13.14 9.85 7.40 EV/Sales 1.7 2.20 1.16 1.10 ROE (%) 28.9 22.3 18.4 27.7 Div Yield (%) 0.8 1.6 0.7 1.9

14.87% 10.77% Source: *CSEC Research, Bloomberg (FY13)

Risk:
Pesticide demand is linked to monsoons and in years of poor monsoons demand goes down drastically Genetically modified crops are made with inbuilt resistance towards pest that reduces the demand for agrichemicals. Execution delay in setting up new capacities would impact the growth in the custom synthesis business

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Jan-13

Jul-08

Jul-09

Jul-10

Jul-11

Jul-12

Financials (Standalone)
Income Statement (Abstract) INR(million) Particulars Net Revenue Growth (%) Operating Expenditure EBIDTA Growth (%) Depreciation Other Income (net of interest) Tax Paid Tax Rate (%) Reported PAT (after min. interest) Adjusted PAT Growth (%) FY12 8,775 22.02 7,389 1,387 20.24 171 -125 388 27.86 1,005 1,005 56.81 FY13E 10,956 24.85 9,090 1,866 34.60 215 -139 456 30.20 1,055 1,055 4.95 FY14E 13,230 20.75 10,928 2,302 23.34 262 -129 573 30.00 1,338 1,338 26.76 FY15E 15,704 18.70 12,877 2,827 22.80 311 -129 716 30.00 1,671 1,671 24.90 Key Ratios Particulars Dividend payout (%) EBIDTA margin (%) PBT Margin (%) RoCE (%) RoE (%) Current Ratio Net Debt/Equity Inventory Days Balance Sheet (Abstract) INR(million) Particulars Share Capital Reserves & Surplus Net worth Current Liabilities Non-Current Liab Total Liabilities Net Fixed Assets Other Non-Current Assets Cash & marketable securities Other Current Assets Total Assets FY12 125 3,067 3,192 3,865 1,639 8,696 3,751 227 76 4,642 8,696 FY13E 125 3,975 4,100 4,712 1,494 10,306 4,239 227 139 5,701 10,306 FY14E 125 5,126 5,251 5,396 1,499 12,146 4,983 227 318 6,618 12,146 FY15E 125 6,564 6,689 6,132 1,504 14,325 5,929 227 313 7,856 14,325 Valuation Ratios Particulars Cash Flow statement (Abstract) INR(million) Particulars Cash flow from operations Cash flow from investing Cash flow from financing Free cash flow Net change in cash FY12 1,041 -1,044 2 22 -1 FY13E 934 -635 -200 230 100 FY14E 1,462 -925 -357 456 180 FY15E 1,567 -1,176 -396 311 -5 P/E P/BV EV/Sales EV/EBIDTA Div Yield (%) FY12 15.8 5.0 2.1 13.2 0.79 FY13E 15.2 3.9 1.7 9.9 0.79 FY14E 12.0 3.0 1.4 8.0 1.00 FY15E 9.6 2.4 1.2 6.5 1.25 DuPont Analysis Particulars Net Profit Margin (%) Asset Turnover Leverage factor RoE (%) FY12 11.46 1.12 2.95 37.95 FY13E 9.63 1.15 2.61 28.94 FY14E 10.11 1.18 2.40 28.60 FY15E 10.64 1.19 2.22 27.98 Debtor Days Creditor Days CCC* Interest Cover Ratio FY12 12.46 15.80 15.88 29.44 37.95 1.22 0.76 75 72 48 99 6.61 FY13E 12.00 17.03 13.80 26.43 28.94 1.24 0.60 75 70 48 97 8.25 FY14E 12.00 17.40 14.44 27.89 28.60 1.29 0.44 75 70 48 97 10.12 FY15E 12.00 18.00 15.20 29.18 27.98 1.33 0.34 75 70 48 97 12.39 Per Share Ratios Particulars Adjusted EPS (INR) Cash EPS BV/Share (INR) FCF/Share(INR) DPS (INR) FY12 40.1 47.0 127.4 0.9 5.0 FY13E 41.9 50.5 162.9 9.1 5.0 FY14E 53.1 63.5 208.7 18.1 6.4 FY15E 66.4 78.7 265.8 12.4 8.0

*CCC Cash Conversion Cycle

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Chetan Dilipkumar Daxini Sathyanarayana N Muthiah A N Baskaran S Sridharan P S Chandrasekar K Maneesh Gupta Murthy A S L N Shibarjun Mukherjee Sheetal Bheda Gowthaman G Deepak V Kshirsagar Gangadhar M AHMEDABAD BANGLORE CHENNAI - HO CHENNAI - Annanagar CHENNAI - Adyar COIMBATORE DELHI HYDERABAD KOLKATA MUMBAI MADURAI PUNE VIZAG 079 - 64500318 / 19 080 - 41503340 / 44 044 3000 7371 044 - 26208911 / 14 044 - 2452 2111 / 2333 0422 - 4292041 / 4204620 011 - 30461161 / 62 / 63 040 - 23316567 / 68 033 - 44103638 / 39 022 - 22617210 / 7203 0452 - 2601195 / 96 020 - 30225432 / 33 /34 0891 - 6642718 chetandd@chola.murugappa.com sathyanarayanaN@chola.murugappa.com muthiahan@chola.murugappa.com baskarans@chola.murugappa.com sridharanps@chola.murugappa.com chandrasekark@chola.murugappa.com maneeshg@chola.murugappa.com murthyasln@chola.murugappa.com shibarjunm@chola.murugappa.com sheetalbheda@chola.murugappa.com gowthamang@chola.murugappa.com deepakvk@chola.murugappa.com gangadharm@chola.murugappa.com

COMPLIANCE
Balaji H
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