NDA Government

Wake Up Call

Fresh Approach

mm o da
o
c
c
t

Bihar
Defeat

Political
Stance

Moodys
Warning Intolerance

For Private Circulation Only

We believe that Bihar defeat has taken BJP lead NDA aback and this could prove to be a wake-up call for coming elections as well
as NDAs political stance in Loksabha and Rajyasabha. Although, they have replied back their critics through various reforms
within days of election outcome and have shown their might to fight back. We believe that government has taken fresh approach
and started to accommodate views of opposition on various reforms, specially on GST, with several opposition parties coming out
in open support.

POLITICAL
STANCE

BIHAR
DEFEAT

MOODY S
WARNING INTOLERANCE

Wake Up call and

Fresh Approach
Pg. 1-2

1st December-2015 to 31st December-2015

Chemical & Sugar

Sector Update
Pg. 3-7

Welspun
Syntex Ltd.
Pg. 9-12

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From The MDs Desk

Leave aside Bihar election and watch the reforms and international trend
The earning season is over and the much debated Bihar election is out of way.
Despite of Bihar fiasco, key reforms are being rolled out by the central government. We have seen the power sector reforms
in the form of UDAY.We have also seen the proposed bankruptcy law which may go a long way in addressing the problems
of banking sector. The Government has accepted the modifications proposed in the Reality Act by the opposition party.
The Government has also seriously attempted to address the concerns of opposition for the proposed GST Act. Without
disturbing the soul of the Act, government has successfully accepted the changes proposed by the states and now all the
states are on board and ready to accept and rollout GST.
Surprisinlgy, some FIIs have arranged a meeting with Mr. Rahul Gandhi to convince him about the urgency and seriousness
to implement GST to boost the economy. FII have sold equities worth ` 6,500 Cr. in the month of November indicating their
dissatisfaction for slow reforms, spoiled political atmosphere and muted corporate earnings. FIIs are also adjusting their
equity exposure in the view of weak earning performance and likely rate hike by Fed on December 15th.. Some big bang
reforms in the parliament session and executive actions in Cabinet coupled with moderate rate hike by Fed will prompt them
to halt the selling spree in the Indian market.
The international atmosphere is also causing threat to the equity market world over. Any remarkable escalation in the war
like situation will heat the global sentiment and the risk assets in the form of emerging market equity. Any rise in Dollex from
the sentimental level of 100 and fall in oil prices below USD 40 will affect the sentiment in the equity market.
Technically, Nifty has support zone of 7690-7700 and below it the market may test the recent low of 7540. The sustainability
of 7850 level may take the market to higher levels. We believe that it is a stock pickers market and one should remain
selective with medium to long term view.

Kamlesh Jhaveri ( MD )
Jhaveri Securities Ltd.

www.jhaveritrade.com

POLITICAL
STANCE

BIHAR
DEFEAT

MOODY S
WARNING INTOLERANCE

Wake Up call and Fresh Approach

Issue Theme

Bihar election outcome : An opportunity for NDA on both the fronts

The Grand Alliance of JD(U), RJD and Congress routed (defeat) the BJP-led NDA in Bihar and scored two-thirds
majority in the state election giving Chief Minister Nitish Kumar a third term in Bihar. RJD emerged the leader in the
Bihar election with 80 seats while JD(U) had 71. Both the parties had contested 101 seats each. Congress won 27
seats out of 41. The BJP-led NDA bagged 58 seats. We believe that the state elections are mostly a depended on local
issues and local leader while national issues and central leadership could have little impact on them.
The Bihar election results give the NDA an opportunity to make strategies for the upcoming state elections and also embark
on longer term corrective measures.
State

Total Seats

Election Due

State

Total Seats

Election Due

Pondicherry

30

Early 2016

West Bengal

294

Mid -2016

Kerala

140

Early 2016

Tamil Nadu

235

Early 2016

Assam

126

Early 2016

Uttar Pradesh

403

2017
Source: Indian Express

However, Bihar election outcome is a clear negative and can slow down the NDA's attempt to strengthen its position in the
Rajya Sabha.

Reformist agenda of NDA becomes more strengthen after Bihar verdict

Initially, it was expected that the Bharatiya Janata Partys fiasco in the Bihar assembly election may set back the
governments economic reforms agenda. However, NDA government eased foreign direct investment (FDI) norms across
15 sectors, including defence, civil aviation and broadcasting to attract overseas funds and boost economic growth which
gives strong signal that the Government has firm intensions for economic growth in spite of Bihar defeat.
The government has introduced 7th pay commission. Historically, more funds in the hands of government employees
following pay hikes has boosted spending on clothing, footwear, consumer durables, vehicles and other products. The Sixth
Pay Commission played a key role in cushioning (Saving) the economy from the Lehman shock as the first payout took
place in October 2008.
However, high lending rates and low capacity utilization are unlikely to change in a hurry. Given this, the expected boost to
consumption demand, as a result of implementation of the Seventh Central Pay Commission is welcome step. Both these
steps have long term impact on the economy.

First sign of recovery Micro consumption related indicator have started to offtake
Some consumption indicators have reveled the sign of improving such as :
Oil : 17% growth YoY in Indias oil demand in October 2015 after September's 15% and 3 month moving average
growth 14% YoY was the highest since 2004.
Plastics : strong pick up in plastics demand in India support Naptha consumption and 54% rise in bitumen YoY means
road construction is doing well.
Auto : 13% /21% rise in 2-wheelers / 4 wheelers sales volume in October.
Power : 11/% 9% rise in power consumption in Sept./ Oct. from prior sub-5% levels.
Retail : These come on the back of general retail strength reported by companies

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POLITICAL
STANCE

BIHAR
DEFEAT

MOODY S
WARNING INTOLERANCE

Wake Up call and Fresh Approach

Capacity Utilization level for various industries (%)

Industry

FY10

FY14

FY16E

Comments for Current year

Steel

92

Touched at all time low

80

Improved YoY

Two Wheelers

76

Currently all time low

76

No Improvement YoY

Passenger Vehicles

84

Touched at all time low

73

Improved YoY

Commercial Vehicles

79

Touched at all time low

62

Improved YoY

Cement

78

Touched at all time low

70

No Improvement YoY
Source: BofAML

Weak Q2 but had many inherent surprises

Surprise :1 The aggregate Sensex headline profit growth for Q2FY16 came in at 5.3% on a consolidated basis (vs.
expectation of 2% ). However, this surprise was entirely driven by a few large one-offs (mainly in Tata Steel and in
Bharti).
Surprise : 2 Aggregate EBITDA margins for Sensex companies showed a 70bp expansion on a y-o-y basis. However
this was below expectation of 150bps and was completely led by Oil. Ex-energy EBITDA margin declined by 100bp, led
by Pharma (300bp) & Metals (180bp).
Surprise : 3 Among Sensex cos, Banks (HDFC Bank, ICICI Bank, SBI), IT (TCS, Infy) lead the growth. On the other
hand, Oil & Gas (GAIL, ONGC), Pharma (Sun Pharma, Lupin) & Industrials (BHEL, L&T) drag down growth.
However, the risks to FY17 earnings estimates have increased post Q2FY16 results on the sluggish weak top line and
continued weak domestic & global macroeconomic conditions.

Q2 FY16 (YoY Change) (%)

Industry
Net Sales

Total Expenditure

-5.91%
-8.18%

Operating Profit Margin

Net Profit

+202bps
+5.30%
Source : Capital Line

Source : BSE 500 ; Excluding Banks, Financials and MRPL

Conclusion
Market is eagerly waiting to conclude two important events in December. First, any positive news from the parliament as
winter session of parliament has started and this session will be more interesting as the government indicated that it
iswilling to tweak the constitutional amendment bill to roll out GST to accommodate the views of the opposition. This is the
first time when govt. has shown readiness to house views of opposition. Moreover, Moodys has also warned that a failure to
implement reforms could hamper investment in India on weak global growth. Second, FIIs are also adjusting their equity
exposure on likely rate hike by Fed. We expect market to remain range bound in near term and will take cues from winter
session and upcoming Fed rate meeting. Technically, Nifty has major support zone of 7690-7700. Any rise above 7850 will
may take market to go higher levels.

www.jhaveritrade.com

Issue Theme

Cement : After a weak year, October has done well.

However, it should take a couple of quarters for the micro growth to catch up with the macros and incorporate results as
exports have done very badly, Credit offtake from the banking system has been poor and there is unutilized capacity in
the industry.

Sector Update

Indian Chemical Industry

Specialty Chemical

Outlook: Positive

Among the most diversified industrial sectors, chemicals cover more than 80,000 commercial products and account for 15%
of the countrys industrial output. The Indian chemical industry was worth US$ 144 billion in 2014, commanding a 3.3%
share in the global chemical market, and is expected to be worth US$ 173 billion by 2018, implying a growth rate of 8.0% per
annum Basic chemicals and their related products accounts for nearly 2.1% of the GDP, 9.5% of total exports and 8.9% of
total imports.

Chemicals can be broadly divided into the following sub-groups

Basic Chemicals : Chemicals such as organic and inorganic chemicals, bulk petrochemicals, other chemical
intermediates, plastic resins, synthetic rubber, man-made fibers, dyes and pigments, printing inks are basic chemicals.
Agro- Chemicals : India is the third largest producer of agrochemicals globally. The market size at US$ 4.2 billion in 2014 is
expected to reach US$ 6.4 billion by 2016. The Indian agrochemicals market is segregated into various segments such as
Insecticides and Herbicides
Specialty Chemicals : Specialty chemicals, also known as performance chemicals, are low-volume but high-value
compounds. These chemicals are derived from basic chemicals and are sold on the basis of their functions.

Speciality chemical offers good growth opportunity

Global Speciality Chemicals Market

800

Revenue (US $ Billion )

Growth Rate

5.37%

5.35%
5.34%

800

684

720

5.40%
760

619
200

4.61%

5.20%
5.00%

4.92%

400

5.60%

4.80%

649

4.60%
4.40%

2014

2015

2016E

2017E

2018E

4.20%

Source: Company, JSL Research

Speciality Chemicals are a group of high value, low volume chemicals formulated for developing/enhancing properties of
specific products. The customized product requires special technologies, process expertise and understanding of client
needs, and so the industry typically commands limited competition, yielding higher gross margins and returns than other
chemical sub-segments.
The Global Specialty Chemicals market is growing at a fast pace. According to TechNavio Analysis, the Global Specialty
Chemicals market is expected to grow at a CAGR of 5.16% during the period 2013-2018 and reach US $760.9 billion by
2018 (from US$ 619.0 billion in 2014).

Proxy to play consumption as well as infrastructure theme

The key demand drivers for Speciality chemicals are per capita income growth, rising urbanization and infrastructure
spending. The per capita chemical consumption for India in most categories of Speciality chemicals (paints, dyes,
polymers, home and personal care etc.) is only about 15-20% of the global average, thus, there is a significant opportunity
for growth.

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Indian Chemical Industry

Specialty Chemical
The robust demand for Speciality chemicals would be driven by strong growth in end-user industries itself. While the ones
linked to infrastructure are expected to grow at >15%, the other categories are expected to grow at 10-15%

Segment 2012 Size

( US $ Billion )

Expected Volume
Growth CAGR (%)
in 2020E

Segment 2012 Size

( US $ Billion )

Expected Volume
Growth CAGR (%)
in 2020E

Paint

15.00

Rubber Chemicals

0.2

13.00

Construction

0.7

25.00

Industrial Cleaners

0.2

19.00

Paper Chemicals

0.5

22.00

Water Chemical

0.7

7.00

Textile

0.9

11.00

Plastic Additives

12.00
Source: Company

Exports to propel further growth

With improving cost competitiveness (with respect to China), favorable IPR framework and strong domestic demand
outlook, India is emerging as a preferred manufacturing destination for Speciality chemicals. China is losing out its edge
over India in chemical manufacturing due to :
(1) Steep cost inflation (labour costs) (2) Stricter compliance of environmental regulations being enforced in China, while in
India the same had been already in place since past few years; and Chemical exports from India have grown at 22% CAGR
over 2010-14, significantly outpacing the global demand growth (3-4%) and the trend has continued through in 2015 as well.

National Chemical Policy aims to increase the share of chemical output in Indias GDP
To boost domestic production, the government has launched the Draft National Chemical Policy (NCP), which aims to
increase chemical sectors share in countrys GDP. The policy is expected to help Indias chemicals sector grow and
become more competitive as well as place a framework for promoting safety and security of chemical facilities. These steps
are 1) Focus on dependency on imports. 2) NCP aims to make available 20% of the domestic petrochemicals as feedstock
for downstream chemical companies.

Preferred Stocks
Company
Name

CAGR
CAGR
CAGR Net
Cash Flow
Operating Net Profit Debt /Equity ROCE (%) RONW (%) Total Asset EBITDA (%) APATM (%) from Operation
Sales 3Yrs Profit
Turnover Ratio
3
Yrs
(x)
(%)
( ` in Cr. )
3yrs (%)
(x)
(%)

Aarti Inds.

20.23

23.36

22.91

1.19

16.71

20.54

1.33

15.2

6.2

339.49

Plastiblends (I)

13.16

17.49

21.59

0.17

24.87

20.42

2.84

9.93

5.67

36.72

Adi Finechem

15.73

19.64

22.73

0.56

28.89

26.3

2.03

15.62

8.33

32.13

Omkar Spl.Chem.

16.67

13.41

14.91

1.41

11.56

15.88

0.78

18.49

8.46

52.85

Source: Company, JSL Research

(Note: All figures are of FY15 excluding CAGR figures & CAGR figures are of last three years)

www.jhaveritrade.com

Sector Update

Key end user industries and their expected growth rates

Indian Sugar Sector

Outlook: Negative

Sector Update

Sugar - Current global perspective

The world sugar industry is facing some challenging times with selling prices hardly meeting production costs. In 20142015, the key sugar producers such as Australia, India, the EU, Central America and Thailand will exceed the production
records of 2012-13, a peak in the world surplus. During 2014-15, global production is `169.40 Mn. MT while global
consumption is `167.10 Mn. MT

World Sugar Production ( In Million MT)

Key Players Brazil CS

2014-15

32.10

India

EU 27

China

Thailand

Russia

USA

Mexico

Australia

Others

28.10

17.50

10.40

11.30

4.45

7.40

6.00

4.25

48.00

Source: Company

Currently, The sugar prices have shot up across the world due to the crop failures overseas. Globally, EU is facing its worst
sugar production in more than four decades, pushing domestic prices higher and spurring a wave of imports by the regions
refiners. Global tracking agencies have forecast sugar supply to be deficient in 2015-16. The International Sugar
Organization has forecast a deficit of 2.5 million tonnes and the US Department of Agriculture reckons the shortage will be
3.8 million tones. Moreover, over the long term, a decline in global sugar consumption patterns driven by lifestyle changes
and government health regulations also add to the price stress.

Indian Sugar industry - Current perspective

India is the second largest producer of sugar in the world, producing around 28 million tons of white plantation sugar per
annum. Called the growth engine of the rural economy, the sugar industry is ranked as the second largest agro processing
industry in the country.
There has been a steady increase in the Central Governments Fair & Remunerative Price (FRP) stipulation for sugarcane
over the years without any corresponding increase in sale price of sugar. The FRP was raised from ` 1700 per tonne in
Sugar Year (SY) 2012-13, to ` 2,100 in SY 2013-14 and further to ` 2,200 for SY 2014-2015.

Govt gives incentives to Indian sugar sector

The Central Government has given a number of incentives to sugar sector so far to facilitate payment of Cane dues to the
farmers. These incentives are expected to improve the liquidity position of the industry. These steps /measures include:Hike in Import duty : Increased the duty on import of sugar from 25% to 40% and abolished the Duty Free import
authorization Scheme (DFIA).
Soft loan Scheme : Scheme for extending soft loan to the sugar mills equivalent to the stock value of 25 lack M.T. @ `24000
per M.T. to facilitate payment of Cane dues of the farmers for the current sugar season 2014-15.
Export incentives : The Government has extended the scheme for current sugar season 2014-15 and provided incentive
@ `4000/- per Metric Tons of raw sugar produced and exported up to 30.09.2015 subject to quantitative ceiling of 14.0 Lac
Metric Tons.
Financial assistance : Envisaging interest free loans worth ` 6600 Cr. by bank as additional working capital to sugar mills

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Indian Sugar Sector

ICRA expects a decline in the domestic sugar Production during FY 16

Lower production leads to better realization for domestic sugar manufacturer but turnaround
unlikely
International sugar prices have gained 30 per cent after a gap of some years, as global output is likely to decline. Brazilian
cane production remains affected by drought conditions and increased ethanol usage is likely to further reduce cane
availability for sugar production. Sugar output in China at 9.3 million tonnes (mt) is likely to be 11 per cent lower than last
years, while the European Unions production is also down 20 per cent. For India, though it might continue to see surplus
stocks, production is expected to decline compared to last year, owing to lower rainfall in Karnataka and Maharashtra. The
likely fall in output, coupled with compulsory exports of four mt, might result in a significant decline in closing stocks to 7.6 mt
this year from 10.1 mt in 2014-15, says ICRA.

Cyclical factors lead to improvement in realization but key fundamental issues are not touched
Due to cyclical factors, sugar prices have gained. Linking input costs (cane pricing) to output prices (sugar realization) will be
key to improving industry profitability. The key factors that have not touched are :
While all these cyclical factors lead to improvement in realizations, fundamental reforms such as linking procurement
prices of cane with sugar prices will play a crucial role for sugar industry. According to experts, sugarcane procurement
prices are not in synchronies with the sugar prices in the country till there is not much improvement in the balance sheet of
companies.
Major reform for the industry that is required for sustained profitability is de-control and linkage of end sugar pricing to
cane prices paid to farmers. In the absence of this, market signals are not reflected to farmers and, hence, production
consistently remains high irrespective of demand.

Key Financials of some sugar companies

YoY Growth (%)

Net Sales ( IN Cr. )

39862

45000

46%

45000
35000

42163

50%
38757

37783

40%

32608

30000

30%
22%

20%

12%

25000

10%

20000
15000

0%

-5%

-8%

10000

-10%
-20%

5000
2011

2012

2013

2014

2015

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Sector Update

Domestically also, due to scanty rains, the production in the domestic market is not high. Indian sugar producers have huge
godown stocks so prices are likely to surge. According to ICRA Research, India's sugar output is estimated to decline by
4.62 percent to 26.8 million tonnes in the 2015-16 marketing year. Due to increase in fair and remunerative price (FRP) of
cane and absence of linkage of cane rates to sugar and by-product realizations in the State Advisory Price (SAP) adhering
states, the profitability and debt coverage of sugar mills would continue to be under stress in the near term resulting in
continued dependence on government support to clear cane arrears to farmers.

Indian Sugar Sector

YoY Growth (%)

Operating Profit ( in Cr. )

Sector Update

4968

20%

5580

5500
4500

1200%

1281
1000%

1000

4604
12%

1089%

2000

10%
10%

YoY Growth (%)

Net Profit ( in Cr. )

436

-245

-2916

0%

-3158

800%

600%

-10%

3500
-18%

2835

400%

-1000

-20%

2500

-2000

-66%

0%

-156%

-38%

1500

200%

-14%

-30%

1627

-3000

-40%

2011
5.00

2012

2013

2014

-400%

-4000

-50%

500

-200%

8%

-43%
2011

2015

2012

2013

2014

2015

4.69

Debt Equity Ratio (x)

4.50

6100

4.00

3.56

5100

3.50

4100

3.00

3100

2.39
2.50

2.02

2100

1.63

2.00

1100
1.50

100
1.00

2011

2012

2013

2014

2015

Company
Monthly

Quarterly Half-yearly

ROCE (%)

10

Stock Return (%)

RONW (%)

7.47

Yearly

Bannari Amm.Sug.

12.39

75.34

17.81

-11.75

Dalmia Bharat

13.55

191.08

224.61

168.40

Sakthi Sugars

26.19

109.59

141.71

71.43

Dhampur Sugar

15.13

124.75

117.92

43.37

KCP Sugar &Inds.

25.81

72.01

31.94

11.50

Triven.Engg.Ind.

21.00

77.47

105.87

46.49

EID Parry

7.35

39.64

22.00

-13.78

Bajaj Hindustan

-2.68

61.36

27.48

-7.67

Balrampur Chini

20.30

92.09

76.97

26.47

Sh.Renuka Sugar

25.84

104.67

31.74

-12.87

8.85

8
6

7.72
6.50
7.79

5.20
4.29

4
2

1.53
0.30

0
FY 11

FY 12

FY 13

FY 14

FY 15

-2
-4
-6

-3.76

Source: Capital Line

Note : Returns calculated from 26/11/2015 to monthly, quarterly, half yearly and yearly. We have taken top 10 companies and their
financial parameters according to market capitalization.

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Welspun Syntex Ltd.

Company Analysis

Company Basics
BSE ID
508933
NSE Symbol
WELSYNTEX
Group
B
EQUITY (` in Cr.)
39.24
MKT.CAP(` in Cr.)
434.39

Financial Basics
10.00
11.37
9.74
2.97
1.3904
30.61

FV (`)
EPS (`) (TTM)
P/E (x) (TTM)
P/BV (x) (TTM)
BETA
RONW (%)

CMP : ` 140

Buy

TGT : ` 223

ROI : 59%

Investment Rationale
Company Overview
Welspun Syntex is a flagship company of the Welspun Group. Welspun group is one of
the leading and largest growing business conglomerates in India. Welspun Syntex
Limited was established in 1983 and is the flagship company under the Welspun
umbrella. Since its inception WSL. has grown manifold and is amongst the largest
manufacturers and exporters of Polyester Texturised Filament Yarn, Nylon Filament
Yarn from India. With plants located at Silvassa and Palghar (Thane), India WSL. is well
equipped to meet the domestic as well as international demand. It has marketing offices
located at Surat and Mumbai in India that facilitate big business ventures.

Product portfolio
WSL produces special kind of yarn that suits best to the industry that includes : Partially
Oriented, Fully drawn, Mono Filament, Draw Textured, Air textured and Nylon and
others.

Indian Textile Industry

Share Holding Pattern
Holder's Name

% Holding

Foreign

0.66

Institutions

1.10

Promoters

70.10

Govt. Holding

0.00

Public & Others

23.16

Non Promoter
Corp. Hold.

The textile industry holds significant presence in Indian economy. The size of the
industry is currently estimated to be over $120 billion. It contributes around 14% in
industrial production, 4% of the countrys GDP and 12% of the countrys merchandise
exports.

Flow chart of Yarn Manufacturing

Natural Material
Natural Material

5.00

Polyester

Cotton

Viscose

Valuations
Currently, WELSYNTEX is trading at
`140. We recommend Buy with
target price of `223, valuing stock
13xFY18E EPS of `17.18.The stock

currently trades at 10.06x of FY16E

and 8.38xof FY17E and 7x of
FY18E.
Investment Horizon : 12 to 15 Months

Yarn

Spinning of Fiber into Yarn

WSL is Producing man made

polyster yarn that uses in
Readymade garments, Home

Weaving / Knitting of Yarn

into Fabric & Conversion of
Fabric

textiles & has other uses.

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Welspun Syntex Ltd.

India has overtaken Italy, Germany and Bangladesh to emerge as the worlds second largest textile exporter. Indian textile

Investment Rational
Lower consumption ratio provides enough growth opportunity for non cotton yarn
Indian textile industry uses all kind of fibres / yarn but it continues to be predominantly cotton based. The consumption of
cotton fibres v/s other fibres / yarn in India is 62 : 38, while the global consumption of fibres / yarn is 40 : 60 in favor of noncotton fibres /yarn. However, Indias consumption of manmade fibre / yarn is increasing very fast and expected to reach
the world level in near future. The man-made fibres/ yarns industry, particularly the polyester segment, has achieved
significant growth during the last two decades. The sharp increase in production of polyester fibre and yarn has made
India to emerge as the 5th largest producer of man-made fibre/filament yarn in the world. Installed capacity of Polyester
filment yarn has marginally increased from 2058 Mn. kg during the year 2009-10 to 2118 Mn. Kg in 2014-15 (up to
December 2014).
Production has been reduced from 1434.88 Mn. during the year 2009-10 to 1213.06 Kg. during the year 2013-14 and 873
Mn. kg during 2014-15. Installed capacity of Nylon filament yarn is at the same level at 32 Mn. kg since 2009-10 to 23.98
Mn. kg during the year 2013.14.

Polycycle- a unique kind of Yarn with unique advantages

WSL has unique positioning in the BCF segment with POLYCYCLE. Polycycle is a 100% recycled Polyester yarn extruded
(derived) from used PET bottles (plastic bottles) using patented process called ReNew. This polyester has same feature
and better quality like normal Vargin polyester. Vargin polyester is derived crude feed stock like PTA and MEG. So
fluctuation in crude oil prices are less concern.
BCF has unique product application like Wall to wall carpets, rugs and tiles and bath mates and is available in the higher
range of 1200-2600 diner. WSL also cater to global customers with specially kind of BCF like in Heat Set, intermingled
fancy and air twisted high performance yarn.

Strategically located plant in Union Territory and Maharashtra

The company has two state of the art manufacturing plants in Silvasa (UT) and Palghar. Silvassa plant is perfectly located
between the two most important Textiles States of India, Gujarat and Maharashtra. This location is situated near sea ports
of JNPT and Mumbai and it becomes possible to deliver the finished products and receive the imported raw materials to
and from the ports. This location helps Welspun to deliver finished products to its customers in India and overseas.
Palghar also plant enjoys the advantages of ideal geographical location to efficiently handle all the logistics to facilitate
prompt shipments to the Indian and overseas customers.

10

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Company Analysis

industry can be divided into several segments, some of which can be :

Cotton : Second largest cotton cellulosic fibers producing country in the world.
Silk : India is the largest producer of silk and contributes.
Man-Made fibres : The fourth largest in synthetic fibres / yarns globally.
Jute : India is the largest producer and second largest exporter of jute goods.

Welspun Syntex Ltd.

Company Analysis

Focus on high margin accretive products

Year ( ` in Cr. )

FY 12

FY 13

FY 14

FY 15

Partially Oriented Yarn (POY)

84.34

115.54

121.39

126.77

Texturised Yarn

595.73

694.32

819.06

752.43
Source: Company

WSL has unique product portfolio that fulfills the requirement of Industry. WSL is highly concentrating on the specialty and
high quality yarns that have multiple use like Polycle. Initially, WSL was focusing on the dyed and dope dyed yarn.

Stable crude oil prices helps to maintain operating margin

Man made yarn mainly consumes crude oil based derivatives as Raw material (chips constitutes ~50-60% where as other
textures consumes ~40% -45% of total RM cost ). RM cost as % of sales fell from 68.41 to 60.95 YoY, one of the lowest in
last five year, largely because of fall in key components like purified terephthalic acid (PTA) and mono-ethylene glycol
(MEG) which have touched multi-year lows on account of lower crude prices.

Financial Analysis
EBITDA grew CAGR 26% from FY11 to FY15

Year ( ` in Cr. )

FY 11

FY 12

FY 13

FY 14

FY 15

EBITDA

34.22

41.51

49.48

63.03

86.87

EBITDA YoY Growth (%)

26%

21%

19%

27%

38%

6.91%

6.92%

6.51%

7.16%

10.57%

EBITDA Margin (%)

Source: Capital Line

Consistent focus on higher margin products, development of new products and production of BCF coupled with cost
optimization drives EBITDA growth. WSLs EBITDA grew from ` 34.22 Cr. in FY11 to ` 86.87 Cr. FY15, CAGR growth of
26%. EBITDA growth largely maintain on higher sales growth of Textured yarn as WSL is strengthening its position in
international market and stepping up production of high Nylon grey and dyed yarn.

Healthy return ratios

35
ROCE (%)

RONW (%)

30.61

30
25
20

21.67
15.74

19.63

18.18

15
10

12.29

14.62

13.53
8.54

13.74

WSL is consistently maintaining higher double digit return

ratios. We believe that higher top line growth in FY16E /
FY17E, higher capacity utilization in existing product
capacity (doubling capacity of BCF, increase capacity of
dyeing vessel, install Nylon mother yarn line) and
concentration on products yielding high margins will drive
better ROCE and RONW.

0
FY 11

FY 12

FY 13

FY 14

FY 15

11

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Welspun Syntex Ltd.

Financial Performance

Equity Paid Up
Networth
Capital Employed
Total Debt
Gross Block (Excl. Reval. Res.)
Net Working Capital ( Incl. Def. Tax)
Current Assets ( Incl. Def. Tax)
Current Liabilities and Provisions ( Incl. Def. Tax)
Total Assets/Liabilities (excl Reval & W.off)
Gross Sales
Net Sales
Other Income
Value Of Output
Cost of Production
Selling Cost
PBIDT
PBDT
PBIT
PBT
PAT after Minority Interest & P/L Asso.Co.
Adjusted PAT

Key Ratios
Debt-Equity Ratio (x)
Long Term Debt-Equity Ratio (x)
Current Ratio (x)
Fixed Assets Ratio (x)
Inventory Ratio (x)
Debtors Ratio (x)
Total Asset Turnover Ratio (x)
Interest Cover Ratio (x)
PBIDTM (%)
ROCE (%)
RONW (%)
Debtors Velocity (Days)
Creditors Velocity (Days)

FY 12
23.65
68.66
201.18
116.17
321
32.12
133.75
101.65
302.83
647.51
611.55
2
617.85
561.31
18.51
41.51
24.17
28.9
11.56
11.57
11.35

FY 13
39.24
107.54
311.13
196.97
364.56
78.9
172.79
93.9
405.03
826.88
776.12
2.5
773.66
697.62
28.15
49.48
30.83
34.67
16.02
16.02
16.33

FY 14
39.24
112.96
328.51
209.67
457.57
73.84
186.24
112.4
440.9
957.29
896.38
3.14
896.84
800
27.7
63.04
39.14
43.93
20.03
19.69
19.85

FY 15
39.24
146.37
350.85
197.78
471.45
72.4
159.73
87.32
438.17
892.7
834.86
3.1
825.9
709.52
24.95
86.87
62.95
66.67
42.75
42.75
42.69

FY 12
1.32
0.58
0.8
2.05
10.72
19.87
3.53
1.67
6.41
15.74
8.54
18
19

FY 13
1.68
0.83
0.87
2.41
12.01
23.85
3.23
1.86
5.98
13.53
18.18
15
12

FY 14
1.84
0.96
0.89
2.33
12.59
22.09
2.99
1.84
6.59
13.74
12.29
17
12

FY 15
1.57
0.84
0.89
1.92
12.45
23
2.63
2.79
9.73
19.63
30.61
16
14

12

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Company Analysis

Key Financials (` in Cr.)

Monthly Technical Picks

INDIAN OIL

Monthly Technical Picks

ASHOK LEYLAND

We have detected an Ascending Continuation triangle

chart pattern formed on Ashok Leyland. It is a bullish
signal with good volume. The increasingly higher highs
and constant highs within this pattern tells us that
buyers are more aggressive than sellers, confirmed by a
breakout through a resistance level and positive
directional moving index crossover to signal a
continuation of the prior uptrend.

The share price of Indian Oil Corporation has recently

registered a breakout above the triangular pattern
formed precisely at the 61.8% retracement of the
previous up move from Rs 324 to Rs 465, as can be
seen in the adjacent weekly chart. It signals resumption
of upward momentum and offers a fresh entry
opportunity to ride the next up move in the stock. The
base of triangular pattern is placed above the 200 Days
EMA , which has acted as a strong support during the
entire recent rally.

BUY BTWN 94-97 TARGET 112-114 SL 87

BUY BTWN 414-422 TARGET 470 - 475 SL 390

BHEL

We have detected break of crucial 200 EMA on Monthly

charts of BHEL. The price continues to descend lower
from last four months. The negative crossover of
Directional moving index on monthly charts suggests
much lower prices in coming weeks. These are all
bearish signals which suggests stock to sell on every
rise as stock is in continous downtrend.

SELL BTWN 174-178 TARGET 140-135 SL 200

TCS

We have detected break of crucial 100 SMAAT Rs 2428

and break of Supertrendline at Rs 2395 on Weekly
charts of TCS. The negative crossover of Directional
moving index on weekly charts suggests much lower
prices in coming weeks. The price continues to descend
lower from last three weeks which suggests selling
pressure. These are all bearish signals which suggests
stock to sell on every rise as stock is in positional
downtrend.
SELL BTWN 2335-2375 TARGET 2220-2180 SL 2440

13

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Are Mutual Fund Retirement Plans suitable for you?

What is Mutual Fund Retirement Plans
Retirement or Pension plans offered by Mutual Funds do not get as much of mention compared to the other retirement
i.e. they have both fixed income and equity allocations in their portfolios. Investors can invest either in lump sum amounts or
through systematic investment plans. Investments in Mutual Fund pension plans, in most cases, qualify for Section 80C
benefits under Income Tax Act. Post retirement the investors can withdraw their corpus on a lump sum basis or through
systematic withdrawal plan at a chosen frequency (e.g. monthly, quarterly etc.) for their regular income needs during
retirement. The balance units post withdrawals in either case remain invested and continue to grow in value.

Benefits of Mutual Fund Retirement Plans

With higher allocation to equities, some mutual funds retirement plans can generate superior returns in the long run
compared to other products like PPF, life insurance plans etc.
Some Mutual fund retirement solutions offers higher flexibility in terms of asset allocation options.
Charges of mutual fund pension plans are much lower compared to insurance products.

Mutual Fund Pension Plans in India

Looking at the assets under management of the different mutual fund retirement plans, it seems that they are not as popular
compared to the other retirement planning solutions like PPF, life insurance plans etc. On the other hand, over the last 3
years or so, these funds have given 11 15% returns, which are much higher than what the more popular retirement
planning solutions generated over the same time period.
UTI Retirement Benefit Plan was the first fund to be launched in this space in 1994, followed by Franklin India Pension Plan
in 1997. After a gap of 15 years, Tata Mutual Fund came out with a retirement savings fund in November 2011. Earlier this
year Reliance Mutual Fund launched the Reliance Retirement Fund.
The funds from UTI and Franklin Templeton have around 40% of their assets allocated to equity, while the balance is
invested in fixed income securities. The equity portions of both these schemes investment portfolios are concentrated in
large-cap stocks in the equity portion, whereas the fixed income has more of corporate bonds and long term government
securities. The Tata scheme offers three options:
Progressive plan in which the minimum equity investment is 85%
Moderate plan in which the equity investment is around 75%
Conservative plans offer equity exposure ranging from 0-65%
The scheme automatically switches from one plan to another depending on the investor's age. At age of 45, investments
under the progressive plan automatically switch to the moderate option while at the age of 60 investments in the moderate

14

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Mutual Fund

planning solutions, e.g. PPF, life insurance pension plans etc. These schemes are essentially hybrid mutual fund schemes,

Are Mutual Fund Retirement Plans suitable for you?

Mutual Fund

plan are switched to the conservative plan.

The chart below shows the 3, 5 and 10 year trailing annualized returns of the three comparable plans, UTI, Franklin
Templeton and Tata (Conservative plan). NAVs as on November 9, 2015.
10 years

5 years

3 years

0%
2%
4%
6%
Tata Retirement Savings Fund - Conservative

8%
10 %
Templeton India Pension Plan

12 %

14 %

16 %

UTI Retirement Benefit Plan

Annualized returns of UTI, Franklin Templeton and Tata (Conservative plan) are shown. The returns of Reliance Retirement
Fund are not shown because it has not completed a year yet.

Tax treatment of Mutual Fund Retirement Plans

Investment in Mutual Fund Retirement Plans is subject to tax deduction under Section 80C of Income Tax Act for most
mutual funds retirement plans. However, the maturity proceeds of retirement plans are not entirely tax free. Non equity
oriented mutual funds, i.e. the mutual funds where equity allocations are less than 65% are subject to debt fund taxation.
Long term capital gains for non equity mutual funds are taxed at 20% after allowing for indexation benefits. Indexation
benefits allow you to adjust the acquisition price of units by the ratio of cost of inflation index in the year of redemption and the
year of purchase.
As a consequence, while the long term capital gain for income tax purposes is not tax free, it is lower and hence the tax
obligation is also lower compared to many other fixed income investments, e.g. fixed deposits etc. You should note that, for
debt funds the minimum holding period for long term capital gains to apply for debt funds is 36 months.

Summary
In summary, while on an absolute basis the returns of these pension plans is not as attractive as equity funds or even
balanced funds, their performance is much better than a lot of other retirement solutions available in the market. Higher
equity market returns over the long term make these products an effective inflation hedge for retirement. The UTI
Retirement Benefit Pension Fund and Templeton India Pension Plan are suitable for investors with conservative risk
profiles, while Tata and Reliance Mutual Fund offers variety of options for investors with different risk profiles. You can also
create your own retirement planning portfolio by investing in diversified equity and income funds through Systematic
Investment Plans.

15

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Date
Tue Dec 1

Wed Dec 2

Thu Dec 3

Fri Dec 4

Mon Dec 7

Tue Dec 8

Wed Dec 9

Thu Dec 10

Fri Dec 11

Mon Dec 14
Tue Dec 15

Time in IST Currency

6:30am
CNY
CNY
7:15am
CNY
CNY
1:45pm
EUR
2:25pm
EUR
3:30pm
EUR
8:30pm
USD
12:30pm
EUR
1:30pm
EUR
3:30pm
EUR
EUR
EUR
6:45pm
USD
7:00pm
USD
9:00pm
USD
1:45pm
EUR
2:15pm
EUR
2:30pm
EUR
3:30pm
EUR
6:15pm
EUR
7:00pm
EUR
USD
8:30pm
USD
USD
12:30pm
EUR
2:40pm
EUR
7:00pm
USD
USD
USD
USD
12:30pm
EUR
1:15pm
EUR
EUR
3:00pm
EUR
8:30pm
USD
1:30am
USD
3:30pm
EUR
4:30pm
USD
8:30pm
USD
USD
7:00am
CNY
CNY
12:00pm
EUR
12:30pm
EUR
8:30pm
USD
9:00pm
USD
11:31pm
USD
1:15pm
EUR
7:00pm
USD
USD
9:00pm
USD
11:31pm
USD
11:00am
CNY
CNY
CNY
3:45pm
EUR
7:00pm
USD
USD
USD
USD
8:30pm
USD
3:30pm
EUR
2:30pm
EUR
3:30pm
EUR
EUR
EUR

Country/Event
Manufacturing PMI
Non-Manufacturing PMI
Caixin Manufacturing PMI
Caixin Services PMI
Spanish Manufacturing PMI
German Unemployment Change
Unemployment Rate
ISM Manufacturing PMI
German Retail Sales m/m
Spanish Unemployment Change
CPI Flash Estimate y/y
Core CPI Flash Estimate y/y
PPI m/m
ADP Non-Farm Employment Change
Revised Nonfarm Productivity q/q
Crude Oil Inventories
Spanish Services PMI
Italian Services PMI
Final Services PMI
Retail Sales m/m
Minimum Bid Rate
ECB Press Conference
Unemployment Claims
ISM Non-Manufacturing PMI
Factory Orders m/m
German Factory Orders m/m
Retail PMI
Average Hourly Earnings m/m
Non-Farm Employment Change
Trade Balance
Unemployment Rate
German Industrial Production m/m
French Gov Budget Balance
French Trade Balance
Sentix Investor Confidence
Labor Market Conditions Index m/m
Consumer Credit m/m
Revised GDP q/q
NFIB Small Business Index
JOLTS Job Openings
IBD/TIPP Economic Optimism
CPI y/y
PPI y/y
French Final Non-Farm Payrolls q/q
German Trade Balance
Wholesale Inventories m/m
Crude Oil Inventories
10-y Bond Auction
French Industrial Production m/m
Unemployment Claims
Import Prices m/m
Natural Gas Storage
30-y Bond Auction
Industrial Production y/y
Fixed Asset Investment ytd/y
Retail Sales y/y
Targeted LTRO
Core Retail Sales m/m
PPI m/m
Retail Sales m/m
Core PPI m/m
Prelim UoM Consumer Sentiment
Industrial Production m/m
Italian Trade Balance
German ZEW Economic Sentiment
ZEW Economic Sentiment
Employment Change q/q

Date
Tue Dec 15

Wed Dec 16

Thu Dec 17

Fri Dec 18
Mon Dec 21

Tue Dec 22

Wed Dec 23

Thu Dec 24

Tue Dec 29

Wed Dec 30

Thu Dec 31

Time in IST Currency

7:00pm
USD
USD
USD
8:30pm
USD
2:30am
USD
3:30pm
EUR
EUR
EUR
7:00pm
USD
USD
7:45pm
USD
USD
9:00pm
USD
12:30am
USD
USD
USD
1:00am
USD
2:30pm
EUR
EUR
7:00pm
USD
USD
USD
2:30pm
EUR
8:30pm
USD
12:30pm
EUR
3:30pm
EUR
4:30pm
EUR
8:30pm
EUR
1:30pm
EUR
EUR
2:00pm
EUR
EUR
2:30pm
EUR
EUR
7:00pm
USD
USD
8:30pm
USD
USD
7:30am
CNY
2:30pm
EUR
7:00pm
USD
USD
USD
USD
USD
8:30pm
USD
9:00pm
USD
7:00pm
USD
8:30pm
USD
USD
9:00pm
USD
12:30pm
EUR
1:15pm
EUR
2:30pm
EUR
7:00pm
USD
7:30pm
USD
8:30pm
USD
12:30pm
EUR
1:30pm
EUR
2:30pm
EUR
EUR
8:15pm
USD
8:30pm
USD
9:00pm
USD
2:30pm
EUR
7:00pm
USD
9:00pm
USD

Country/Event
CPI m/m
Core CPI m/m
Empire State Manufacturing Index
NAHB Housing Market Index
TIC Long-Term Purchases
Final CPI y/y
Final Core CPI y/y
Trade Balance
Building Permits
Housing Starts
Capacity Utilization Rate
Industrial Production m/m
Crude Oil Inventories
FOMC Economic Projections
FOMC Statement
Federal Funds Rate
FOMC Press Conference
German Ifo Business Climate
ECB Economic Bulletin
Philly Fed Manufacturing Index
Unemployment Claims
Current Account
Current Account
CB Leading Index m/m
German PPI m/m
Italian Prelim CPI m/m
German Buba Monthly Report
Consumer Confidence
French Flash Manufacturing PMI
French Flash Services PMI
German Flash Manufacturing PMI
German Flash Services PMI
Flash Manufacturing PMI
Flash Services PMI
Final GDP q/q
Final GDP Price Index q/q
Existing Home Sales
Richmond Manufacturing Index
CB Leading Index m/m
Italian Retail Sales m/m
Core Durable Goods Orders m/m
Core PCE Price Index m/m
Durable Goods Orders m/m
Personal Spending m/m
Personal Income m/m
New Home Sales
Crude Oil Inventories
Unemployment Claims
Revised UoM Consumer Sentiment
Revised UoM Inflation Expectations
Natural Gas Storage
GfK German Consumer Climate
French Consumer Spending m/m
Italian Monthly Unemployment Rate
Goods Trade Balance
S&P/CS Composite-20 HPI y/y
CB Consumer Confidence
German Import Prices m/m
Spanish Flash CPI y/y
M3 Money Supply y/y
Private Loans y/y
Chicago PMI
Pending Home Sales m/m
Crude Oil Inventories
ECB Monetary Policy Meeting Accounts
Unemployment Claims
Natural Gas Storage

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DISCLAIMER : Trading and Investment decision taken on your consultation are solely at the discretion of the traders/investors.We are not liable for any loss, which occur as a result of our recommendations. This document has
been prepared on the of publicly available information, internally developed data and other sources believed to be reliable.
NSE:INB/F/E 230823233 BSE: INB/F 010823236 NSDL: IN-DP-NSDL-166-2000, MCX-SX: INE 26082333 AMFI ARN 3524 MCX: TM 29040 / FMC REG NO. MCS / TC / CORP / 0963 MCDEX: TM 00749 / FMC REG NO.
NCDEX / TCM / CORP / 0736 / NSEL TM 10110* Note: Dealing in Commodity Segment through its group company Jhaveri Credits & capital Ltd.
Distributors for IPOs & Mutual Funds. Past performance is not a measure for future returns.