Results Review

INDIA
DOWNSTREAM
23 August 2016

HOLD

Hindustan Petroleum

TP: INR 1,275.00

4.9%

HPCL IN

GRMs outperform, but unsustainable

HPCLs Q1FY17 earnings outperformed estimates at Rs 21bn (+35% QoQ) led
by (a) higher-than-expected GRMs (US$ 6.8/bbl; -9% QoQ), (b) increased
refining output (4.5mmtpa; -4.7% QoQ), (c) lower interest costs (Rs 1.4bn; -27%
REPORT AUTHORS

QoQ) and (d) inventory gains (~Rs 22bn). However, benchmark GRMs trend
lower, on decline in light distillate spreads, which could impact HPCL the most
among OMCs. HPCL seems to be losing market share too. HOLD with an

Rohit Ahuja
+91 22 6766 3437
ahuja.rohit@religare.com

unchanged SOTP-based Sep17 TP of Rs 1,275 (implying 8.7x FY18E EPS).

Akshay Mane
Marketing business outperformance continues: While marketing volumes declined
1.4% QoQ to 8.9mmt, the EBITDA for marketing & other business likely surged by
>80% QoQ to ~Rs 26bn. Most of this increase could be driven by inventory gains
(precise numbers not disclosed by HPCL) and hence may not be sustainable. Prima
facie, it seems HPCL is losing market share as its market sales growth (4% YoY)
underperformed overall consumption growth (~7% YoY for Q1FY17). This implies
HPCLs marketing business margins could come under stress.

+91 22 6766 3438

akshay.mane@religare.com

PRICE CLOSE (22 Aug 16)

INR 1,215.15

Higher GRMs not sustainable: HPCLs GRMs stood at US$ 6.83/bbl, outperforming
the Singapore complex benchmark by US$ 1.83/bbl. However, the reason for this
outperformance is unclear due to limited data available currently. Note that the
recent crash in Singapore complex GRMs to US$ 3.5/bbl driven by a decline in light
distillate spreads could hit HPCLs GRMs the most among OMCs.
Pricing in positives; HOLD: Current valuations at 8.4x FY18E EPS capture most of the
positives from expansion in GRMs and marketing business deltas. The company will
find it tough to sustain market share post IOCLs Paradip refinery ramp-up. Expansion
in diesel spreads would benefit other OMCs more. We value both the refining and
marketing businesses at 6.5x Sep18 EBITDA and maintain HOLD on the stock.

MARKET CAP

INR 411.5 bln

USD 6.1 bln
SHARES O/S

338.6 mln
FREE FLOAT

48.9%
3M AVG DAILY VOLUME/VALUE

1.6 mln / USD 25.6 mln

52 WK HIGH

52 WK LOW

INR 1,328.95

INR 635.15

Financial Highlights
Y/E 31 Mar

FY15A

FY16P

FY17E

FY18E

FY19E

2,166

1,871

1,958

2,209

2,458

(INR)

Revenue (INR bn)

1350

EBITDA (INR bn)

47

106

94

99

103

Adjusted net profit (INR bn)

15

49

50

49

52

950

Adjusted EPS (INR)

44.3

145.3

148.5

145.4

152.3

750

Adjusted EPS growth (%)

41.6

227.8

2.2

(2.1)

4.8

550

DPS (INR)

24.5

34.5

49.0

48.0

50.0

ROIC (%)

2.5

9.4

9.3

9.6

9.5

Adjusted ROAE (%)

10.7

31.3

26.6

22.4

20.6

Adjusted P/E (x)

27.4

8.4

8.2

8.4

8.0

EV/EBITDA (x)

20.1

7.9

8.0

7.3

7.1

2.9

2.4

2.0

1.8

1.5

P/BV (x)

1150

Stock Price

Index Price
29,410
24,410
19,410

350
150

14,410

Source: Company, Bloomberg, RCML Research

This report has been prepared by Religare Capital Markets Limited or one of its affiliates. For analyst certification and other important disclosures, please refer to the Disclosure and Disclaimer section at the end of
this report. Analysts employed by non-US affiliates are not registered with FINRA regulation and may not be subject to FINRA/NYSE restrictions on communications with covered companies, public appearances, and
trading securities held by a research analyst account.

HOLD

Results Review

Hindustan
Petroleum

TP: INR 1,275.00

4.9%

INDIA
DOWNSTREAM

HPCL IN

Fig 1 - Quarterly performance

(Rs mn)

Q1FY17

Q1FY16

YoY (%)

Q4FY16

QoQ (%)

FY16

FY15

YoY (%)

Net sales

4,47,793

5,13,861

(12.9)

4,21,260

6.3

17,89,467

20,63,804

(13.3)

Purchases

3,02,764

3,76,720

(19.6)

2,56,681

18.0

11,59,484

12,92,784

(10.3)

64.8

62.6

2.2

1,38,658

(21.1)

5,53,453

7,16,844

30.9

34.7

37.5

76,530

54,176

% of sales
Other expenditure

67.6

73.3

1,09,375

1,06,977

24.4

20.8

35,653

30,164

% of sales
EBITDA
EBITDA Margin (%)

60.9
32.9
18.2

25,921

41.3

8.0

5.9

4.3

2.6

Depreciation and amortisation

6,108

7,513

(18.7)

6,754

(9.6)

26,673

19,712

35.3

Interest

1,395

1,248

11.8

1,913

(27.1)

6,422

7,066

(9.1)

Other income

6.2

(22.8)

3,368

3,199

5.3

4,771

(29.4)

14,343

14,142

1.4

PBT

31,518

24,602

28.1

22,025

43.1

57,778

41,541

39.1

Provision for tax

10,534

8,461

24.5

6,495

62.2

18,890

14,209

32.9

PAT

20,984

16,141

30.0

15,529

35.1

38,888

27,333

42.3

507

(185)

nm

nm

nm

21,490

15,957

34.7

15,529

38.4

38,888

27,333

42.3

Other comprehensive income

Total Profit
NPM (%)

4.8

3.1

2.2

1.3

62.0

47.7

30.0

45.9

35.1

114.8

80.7

42.3

GRMs (US$/bbl)

6.8

8.6

(20.2)

7.5

(9.1)

6.7

2.8

135.2

Refining throughput (mmt)

4.5

3.8

19.5

4.7

(4.7)

17.2

16.2

6.5

Market sales (mmt)

8.9

8.6

4.0

9.1

(1.4)

34.2

32.0

7.1

Pipeline throughput (mmt)

4.7

4.6

0.2

4.2

10.2

17.6

14.9

18.1

EPS

3.7

Source: RCML Research, Company

Fig 2 - Crude throughput to marketing sales

(mnte)

Crude throughput

Marketing sales

Throughput to sales ratio (R)

10

70%
60%

50%
6

40%

30%
20%

10%

Q1FY17

Q4FY16

Q3FY16

Q2FY16

Q1FY16

Q4FY15

Q3FY15

Q2FY15

Q1FY15

Q4FY14

Q3FY14

Q2FY14

Q1FY14

Q4FY13

Q3FY13

0%

Q2FY13

Source: RCML Research, Company

Fig 3 - HPCLs GRM trend

(US$/bbl)
10

8.6

8
6

7.9

7.6

7.5

6.8

4.7

4.4

3.8

3.7

2.6

1.9

2.3

2.0

2.7

2.1

2
0
(2)

Q1FY17

Q4FY16

Q3FY16

Q2FY16

Q1FY16

Q4FY15

Q3FY15

Q2FY15

Q1FY15

Q4FY14

Q3FY14

Q2FY14

Q1FY14

Q4FY13

Q3FY13

Q2FY13

(1.0)

Source: RCML Research, Company

23 August 2016

Page 60 of 90

HOLD
TP: INR 1,275.00
4.9%

Results Review

Hindustan
Petroleum

INDIA
DOWNSTREAM

HPCL IN

Valuations - maintain HOLD

HPCL has been the biggest gainer of recent macro trends such as low oil prices, higher
petrol/diesel margins and improving GRMs. Efforts to raise distillate yields at its
refineries and gain market share have driven earnings, while high leverage to the
marketing business has paid off amid falling crude prices.
However, we believe the recent run-up in the stock price largely captures these positives.
Further upsides look difficult as (1) HPCL will find it tough to sustain market share post
IOCLs Paradip refinery ramp-up in FY17/FY18, (2) high leverage to light distillates puts
GRMs at risk in the current scenario, and (3) marketing margins appear to have peaked.
We maintain HOLD, valuing HPCL on SOTP basis at a Sep17 TP of Rs 1,275, implying 8.7x
FY18E EPS.

We find the positives priced in post the

recent share price rally

Our SOTP valuation includes the following:

Refining business (standalone and Bhatinda refinery) at 6.5x Sept18 EBITDA a

discount to global peers.

Marketing business at 6.5x Sep18 EBITDA on par with refining, considering HPCL is
gaining market share in high-margin retail fuels.

Fig 4 - SOTP valuation summary

Marketing is evolving into a noncyclical business post petrol/diesel
deregulation

Value
(Rs/sh)

EV
(Rs bn)

Refining Business

523

177

6.5x Sep18 EBITDA

Marketing & others

709

240

6.5x Sep18 EBITDA

Bhatinda refinery

348

118

6.5x Sep18 EBITDA

1,580

535

374

127

Adjusted for Bhatinda stake, FY17E

1,206

409

MRPL stake

56

19

20% discount to CMP

OIL stake

12

20% discount to CMP

1,275

432

Particulars

Total core business

Less: Net debt
Equity Value of core businesses

Total

Comments

This business will deserve a higher

multiple once LPG/kerosene prices are
eventually deregulated (or DBT on
these is transferred to govt. control)

8.7x FY18E EPS

Source: RCML Research, Company

Fig 5 - Key assumptions

FY15

FY16

FY17E

FY18E

FY19E

USDINR

61.2

65.5

68.0

68.0

68.0

Crude price (US$/bbl)

85.6

47.5

45.0

50.0

55.0

GRM (US$/bbl)

2.84

6.68

5.5

5.5

5.5

Crude throughput (mmt)

16.2

17.2

17.4

17.6

17.8

GRM (US$/bbl)

8.5

13.0

11.0

11.0

11.0

Crude throughput (mmt)

5.0

10.7

10.7

11.0

11.5

32.0

34.1

36.5

39.0

41.8

Mumbai & Vizag

HMEL (Bhatinda)

Total market sales (mmt)

Source: RCML Research, Company

23 August 2016

Page 61 of 90

HOLD

Results Review

Hindustan
Petroleum

TP: INR 1,275.00

4.9%

INDIA
DOWNSTREAM

HPCL IN

Fig 6 - Refining & marketing International comparables

R&M companies

EV/EBITDA (x)

P/BV (x)

P/CF (x)

PE (x)

FY18/CY17

FY19/CY18

FY18/CY17

FY19/CY18

FY18/CY17

FY19/CY18

FY18/CY17

FY19/CY18

Sunoco Inc

9.21

8.53

1.17

1.25

5.87

5.27

13.72

12.31

Tesoro Corp

5.92

5.29

1.58

1.26

5.01

4.66

11.62

10.44

Tonengeneral Sekiyu Kk

5.90

5.78

1.17

1.08

nm

nm

8.00

8.95

Valero Energy Corp

4.99

4.64

1.15

1.13

5.26

4.70

10.27

9.56

Showa Shell Sekiyu Kk

5.41

5.33

1.33

1.24

nm

nm

9.26

8.33

11.30

11.84

2.98

2.86

15.41

14.10

17.72

18.72

Thai Oil

5.04

5.11

1.11

1.03

5.61

5.94

8.22

8.29

Caltex Australia

8.48

8.25

2.81

2.57

9.44

9.91

15.54

14.49

Sk Energy Co Ltd

4.72

4.67

0.72

0.67

4.65

4.60

7.38

7.29

Hindustan Petroleum Corp

6.13

7.54

1.84

1.81

6.14

nm

10.02

14.88

Bharat Petroleum Corp Ltd

6.99

6.69

2.28

1.99

7.85

7.64

10.69

10.62

Indian Oil Corporation Ltd

6.20

6.38

1.44

1.31

6.18

7.04

9.39

10.10

Average

6.69

6.67

1.63

1.52

7.14

7.10

10.99

11.16

Formosa Petrochemical Corp

Source: RCML Research, Company

Fig 7 - HPCL: One-year forward P/E band

(Rs)

Price

4x

6x

8x

10x

12x

1,800
1,600

Min
Max
Avg
Median
Last

1,400
1,200
1,000

4.1
98.7
25.1
9.2
8.9

800
600
400
200
Aug-16

Apr-16

Jun-16

Feb-16

Oct-15

Dec-15

Jun-15

Aug-15

Feb-15
Apr-15

Oct-14

Dec-14

Jun-14

Aug-14

Feb-14
Apr-14

Oct-13

Dec-13

Jun-13

Aug-13

Feb-13
Apr-13

Oct-12

Dec-12

Aug-12

Apr-12

Jun-12

Feb-12

Oct-11

Dec-11

Aug-11

Apr-11

Jun-11

HPCLs stock price has outperformed

OMC peers, driven by outperformance
on all operating parameters

Source: RCML Research, Bloomberg

Fig 8 - HPCL: One-year forward P/B band

(Rs)

Price

1,400

Min
Max
Avg
Median
Last

1,200
1,000

0.5x

1.0x

1.5x

We believe fundamentals have peaked

out in FY16, and expect multiples to
trend lower

2.0x

0.4
2.0
1.0
0.9
1.9

800
600
400
200

Aug-16

Jun-16

Apr-16

Feb-16

Oct-15

Dec-15

Jun-15

Aug-15

Feb-15
Apr-15

Oct-14

Dec-14

Jun-14

Aug-14

Feb-14
Apr-14

Oct-13

Dec-13

Jun-13

Aug-13

Feb-13
Apr-13

Dec-12

Oct-12

Aug-12

Jun-12

Apr-12

Feb-12

Dec-11

Oct-11

Aug-11

Apr-11

Jun-11

Source: RCML Research, Bloomberg

23 August 2016

Page 62 of 90

HOLD
TP: INR 1,275.00
4.9%

Results Review

Hindustan
Petroleum

INDIA
DOWNSTREAM

HPCL IN

Sensitivity analysis & key risks

Higher-than-expected marketing volumes on gains in market share over peers (OMC

or private) could present an upside risk to marketing business earnings.

Higher-than-expected GRMs.

Fig 9 - Refining business sensitivity to GRMs

Chg in GRMs vs.
RCMLe (US$/bbl)

Fair value
(Rs/sh)

Chg in EBITDA (%)

Chg in EPS (%)

FY18

FY19

FY18

FY19

Fair value chg

(%)

(2)

1,166

(11.0)

(11.1)

(22.3)

(22.9)

(8.4)

(1)

1,221

(5.5)

(5.6)

(11.2)

(11.4)

(4.2)

1,328

5.5

5.6

11.2

11.4

4.3

1,381

11.0

11.1

22.3

22.9

8.4

Source: RCML Research, Company | Note - *Our estimates for Mumbai & Vizag GRM: FY18 - US$5.5/bbl, FY19 - US$5.5/bbl & estimates for Bhatinda GRM: FY18 US$11.0/bbl, FY19 - US$11.0/bbl

Fig 10 - Marketing & other business sensitivity to EBITDA

Chg in Marketing
EBITDA vs.
RCMLe (Rs/mt)

Fair value
(Rs/sh)

Chg in EBITDA (%)

Chg in EPS (%)

FY18

FY19

FY18

FY19

Fair value chg

(%)

(200)

1,118

(7.9)

(8.1)

(10.6)

(11.2)

(12.2)

(100)

1,195

(3.9)

(4.0)

(5.3)

(5.6)

(6.1)

100

1,352

3.9

4.0

5.3

5.6

6.1

200

1,430

7.9

8.1

10.6

11.2

12.3

Source: RCML Research, Company | Note - *Our estimates for marketing EBITDA: FY18 - Rs920/mt, FY19 - Rs909/mt

23 August 2016

Page 63 of 90

HOLD
TP: INR 1,275.00
4.9%

Results Review

Hindustan
Petroleum

INDIA
DOWNSTREAM

HPCL IN

Per Share Data

Y/E 31 Mar (INR)

FY15A

FY16P

FY17E

FY18E

FY19E

Reported EPS

44.3

145.3

148.5

145.4

152.3

Adjusted EPS

44.3

145.3

148.5

145.4

152.3

DPS

24.5

34.5

49.0

48.0

50.0

414.6

512.8

604.0

693.2

787.0

FY15A

FY16P

FY17E

FY18E

FY19E

0.4

0.5

0.4

0.3

0.3

EV/EBITDA

20.1

7.9

8.0

7.3

7.1

Adjusted P/E

27.4

8.4

8.2

8.4

8.0

2.9

2.4

2.0

1.8

1.5

FY15A

FY16P

FY17E

FY18E

FY19E

EBITDA margin

2.2

5.7

4.8

4.5

4.2

EBIT margin

1.0

3.8

3.0

2.8

2.6

Adjusted profit margin

0.7

2.6

2.6

2.2

2.1

10.7

31.3

26.6

22.4

20.6

2.3

8.6

8.6

8.8

8.6

Revenue

(7.5)

(13.6)

4.7

12.8

11.2

EBITDA

(12.2)

126.6

(11.4)

5.3

4.0

41.6

227.8

2.2

(2.1)

4.8

(16.7)

(7.2)

(0.3)

7.5

5.9

BVPS

Valuation Ratios
Y/E 31 Mar (x)
EV/Sales

P/BV

Financial Ratios
Y/E 31 Mar
Profitability & Return Ratios (%)

Adjusted ROAE
ROCE
YoY Growth (%)

Adjusted EPS
Invested capital
Working Capital & Liquidity Ratios
Receivables (days)
Inventory (days)

89

97

86

84

89

Payables (days)

24

24

22

23

23

Current ratio (x)

1.1

0.9

0.8

0.9

0.9

Quick ratio (x)

0.1

0.1

0.1

0.1

0.1

Gross asset turnover

3.5

2.8

2.8

3.0

3.2

Total asset turnover

2.4

2.2

2.2

2.4

2.5

Net interest coverage ratio

1.2

4.0

3.4

3.4

3.4

Adjusted debt/equity

3.1

2.0

1.5

1.4

1.2

FY15A

FY16P

FY17E

FY18E

FY19E

67.4

70.8

87.8

89.1

89.0

101.0

98.7

97.9

89.6

89.5

1.0

3.8

3.0

2.8

2.6

Asset turnover (Revenue/Avg TA)

237.4

215.7

222.1

240.9

250.8

Leverage (Avg TA/Avg equities)

650.8

552.2

466.1

417.6

391.1

10.7

31.3

26.6

22.4

20.6

Turnover & Leverage Ratios (x)

DuPont Analysis
Y/E 31 Mar (%)
Tax burden (Net income/PBT)
Interest burden (PBT/EBIT)
EBIT margin (EBIT/Revenue)

Adjusted ROAE

23 August 2016

Page 64 of 90

HOLD
TP: INR 1,275.00
4.9%

Results Review

Hindustan
Petroleum

INDIA
DOWNSTREAM

HPCL IN

Income Statement
Y/E 31 Mar (INR mln)

FY15A

FY16P

FY17E

FY18E

FY19E

21,65,941

18,70,788

19,58,125

22,09,429

24,57,880

EBITDA

46,944

1,06,395

94,292

99,262

1,03,252

EBIT

22,050

70,438

58,530

61,629

64,728

(18,352)

(17,473)

(17,318)

(18,293)

(19,268)

18,607

16,576

16,085

11,898

12,490

(39)

EBT

22,305

69,542

57,298

55,234

57,950

Income taxes

(7,377)

(21,072)

(11,770)

(10,763)

(11,117)

(97)

(746)

(4,751)

(4,751)

(4,751)

Reported net profit

14,986

49,215

50,279

49,222

51,585

Adjusted net profit

15,012

49,215

50,279

49,222

51,585

Total revenue

Net interest income/(expenses)

Other income/(expenses)
Exceptional items

Min. int./Inc. from associates

Balance Sheet
Y/E 31 Mar (INR mln)

FY15A

FY16P

FY17E

FY18E

FY19E

1,26,383

1,06,003

1,22,533

1,38,755

1,54,608

Other current liabilities

76,560

1,62,633

1,62,633

1,62,633

1,62,633

Provisions

31,378

23,570

23,570

23,570

23,570

Debt funds

4,54,690

3,74,134

3,34,871

3,49,871

3,64,871

28,045

36,866

37,892

38,826

39,791

3,386

3,386

3,386

3,386

3,386

Reserves & surplus

1,37,001

1,70,278

2,01,143

2,31,348

2,63,123

Shareholders' fund

1,40,387

1,73,664

2,04,530

2,34,734

2,66,510

Total liabilities and equities

8,57,443

8,76,871

8,86,028

9,48,388

10,11,982

Cash and cash eq.

22,358

27,994

22,164

30,616

46,671

Accounts receivables

40,683

45,337

40,818

45,024

49,095

1,60,448

1,49,839

1,42,138

1,66,506

1,85,529

Other current assets

79,127

77,172

77,172

77,172

77,172

Investments

61,078

55,704

55,704

55,704

55,704

4,53,066

4,11,573

4,19,479

4,21,380

4,22,392

39,498

1,08,048

1,27,349

1,50,782

1,74,215

1,186

1,204

1,204

1,204

1,204

8,57,443

8,76,871

8,86,028

9,48,388

10,11,982

Y/E 31 Mar (INR mln)

FY15A

FY16P

FY17E

FY18E

FY19E

Net income + Depreciation

38,791

85,172

87,066

87,790

91,074

Changes in working capital

1,50,879

65,794

28,749

(12,351)

(7,242)
(12,490)

Accounts payables

Other liabilities
Equity capital

Inventories

Net fixed assets

CWIP
Intangible assets
Total assets

Cash Flow Statement

Other operating cash flows

(18,568)

(16,576)

(16,085)

(11,898)

Cash flow from operations

1,71,102

1,34,390

99,730

63,540

71,343

Capital expenditures

(72,697)

(63,015)

(62,968)

(62,968)

(62,968)

Change in investments

(114)

50

Other investing cash flows

14,551

21,900

16,085

11,898

12,490

Cash flow from investing

(58,260)

(41,065)

(46,882)

(51,070)

(50,478)

Debt raised/repaid

(98,586)

(80,555)

(39,264)

15,000

15,000

(9,707)

(13,669)

(19,414)

(19,017)

(19,810)

Dividends paid
Other financing cash flows

(3,979)

6,534

Cash flow from financing

(1,12,272)

(87,690)

(58,677)

(4,017)

(4,810)

570

5,635

(5,830)

8,453

16,055

22,358

27,994

22,164

30,616

46,671

Changes in cash and cash eq

Closing cash and cash eq

23 August 2016

Page 65 of 90

RESEARCH TEAM

ANALYST

SECTOR

EMAIL

TELEPHONE

Varun Lohchab
(Head India Research)

Consumer, Strategy

varun.lohchab@religare.com

+91 22 6766 3470

Mihir Jhaveri

Auto, Auto Ancillaries, Cement

mihir.jhaveri@religare.com

+91 22 6766 3459

Siddharth Vora

Auto, Auto Ancillaries, Cement

siddharth.vora@religare.com

+91 22 6766 3435

Misal Singh

Capital Goods, Infrastructure, Utilities

misal.singh@religare.com

+91 22 6766 3466

Prashant Tiwari, CFA

Capital Goods, Infrastructure, Utilities

prashant.tiwari@religare.com

+91 22 6766 3485

Manish Poddar

Consumer

manish.poddar@religare.com

+91 22 6766 3468

Rohit Ahuja

Energy

ahuja.rohit@religare.com

+91 22 6766 3437

Akshay Mane

Energy

akshay.mane@religare.com

+91 22 6766 3438

Parag Jariwala, CFA

Financials

parag.jariwala@religare.com

+91 22 6766 3442

Vikesh Mehta

Financials

vikesh.mehta@religare.com

+91 22 6766 3474

Rumit Dugar

IT, Telecom, Media

rumit.dugar@religare.com

+91 22 6766 3444

Saumya Shrivastava

IT, Telecom, Media

saumya.shrivastava@religare.com

+91 22 6766 3445

Pritesh Jani

Metals

pritesh.jani@religare.com

+91 22 6766 3467

Arun Baid

Mid-caps

arun.baid@religare.com

+91 22 6766 3446

Praful Bohra

Pharmaceuticals

praful.bohra@religare.com

+91 22 6766 3463

Aarti Rao

Pharmaceuticals

aarti.rao@religare.com

+91 22 6766 3436

Jay Shankar

Economics & Strategy

shankar.jay@religare.com

+91 11 3912 5109

Rahul Agrawal

Economics & Strategy

ag.rahul@religare.com

+91 22 6766 3433

23 August 2016

Page 66 of 10

RESEARCH DISCLAIMER

Important Disclosures
This report was prepared, approved, published and distributed by a Religare Capital Markets (RCM)
group company located outside of the United States (a non-US Group Company). This report is
distributed in the U.S. by Enclave Capital LLC (Enclave Capital), a U.S. registered broker dealer, on
behalf of RCM only to major U.S. institutional investors (as defined in Rule 15a-6 under the U.S.
Securities Exchange Act of 1934 (the Exchange Act)) pursuant to the exemption in Rule 15a-6 and
any transaction effected by a U.S. customer in the securities described in this report must be effected
through Enclave Capital. Neither the report nor any analyst who prepared or approved the report is
subject to U.S. legal requirements or the Financial Industry Regulatory Authority, Inc. (FINRA) or
other regulatory requirements pertaining to research reports or research analysts. No non-US Group
Company is registered as a broker-dealer under the Exchange Act or is a member of the Financial
Industry Regulatory Authority, Inc. or any other U.S. self-regulatory organization.

Information and opinions presented in this report were obtained or derived from sources that RCM
believes to be reliable, but RCM makes no representations or warranty, express or implied, as to their
accuracy or completeness or correctness. RCM accepts no liability for loss arising from the use of the
material presented in this report, except that this exclusion of liability does not apply to the extent that
liability arises under specific statutes or regulations applicable to RCM. This report is not to be relied
upon in substitution for the exercise of independent judgment. RCM may have issued, and may in the
future issue, a trading call regarding this security. Trading calls are short term trading opportunities
based on market events and catalysts, while stock ratings reflect investment recommendations based
on expected absolute return over a 12-month period as defined in the disclosure section. Because
trading calls and stock ratings reflect different assumptions and analytical methods, trading calls may
differ directionally from the stock rating.

Subject to any applicable laws and regulations at any given time, non-US Group Companies, their
affiliates or companies or individuals connected with RCM (together, Connected Companies) may
make investment decisions that are inconsistent with the recommendations or views expressed in this
report and may have long or short positions in, may from time to time purchase or sell (as principal or
agent) or have a material interest in any of the securities mentioned or related securities or may have
or have had a business or financial relationship with, or may provide or have provided investment
banking, capital markets and/or other services to, the entities referred to herein, their advisors and/or
any other connected parties. As a result, recipients of this report should be aware that Connected
Companies may have a conflict of interest that could affect the objectivity of this report.

Past performance should not be taken as an indication or guarantee of future performance, and no
representation or warranty, express or implied, is made regarding future performance. Information,
opinions and estimates contained in this report reflect a judgment of its original date of publication by
RCM and are subject to change without notice. The price, value of and income from any of the
securities or financial instruments mentioned in this report can fall as well as rise. The value of
securities and financial instruments is subject to exchange rate fluctuation that may have a positive or
adverse effect on the price or income of such securities or financial instruments. Investors in
securities such as ADRs, the values of which are influenced by currency volatility, effectively assume
this risk.

This report is only for distribution to investment professionals and institutional investors.

This report is distributed in India by Religare Capital Markets Limited, which is a registered
intermediary regulated by the Securities and Exchange Board of India. In Singapore, it is being
distributed (i) by Religare Capital Markets (Singapore) Pte. Limited (RCMS) (Co. Reg. No.
200902065N) which is a holder of a capital markets services licence and an exempt financial adviser
in Singapore and (ii) solely to persons who qualify as institutional investors or accredited investors
as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (the SFA).
Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations (the FAR), sections
25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to RCMS when
providing any financial advisory service to an accredited investor, or overseas investor (as defined
in regulation 36 of the FAR). Persons in Singapore should contact RCMS in respect of any matters
arising from, or in connection with this publication/communication. In Hong Kong, it is being
distributed by Religare Capital Markets (Hong Kong) Limited (RCM HK), which is licensed and
regulated by the Securities and Futures Commission, Hong Kong. In Australia, it is being distributed
by RCMHK which is approved under ASIC Class Orders. In Sri Lanka, it is being distributed by
Bartleet Religare Securities, which is licensed under Securities and Exchange Commission of Sri
Lanka. If you wish to enter into a transaction please contact the RCM entity in your home jurisdiction
unless governing law provides otherwise. In jurisdictions where RCM is not registered or licensed to
trade in securities, transactions will only be effected in accordance with applicable securities
legislation which may vary from one jurisdiction to another and may require that the trade be made in
accordance with applicable exemptions from registration or licensing requirements.

Analyst Certification
Each of the analysts identified in this report certifies, with respect to the companies or securities that
the individual analyses, that (1) the views expressed in this report reflect his or her personal views
about all of the subject companies and securities and (2) no part of his or her compensation was, is
or will be directly or indirectly dependent on the specific recommendations or views expressed in this
report.
Analysts and strategists are paid in part by reference to the profitability of RCM.
Stock Ratings are defined as follows
Recommendation Interpretation (Recommendation structure changed with effect from March 1, 2009)
Recommendation
Buy
Hold
Sell

Expected absolute returns (%) over 12 months

More than 15%
Between 15% and 5%
Less than 5%

Expected absolute returns are based on the share price at market close unless otherwise stated.
Stock recommendations are based on absolute upside (downside) and have a 12-month horizon. Our
target price represents the fair value of the stock based upon the analysts discretion. We note that
future price fluctuations could lead to a temporary mismatch between upside/downside for a stock
and our recommendation.
Stock Ratings Distribution
As of 1 August 2016, out of 169 rated stocks in the RCM coverage universe, 92 have BUY ratings
(including 4 that have been investment banking clients in the last 12 months), 44 are rated HOLD and
33 are rated SELL.
Research Conflict Management Policy
RCM research has been published in accordance with our conflict management policy, which is
available here.
Disclaimers
This report is not directed to, or intended for distribution to or use by, any person or entity who is a
citizen or resident of or located in any locality, state, country or other jurisdiction where such
distribution, publication, availability or use would be contrary to law or regulation or which would
subject RCM to any registration or licensing requirement within such jurisdiction(s). This report is
strictly confidential and is being furnished to you solely for your information. All material presented in
this report, unless specifically indicated otherwise, is under copyright to RCM. None of the material,
its content, or any copy of such material or content, may be altered in any way, transmitted, copied or
reproduced (in whole or in part) or redistributed in any form to any other party, without the prior
express written permission of RCM. All trademarks, service marks and logos used in this report are
trademarks or service marks or registered trademarks or service marks of RCM or its affiliates, unless
specifically mentioned otherwise.
The information, tools and material presented in this report are provided to you for information
purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or
to buy or subscribe for securities or other financial instruments. RCM has not taken any steps to
ensure that the securities referred to in this report are suitable for any particular investor. RCM will
not treat recipients as its customers by virtue of their receiving the report. The investments or
services contained or referred to in this report may not be suitable for you and it is recommended that
you consult an independent investment advisor if you are in doubt about such investments or
investment services. In addition, nothing in this report constitutes investment, legal, accounting or tax
advice or a representation that any investment or strategy is suitable or appropriate to your individual
circumstances or otherwise constitutes a personal recommendation to you.

Religare Capital Markets does and seeks to do business with companies covered in our research
report. As a result, investors should be aware that the firm may have a conflict of interest that could
affect the objectivity of research produced by Religare Capital Markets. Investors should consider our
research as only a single factor in making their investment decision.
Any reference to a third party research material or any other report contained in this report represents
the respective research organization's estimates and views and does not represent the views of RCM
and RCM, its officers, employees do not accept any liability or responsibility whatsoever with respect
to its accuracy or correctness and RCM has included such reports or made reference to such reports
in good faith. This report may provide the addresses of, or contain hyperlinks to websites. Except to
the extent to which the report refers to material on RCMs own website, RCM takes no responsibility
whatsoever for the contents therein. Such addresses or hyperlinks (including addresses or hyperlinks
to RCMs own website material) is provided solely for your convenience and information and the
content of the linked site does not in any way form part of this report. Accessing such website or
following such link through this report or RCMs website shall be at your own risk.
Other Disclosures by Religare Capital Markets Limited under SEBI (Research Analysts)
Regulations, 2014 with reference to the subject companies(s) covered in this report:
Religare Capital Markets Limited (RCML) is engaged in the business of Institutional Stock Broking
and Investment Banking. RCML is a member of the National Stock Exchange of India Limited and
BSE Limited and is also a SEBI-registered Merchant Banker. RCML is a subsidiary of Religare
Enterprises Limited which has its various subsidiaries engaged in the businesses of commodity
broking, stock broking, lending, asset management, life insurance, health insurance, wealth
management, portfolio management, etc. RCML has set up subsidiaries in Singapore, Hong Kong
and Sri Lanka to render stock broking and investment banking services in respective jurisdictions.
RCMLs activities were neither suspended nor has it defaulted with any stock exchange authority with
whom it has been registered in the last five years. RCML has not been debarred from doing business
by any Stock Exchange / SEBI or any other authority. No disciplinary action has been taken by any
regulatory authority against RCML impacting its equity research analysis activities.
RCML or its research analyst or his/her relatives do not have any financial interest in the subject
company.
RCML or its research analyst or his/her relatives do not have actual/beneficial ownership of one per
cent or more securities in the subject company at the end of the month immediately preceding the
date of publication of this research report.

23 August 2016

Page 67 of 10

RESEARCH DISCLAIMER

Research analyst or his/her relatives do not have any material conflict of interest at the time of
publication of this report.

RCML may from time to time solicit or perform investment banking services for the company(ies)
mentioned in this report.

Research analyst has not received any compensation from the subject company in the past 12
months.

RCML or its associates may have material conflict of interest at the time of publication of this
research report.

RCML may have managed or co-managed a public offering of securities for the subject company in
the past 12 months.

RCMLs associates may have financial interest in the subject company. RCMLs associates may have
received compensation from the subject company in the past 12 months. RCMLs associates may
hold actual / beneficial ownership of one per cent or more securities in the subject company at the
end of the month immediately preceding the date of publication of this research report.

RCML may have received compensation from the subject company in the past 12 months.
Research analyst has not served as an officer, director or employee of the subject company.
RCML or its research analyst is not engaged in any market making activities for the subject company.

RCM has obtained registration as Research Entity under SEBI (Research Analysts) Regulations,
2014.

Digitally signed by MANE AKSHAY

Date: 2016.08.23 00:23:20 +05'30'

23 August 2016

Page 68 of 10