V2 RETAIL LIMITED

V2 Retail Limited
Company Profile RATING: BUY
V2 Retail Limited (V2 Retail) offers a portfolio of products, including apparel and life Target: 322.0
Upside: 19 %
style products. V2 stands for „Value and Variety‟ it sells good quality fashion gar-
CMP : 270.85 (As on 18/01/2018)
ments at affordable prices, which suits every individual and household. The company
Reuter Code : VREL.NS
caters to the neo middle class group of population living in Tier II and Tier III cities.
Bloomberg Code : VREL.IN
The Company operated 70 stores in 16 states and 65 cities covering a total retail
area of 8.0 lac sq. ft. as on Sep 30, 2018.
Investment Rationale Market Data
Face Value (INR) 10.0
Strong Tier II & Tier III market presence with centre distribution network - V2 Retail‟s Equity Share Capital (cr) 34.0
majority of stores are concentrated in Tier II (27% of total store) and Tier III (66% of Share Outstanding (cr) 3.4
total store) cities of Northern and Eastern region of the country, where modern retail Market Cap (INR cr) 918.8
penetration is low. In last two years, V2 Retail has expanded its store presence in Tier Book Value / share 81.0
II & Tier III cities from 20 stores in FY2016 to 45 stores in FY18. The company oper- Daily Avj. Volume 20.544
ates through regional hub and spoke model which derives supply chain efficiency, 52 W High 497.7
helping to manage stores and warehouse inventories. 52 W Low 245.4
Shareholding %
Increased focus on Private Label - V2 Retail has private label (company owned) Promoter 51.1
brands - GODSPEED, HERRLICH, Glamora, ebellia, Honey Brats. The company Foreign 10.4
earned revenue of INR 69.9 crore with 12.5% of total revenue from private label Institutions 3.3
brands in FY2018. The company‟s management expects to double its private label Public & Others 35.2
share of total revenue by 25% till 2020 to garner higher margins at gross level.
Stores like Shopper Stop, Lifestyle, etc generates 15-25% of their revenues from pri- Sensex and Stock Movement
vate label brands.
Valuation
V2 Retail caters to Tier II & III cities in India with 92% of its stores are present in these
cities. Almost 65% of V2 Retail stores are in Tier III cities, which are currently being
under-served by the organized retailers. V2 Retail emphasizes on asset light business
model and smaller store formats with an average size of 10,000-11,000 sq ft where
payback period is 3-4 years, which reduces the risk of store failure significantly. This
strategy has yielded benefits like low operating cost and helping it to maintain profit
margin.
We initiate BUY on V2 Retail with a TP of INR 322, valuing it at 20x FY21E earnings,
considering earnings CAGR of 18.7% over FY18-21E and improving margin with
healthy inventory turnover. V2 Retail is currently trading at PE of 16.8x and EV/
EBITDA of 9.7x FY21E. It‟s nearest listed competitor V-Mart Ltd is trading at 55.6x
TTM PE.

Financials : (Standalone) (In INR Cr.)

FY 2017 FY 2018 FY 2019E FY 2020E FY 2021E Dinesh Gupta
Net Sales 472 559 696 896 985 +91 22 30272867

EBDITA 43 55 62 82 100 dinesh.gupta@dalmiasec.com

PAT 39 31 34 47 57 Lohit Bharambe
EPS (INR) 13.9 9.6 0.3 10.9 16.1 +91 22 30272868

P/E (x) 13.7 43.4 1028.8 24.87 16.8 lohit.bharambe@dalmiasec.com

Source - DSPL Research, Company

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V2 RETAIL LIMITED

Company Profile

Incorporated in 2001 as Vishal Megamart Ltd, was trapped into debt due to large expansion and poor cash flow gen-
eration. In 2011, management sold brand “Vishal” and started again with name V2 Retail Ltd (V2 Retail). V2 Retail
offers a portfolio of products, including apparel and life style products. V2 stands for „Value and Variety‟ it sells good
quality fashion garments at affordable prices, which suits every individual and household. The company has a strong
presence in Northern & Eastern India. The company caters to the neo middle class group of population living in Tier II
and Tier III cities. The Company operated 70 stores in 16 states and 65 cities covering a total retail area of 8.0 lac
sq. ft. as on Sep 30, 2018.

The company also sells goods through private label (company owned) brands - GODSPEED, HERRLICH, Glamora,
ebellia, Honey Brats.

Product Offerings

Men’s Wear Women’s Wear Kids’ Wear Lifestyle

• Trouser • Ethnic Wear • Boy • Deodorants
• Shirt • Upper Outfit • Girls • Wallets
• Occasion Wear • Lower Outfit • Infants • Sunglasses
• Winter Wear • Occasion Wear • Winter Wear • Ladies purse
• Sportswear • Winter Wear etc
• Formal • Sportswear
• Casual

Private Label

Source – Company, DSPL Research

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V2 RETAIL LIMITED

V2 Retail Business Strategy - V2 stand for Value & Variety

V2 Retail has adopted two business strategies to drive company‟s growth going forward. Business Strategy 1 of the
company is to derive top line growth by tapping neo middle class and middle class by providing latest fashion at rea-
sonable price. It is also going to tap revenue through cross promotional activities.

V2 Retail‟s Business Strategy 2 is to derive bottom line growth through efficient inventory management with better sys-
tem and process management. The company has plans to expand through zero working capital debt and focus on
increasing same store sales growth.

Business Strategy 1

Business Strategy 2

Source – Company, DSPL Research

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V2 RETAIL LIMITED

Store Presence

Key Management

Source – Company, DSPL Research

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V2 RETAIL LIMITED

Retail Industry Overview

India is one of the top five retail markets in the world by economic value. Retail industry is one of the pillar of Indian
economy and account for ~10% of the country‟s GDP & employs around 8% of the workforce. India‟s retail market is
estimated to be US $710 billion which is mostly unorganised; with nearly 93% of these outlets being small mom-and-
pop stores or stand-alone outlets.

The India‟s retail sector is witnessing exponential growth due to rapid urbanisation and digitisation, rising disposable
incomes and lifestyle changes, particularly that of the middle-class. Retail market in India is projected to grow from
USD 710 billion in FY2017 to USD 990 billion in FY2020E, with CAGR of 9.4%. India‟s Organised retail is expected
to increase from USD 66.7 billion in FY2017 to USD 118.8 billion in FY2020E. India‟s Organised retail to the total
retail is set to increase from 9.4% in FY2017 to 16% in FY2025E.

Source – TCNS Clothing RHP, Technopak, DSPL Research

In India Private consumption remains the primary driver of economic growth, and this is reflected in the relatively high
share of merchandise retail market. Private consumption is estimated at 59% of GDP for FY2017 and India‟s retail
market accounted for 49% of private consumption in FY2017. India‟s retail sector is witnessing accelerated growth,
with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities. The pur-
chasing power of Indian consumer is growing in categories like apparels, cosmetics, shoes, watches, beverages, food
and even jewellery. Indian Retail spending across top 2 cities - Delhi and Mumbai contributed 9.3% in FY2017. Next
6 cities accounted for 10.4% and next 16 cities accounted for 9.3% of total retail spending in FY2017. Similarly Next
50 cities (mostly Tier III cities) contributed 9.3% in FY2017. Rest of India contributed 61.7% share of total retail spend-
ing in FY2017.

Source – TCNS Clothing RHP, Technopak, DSPL Research

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V2 RETAIL LIMITED

According to Indian people‟s spending habit - Food & Grocery remained top contributor with 66.7% to Indian retail
industry in FY2017 and is expected to remain top category in coming years as well. Apparel and Accessories retail
was second and contributed 7.9% to total Indian retail industry in FY2017 and likely to remain one of the top three
categories in this list in FY2021and FY2025.

Retail Industry by Segment in USD billion FY2007 FY2012 FY2017 FY2021E FY2025E
Food & Grocery 181.3 268.5 473.9 727.2 1,025.1
Apparel & Accessories (Bags, Belts and Wallets) 20.7 33.0 56.4 84.6 119.9
Jewellery and Watches 15.5 29.1 55.0 90.7 134.0
Consumer Electronics 15.5 20.7 42.2 74.7 115.1
Home and Living 5.2 16.7 30.5 48.1 69.4
Pharmacy and Wellness 5.2 10.9 20.9 33.2 48.9
Foot apparel 2.6 4.8 8.5 13.3 20.5
Others* 13.0 14.3 22.7 34.3 44.2
Total 259.0 398.0 710.0 1,106.0 1,577.0

Retail Industry by Segment Mix (%) FY2007 FY2012 FY2017 FY2021E FY2025E
Total Retail in USD billion 259.0 398.0 710.0 1,106.0 1,577.0
Food & Grocery 70.0% 67.5% 66.7% 65.8% 65.0%
Apparel & Accessories (Bags, Belts, and Wallets) 8.0% 8.3% 7.9% 7.7% 7.6%
Jewellery and Watches 6.0% 7.3% 7.7% 8.2% 8.5%
Consumer Electronics 6.0% 5.2% 5.9% 6.8% 7.3%
Home and Living 2.0% 4.2% 4.3% 4.4% 4.4%
Pharmacy and Wellness 2.0% 2.8% 2.9% 3.0% 3.1%
Foot apparel 1.0% 1.2% 1.2% 1.2% 1.3%
Others* 5.0% 3.6% 3.2% 3.1% 2.8%

Source – TCNS Clothing RHP, Technopak, DSPL Research,

Others* include Books and Stationery, Toys, Eye apparel, Sports Goods, Alcoholic Beverages and Tobacco

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V2 RETAIL LIMITED

Apparel & Accessories Industry Overview

The apparel & accessories market in India was estimated to be USD 56.1 billion in FY2017 and is expected to reach
USD 77.7 billion by FY2020E, growing at a CAGR of 11.5%. Share of Apparel and Accessories stood at 90.7% and
9.3% respectively in FY2017.

The apparel segment was estimated to be USD 50.9 billion in FY2017 and is expected to grow at a CAGR of 8.9% in
FY2017-FY2020E to reach USD 65.8 billion, on the back of factors such as greater purchasing power, in turn driving
growth in primary discretionary spends, better access and availability of products, higher brand consciousness, in-
creasing urbanization and increasing digitization.

Out of total apparel & accessories market, 75.7% market amounting to USD 42.5 billion was concentrated in Unor-
ganised sector and remaining 24.3% market amounting to USD 13.6 billion was in Organised sector in FY2017.
Share of Organised apparel & accessories market is expected to increase up to 36% in FY2021E.

Source – TCNS Clothing RHP, Technopak, DSPL Research

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V2 RETAIL LIMITED

Men‟s wear market in India contributed about 42% to total Apparel market amounting to USD 21.4 billion in
FY2017. Women‟s wear market in India contributed about 38% to total Apparel market and amounting to USD 19.3
billion in FY2017. Finally, Kids wear accounted for 20% of the total market share amounting to USD 10.2 billion in
FY2017. Share of Women‟s and Kids wear is set to increase as compared to Men‟s wear by FY2025E.
Out of the overall apparel market in India - Indian apparel accounted for approximately 30% or USD 15.27 billion
and the balance 70% of the market stood at USD 35.63 billion from western apparel in FY2017.

Source – TCNS Clothing RHP, PWC, Technopak, DSPL Research

Women‟s Indian wear format like Salwar Kameez, Kurtis, Mix & Ethnic contributed the most at 34% followed by Sarees
at 32% and Blouse Peticot at 5% of the women‟s apparel market in FY2017. Further, Innerwear, Winterwear and
Sleepwear market accounted at 15%, 3% and 3% respectively in FY2017.

In men‟s wear segment, Shirts contributed the most at 28% followed by Trousers at 22% and Denim at 14% of the
overall men‟s apparel market in FY2017. Share of Winterwear, T-Shirts and Innerwear categories accounted at 7%
each in FY2017. Ethnic, Suits/Coats/ Safari Suits and Activewear segment contributed at 6%, 4% and 3% respectively
in FY2017.

Source – TCNS Clothing RHP, Active Clothing RHP, Technopak, DSPL Research

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V2 RETAIL LIMITED

Investment Rationale

Strong Tier II & Tier III market presence with centre distribution network

Tier II and Tier III cities are undoubtedly the future growth engines of the country. With rapid urbanization and digitiza-
tion, rising disposable incomes and lifestyle changes of particularly the middle-class is leading to a major revolution in
the Indian retail sector. As per Anarock Research estimates, nearly 100 million people out of the 300-400 million
middle class currently reside in tier II and tier III cities. This indicates that a significant portion of the target segment for
the retailers continues to live in the non-metro cities. With increasing investments in infrastructure connectivity to Tier II
& Tier III cities is now becoming easier which has helped the retailer to tap such high potential markets of Tier II and
Tier III. Further, there are additional advantages for retail player in tier II and tier III cities such as lower rental charges
and operating cost than metro cities. As per industry estimates, rental values in Tier II and Tier III cities are in the range
of INR 40-80 per sq. ft. in prime locations, whereas the average rental value is in the range of INR 150-250 per sq.
ft. in prime location in metros (Source - Anarock).

V2 Retail‟s majority of stores are concentrated in Tier II (27% of total store) and Tier III (66% of total store) cities of
Northern and Eastern region of the country, where modern retail penetration is low. In last two years, V2 Retail has
expanded its store presence in Tier II & Tier III cities from 20 stores in FY2016 to 45 stores in FY18. V2 Retail‟s aver-
age selling price is in range of INR 255-280 and it has maintained rent in the range of INR 44-53 per sq. ft. V2 Re-
tail serves mainly to under penetrated markets, targeting customers in Tier II & III cities with main focus to provide lat-
est fashion variety with affordable prices - its average selling price (ASP) is INR 278 (Q2 FY19) while the average bill-
ing per transaction is ~INR 800 (FY18). We see huge potential for V2 Retail as this under-served market do not have
presence of big players like Shopper Stop, Lifestyle, etc.

V2 Retail has 70 stores catering to retail space of 8 lakh sq. ft. as on Q2FY19. The company has one warehouse/
distribution centre located at Gurgaon spread across 1.8 lakh sq. ft. The distribution centre is capable of addressing
the needs of 10 lakh sq. ft. of retail space. The company operates through regional hub and spoke model which de-
rives supply chain efficiency, helping to manage stores and warehouse inventories. V2 Retail expanded stores horizon-
tally and vertically and believes that consumer aspirations and preferences change considerably across geographies.
Thus, the company decided to expand in clusters, whereby new stores are opened within a 150 km radius of existing
ones.

Source – Company, DSPL Research

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V2 RETAIL LIMITED

V2 Retail - Stores by Location Q2FY19 (%)

Bihar 17 24.3%
Uttar Pradesh 14 20.0%
Odisha 7 10.0%
Jharkhand 6 8.6%
Karnataka 4 5.7%
Assam 4 5.7%
Uttarakhand 4 5.7%
NCR 3 4.3%
West Bengal 2 2.9%
Madhya Pradesh 2 2.9%
Jammu & Kashmir 2 2.9%
Himachal Pradesh 1 1.4%
Tripura 1 1.4%
Arunachal Pradesh 1 1.4%
Rajasthan 1 1.4%
Telangana 1 1.4%
Total 70 100.0%

Source – Company, DSPL Research

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V2 RETAIL LIMITED

Increased focus on Private Label

Private labels are brands which are not owned by the manufacturer or the producer but by a retailer. The retailer gets
their goods made by a contract manufacturer under their own labels, similar to brands. Private labels are also known
as store brand, own label, retailer brand etc.

With high growth potential, the Indian fashion retail market has witnessed several interesting trends in recent years,
indicating the evolving fashion retail market. Growth of private labels is one such trend in the dynamic fashion retail
environment. Private labels in India have seen a sharp rise with offline as well as online retailers.

The organised Indian retail industry has begun experiencing an increased level of activity in the private label space.
The share of private label strategy in the US and the UK markets is 19% and 39%, respectively, while its share in India
is just 6%.(Source: India Brand Equity Foundation report)

V2 Retail has the following private labels (company owned) brands - GODSPEED, HERRLICH, Glamora, ebellia, Hon-
ey Brats. The company earned revenue of INR 69.9 crore which constituted 12.5% of total revenue from private label
brands in FY2018. The company‟s management expects to double its private label share up to 25% of total revenue
by 2020 to garner higher margins at gross level. Stores like Shopper Stop, Lifestyle, etc generates 15-25% revenues
from private label brands.

Private Label Brands of V2 Retail

Source – Company, DSPL Research

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V2 RETAIL LIMITED

Affordable Price range of Products

V2 Retail operate in a competitive environment, because of the presence of numerous players in the unorganised seg-
ment. The demand for V2 Retail‟s products are dependent on macroeconomic factors primarily pertaining to growth in
rural economy and smaller cities & towns. V2 Retail average selling price for its product offerings across stores stood
at INR 278 in FY2018 which is well within the affordable range of middle class. The key for V2 Retail value pricing is
to strike a balance between cost and quality. The company has position products at reasonable prices on the back of
low cost procurement that is outsource rather than internally manufactured which has help it to focus more on its core
business activity.

Apparel market is divided into Medium, Economy, Low, Premium and Super Premium price segments. Medium price
segment was the top contributor with 29% share followed by Economy price segment with 28% share and Low price
segment with 26% share in 2016. Premium and Super Premium categories had share of 13% and 3% respectively in
2016. The price sensitive Tier III population forms a major chunk of 54% of the low and economy price segments of
apparel market.

V2 Retail‟s pricing strategy lies around a reasonable mark-up that enhances affordability and helps widen the market.
The company focuses on the democratization of branded apparel, extending its products to consumers who have ear-
lier never had the benefit of access to branded products at prices lower than that of branded products – a unique po-
sitioning. The under served market holds out attractive potential due to per capita income of Tier II and Tier III cities
are rising faster than national average.

Source – Company, Active Clothing DRHP, DSPL Research

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V2 RETAIL LIMITED

Financial Performance

V2 Retail‟s net sales increased by 18.5% YoY to INR 559.4 crore in FY2018. The company derives majority of the rev-
enue from sale of apparels which contributed 96% to net sales and remaining 4% from others in FY2018. V2 Retail
has derived majority of the revenue from sale of Non-Private Labels which contributed 87% to net sales amounting to
INR 489.5 crore and remaining 13% from Private Labels at INR 69.9 crore in FY2018. V2 Retail has four business
verticals viz. Men‟s wear, Ladies wear, Kid‟s wear and Lifestyle. The company‟s Men‟s wear contributed 44% of net
sales to INR 246.1 crore, Ladies wear accounted 26% of net sales to INR 145.4 crore, Kid‟s wear comprised 25% of
net sales to INR 139.9 crore and Lifestyle at 5% to INR 28 crore in FY2018.

V2 Retail has started diversifying revenue stream on geographical front. Earlier company was focused in Northern and
Eastern market of India but company has started rolling out new stores in Southern region as well. V2 Retail earned
majorly from Eastern region with 59% of revenue at INR 330 crore, followed by Northern region with 29% of net sales
amounting to INR162.2 crore and remaining 12% with INR 67.1 crore from Southern region in FY2018.

Source – Company, DSPL Research, *Others include Non-Apparel, FMCG, other operating Income

V2 Retail‟s revenue increased by CAGR of 24.9% in FY2015-FY2018 on the back of store expansion in new region i.e
from 16 in FY15 to 49 in FY18. The company‟s EBITDA too rose by CAGR of 22.0% in FY2015-FY2018 with stable
EBITDA margin mainly due to its presence across Tier-II and Tier-III cities where rent and employee cost are lower. V2
Retail‟s PAT also increased by CAGR of 47.2% in FY2015-FY2018. It has reduced its total debt to equity ratio from
0.05x in FY2015 to zero in FY2018.

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V2 RETAIL LIMITED

V2 Retail has been expanding its retail store network very rapidly. We expect the company to have ~96 stores with
~1.1 mn sq ft of retail space by end - FY21 which will propel both revenue growth as well as operating leverage. For
FY18-21, we expect revenue growth at CAGR of 20.8%, EBITDA for the same period to witness CAGR of 17.7% and
PAT CAGR is estimated at 18.7%. As per management, same store sales growth (SSG) to turn positive and expect to
growth of ~5% by FY20.

Source – Company, DSPL Research

We expect gross margin to remain stable at ~32%. Despite aggressive store expansion, V2 retail has not taken big
debt. Recently, company raised new capital to the tune of INR 76 crores @ INR 380 per share (equity dilution was
6.1%) in FY18 from PE fund Lighthouse (India 2020 Fund ltd). These funds were utilised for store expansions.

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V2 RETAIL LIMITED

We believe that working capital cycle is very crucial for retail company like V2 Retail, as the cost per sq ft is largely
fixed. Inventory and payables are major drivers of working capital cycle. V2 Retail has maintained the average cash
conversion cycle of 50-55 days.

Cash Conversion Cycle Days FY2017 FY2018 FY2019E FY2020E FY2021E

Inventory Turnover Days 89 105 130 125 120

Trade Receivable Days 0 0 0 0 0

Trade Payable Days 50 65 70 67 65

Cash Conversion Cycle Days 38 39 60 58 55

Particulars in INR crores FY2017 FY2018 FY2019E FY2020E FY2021E

Net Cash from Operating Activities -1 37 -20 8 53

Less - Capex -13 -24 -38 -10 -12

Less - Interest Cost -9 -1 - - -

Free Cash Flow -22 13 -58 -2 41

Source – Company, DSPL Research

Peer Comparison

Particular – Q2FY19 V-Mart Retail V2 Retail

Stores Presence by City Type
Tier-I 29 5
Tier-II 46 9
Tier-III 91 46
Tier-IV 24 0
Total Stores 190 70

Retail Area in Lakh Sq. Ft. 16.0 8.0

Avg. Store Size in Sq. Ft. 8,000 10,000-12,000

Same Store Sales Growth (SSG) – YTD FY19 1.2% -13.0%

Sales/Sq. Ft. per Month in INR 611 679

Avg. Transaction Size in INR 613 807**

Avg. Selling Price in INR 246* 243

EBITDA Margin (%) -1.08% -1.8%

PAT Margin (%) -1.53% -11.9%
ROE (%) -1.1% -6.4%
ROCE (%) -0.9% 2.4%
Source: Company, DSPL Research
* Only Apparel (Avg. Selling Price), ** FY2018

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V2 RETAIL LIMITED

Q2FY19 Result Update

 V2 Retail‟s revenue increased by 13.18% YoY to INR 155.67 crore in Q2FY19. The company‟s has expanded 7
new stores on net addition basis during the quarter. Its total number of stores increased to 70 in Q2FY19 from 44
in Q2FY18.
 The company has about 8 lakh sq. ft. retail space spread across 17 states and 65 cities as on Q2FY19.
 V2 Retail‟s gross profit increased by 7.94% YoY to INR 46.33 crore in Q2FY19. However, the company‟s gross
profit margin contracted by 144 basis points to 29.76% in Q2FY19 on yearly basis.
 The company posted negative EBITDA at INR 2.77 crore in Q2FY19 against INR 10.36 crore in Q2FY18. Its em-
ployee expense increased 78.82% YoY to INR 20.26 crore in Q2FY19 and other expense also rose by 57.36%
YoY to INR 33.98 crore in Q2FY19.
 V2 Retail posted loss of INR 18.53 crore in Q2FY19 against PAT of INR 4.99 crore in Q2FY18. The company has
exceptional item loss of INR 25.30 crore, which was on account of one time settlement for corporate debt restruc-
turing package.
 The company posted other income of INR 5.14 crore in Q2FY19 which include gain of INR 4.6 crore on Sale of
compulsory convertible debenture (CCD) of TPG Wholesale Private Limited.

Source – Company, DSPL Research

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V2 RETAIL LIMITED

Valuation

V2 Retail caters to Tier II & III cities in India with 92% of its stores are present in these cities. Almost 65% of V2 Retail
stores are in Tier III cities, which are currently being under-served by the organized retailers. V2 Retail emphasizes on
asset light business model and smaller store formats with an average size of 10,000-11,000 sq ft where payback peri-
od is 3-4 years, which reduces the risk of store failure significantly. This strategy has yielded benefits like low operating
cost and helping it to maintain profit margin.

We initiate BUY on V2 Retail with a TP of INR 322, valuing it at 20x FY21E earnings, considering earnings CAGR of
18.7% over FY18-21E and improving margin with healthy inventory turnover. V2 Retail is currently trading at PE of
16.8x and EV/EBITDA of 9.7x FY21E. It‟s nearest listed competitor V-Mart Ltd is trading at 55.6x TTM PE.

Key Risks

 Competition from E-commerce players

 Increasing Competition in Tier-II and Tier III cities

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V2 RETAIL LIMITED

Financials - Standalone (in INR Cr.)

Profit & Los s Statement FY 2018 FY 2019E FY 2020E FY 2021E Balance Sheet FY2018 FY2019E FY2020E FY2021E
Net Sales 559.4 696.0 895.8 985.0 Share Capital 33.9 33.9 33.9 33.9
Reserves and Surplus 240.0 240.9 276.1 328.1
Total Revenue 559.4 696.0 895.8 985.0
Shareholders Fund 274.0 274.8 310.0 362.0
Raw Material Cost 379.0 468.0 600.2 650.1
Minority Interest - - - -
Gros s Profit 180.4 227.9 295.6 334.9
Total Loan - - - -
Employee Cost 48.5 73.1 85.1 93.6 Deferred Tax Liailities - - - -
Other Manufacturing Cost 80.2 125.3 152.3 157.6 Total Liabilities 274.0 274.8 310.0 362.0
O perating EBITDA 51.7 29.6 58.2 83.7 Net Fixed Assets 69.1 96.7 96.3 96.2
Op. EBITDA Margin (%) 9.2% 4.3% 6.5% 8.5% Deferred Tax Assets 4.75 4.75 4.75 4.75
Other Income 3.3 7.0 5.4 5.9 Goodwill - - - -
Deperication 8.4 10.0 10.8 11.7 Investments 89.7 - - -
EBIT 46.6 26.6 52.8 77.9 Sundry Debtors - - - -
EBIT Margin 8.3% 3.8% 5.9% 7.9% Cash & Bank 4.8 11.5 9.1 50.5
Finance Cost 0.6 - - - Loans & Advances 3.4 3.5 4.5 4.9
Inventories 160.2 247.9 306.8 323.8
Exceptional Item - (25.3) - -
Other Current Assets 45.0 56.0 72.0 79.2
PBT 46.0 1.3 52.8 77.9
Total Current Assets 213.4 318.8 392.4 458.4
Tax 14.9 0.4 17.6 25.9
Sundry Creditors 100.3 133.5 164.4 175.4
PAT 31.1 0.8 35.2 52.0 Provision 1.9 3.5 4.5 4.9
Other Current Liabilities 13.2 20.9 26.9 29.5
Share O/S (in cr) 3.2 3.2 3.2 3.2 Total Current liabilities & Provision 115.4 157.8 195.8 209.9
Basic EPS (INR) 9.6 0.3 10.9 16.1 Net Assets 98.0 160.9 196.6 248.6
Diluted EPS (INR) 9.6 0.3 10.9 16.1 Miscelleneous Expenditure 12.4 12.4 12.4 12.4
Cash EPS (INR) 12.2 3.3 14.3 19.7 Total Assets 274.0 274.8 310.0 362.0

Cashflow Statement FY2018 FY2019E FY2020E FY2021E Ratio s Analys is FY 2018 FY 2019E FY 2020E FY 2021E
PBT 46.0 1.3 52.8 77.9 Per Share V alue
Depreciation & Amortization 8.4 10.0 10.8 11.7 EPS (Rs) 9.6 0.3 10.9 16.1
Finance Cost 0.6 - - - BVPS (Rs) 80.8 81.0 91.4 106.7
Others 0.4 25.3 - - DPS (Rs) - - - -
Turno ver Ratio
(Incr)/Decr in Working Capital (17.7) (56.3) (38.0) (10.6)
Inventory Days 90 130 125 120
Tax Paid (0.4) (0.4) (17.6) (25.9)
Debtors Days 0 - - -
Cash Flow from Operating 37.3 (20.2) 8.0 53.1
Creditors Days 54 70 67 65
(Incr)/ Decr in Gross PP&E (24.1) (37.5) (10.4) (11.7) Cash Conversion Cycle 36 60 58 55
Others (86.9) 89.7 - - Asset Turnover Ratio 1.4 1.6 1.8 1.7
Cash Flow from Investing (111.0) 52.2 (10.4) (11.7) Pro fitabiliy Ratio
Proceeds from issue of Shares & Warrants 81.5 - - - EBITDA Margin 9.8% 5.3% 7.1% 9.1%
(Decr)/Incr in Debt (8.6) - - - PAT margin 5.6% 0.1% 3.9% 5.3%
Interest Paid (0.6) - - - ROA 8.0% 0.2% 7.0% 9.1%
Others - (25.3) - - ROE 11.3% 0.3% 11.4% 14.4%
Dividend Paid - - - - ROCE 11.6% 9.5% 11.4% 14.4%
Cash Flow from Financing 72.3 (25.3) - - So lvency Ratio
Incr/(Decr) in Balance Sheet Cash (1.4) 6.7 (2.4) 41.4 Debt / Equity Ratio 0.0 0.0 0.0 0.0
Cash and cash equivalents op. bal 6.2 4.8 11.5 9.1 Current Ratio 2.4 1.7 1.7 1.8
Quick Ratio 1.0 0.1 0.0 0.2
Other Bank Balances - - - -
Interest Coverage Ratio 95.7 0.0 0.0 0.0
Cash and cash equivalents cl. Bal 4.8 11.5 9.1 50.5
V aluatio n Ratio s
PE (x) 43.4 1,034.2 24.8 16.8
P/B (x) 5.2 3.3 3.0 2.5
EV/EBITDA (x) 24.1 24.8 14.3 9.7
Mcap/Sales (x) 2.5 1.3 1.0 0.9
Earning Yield (%) 2.3% 0.1% 4.0% 5.9%
Dividend Yield (%) 0.0% 0.0% 0.0% 0.0%
Free Cash Flow Yield (%) 0.9% -6.3% -0.3% 4.5%

Source - DSPL Research

18
DISCLOSURE

Investment
Expected return (Over 1 year)
Rating Trading Rating Expected return (less than1 year)
Buy > 15%
Buy > 5%
Hold > -10% to 15%
Sell < -10% Hold > -5% to 5%
We have forward looking estimates for the stock but we refrain Sell < - 5%
Not Rated
from assigning recommendation

The definition of the terms used in making recommendations are available at http://www.dalmiasec.com/Pdf/Abbreviation.pdf. These terms have been consistently used throughout the Re-
search Reports contained herein.

We/I, Dineshkumar Gupta, M. Sc, Lohit Bharambe, BE, PGPM, as author / the name subscribed to this report, hereby certify that all of the views expressed in this re-
search report reflect my / our personal views about the subject or securities and no part of my / our compensation was / is, or will be directly or indirectly related to the
specific recommendation(s) or view(s) in this report.. We / I or my / our relative(s) or Research Entity does not have any financial interest in the subject company other
than disclosed.
Business activity of the research entity Stock Broker, Merchant Banker, Depository Participant, Mutual Fund Distribu-
tor
Disciplinary history of the research entity Nil
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On principal, we do not sell our research reports.
The Research Report should be kept confidential.
The Research Report is published with honesty and in good faith.
The Research Report is prepared after thorough analysis of the Stock Market.
Research analyst or research entity shall effectively address conflict of interest which may affect the impartiality of its research analysis and
research report and shall make appropriate disclosures to address the same.
Research analyst or research entity or any employees will not engage in insider trading or front running or front running of its own research
report.
Research analyst or research entity shall comply with all regulatory requirements applicable to the conduct of its business activities.
Research analyst or research entity or its employees engaged in research analysis shall observe high professional standard while preparing
research report.
Details of associate of research entity
Dalgreen Agro Pvt. Ltd. Visual Estates Pvt. Ltd. DSPL Investments Pvt. Ltd. Chanda Bharech Beneficiary VSN Enterprises
Trust
Dalmia Investmart Pvt. Dalmia Devcon Pvt. Narain Prasad Dalmia Damia Devcon Pvt. Ltd. Namtech Commercial
Ltd. Ltd. HUF LLP.
Dalmia Janakalyan Sweta Beneficiary Suryakant Dalmia HUF Mount Intra Finance Pvt. Ltd. Vaishnawi Housing Pvt.
Kosh Trust Ltd.
Avni Beneficiary Trust Dalmia Securities Pvt. Mount Intra Properties LLP Advay Beneficiary Trust Mount Intra Finance
Ltd. Employees Gratu- Private Limited Employ-
ity Fund ees Gratuity Fund

DISCLOSURE OF INTEREST:
Whether the research analyst or his relative or research entity or his associate has any financial interest in the subject com-
pany and the nature of such financial interest. □ Yes √ No

Whether the research analyst or research entity or its associates or relatives, have actual / beneficial ownership of one per
cent or more securities of the subject company, at the end of the month immediately preceding the date of publication of □ Yes √ No
the research report;
Whether the research analyst or research entity or its associates have received any compensation from the subject compa-
ny in the past twelve months; □ Yes √ No

Whether the research analyst or research entity or its associates have managed or co-managed public offering of securi-
ties for the subject company in the past twelve months; □ Yes √ No

Whether the research analyst or research entity or its associates have received any compensation for investment banking
or merchant banking or brokerage services from the subject company in the past twelve months; □ Yes √ No

Whether the research analyst or research entity or its associates have received any compensation for products or services
other than investment banking or merchant banking or brokerage services from the subject company in the past twelve □ Yes √ No
months;
Whether the research analyst or research entity or its associates have received any compensation or other benefits from
the subject company or third party in connection with the research report; □ Yes √ No

Whether the research analyst has served as an officer, director or employee of the subject company;
□ Yes √ No

Whether the research analyst or research entity has been engaged in market making activity for the subject company.
□ Yes √ No

Other Material Conflict of Interest, if any NIL

19
DISCLAIMER

DISCLAIMER

This report has been prepared by M/s Dalmia Securities Pvt. Ltd. (hereinafter referred as DSPL, SEBI Registered Research Ana-
lyst) and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have
been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such infor-
mation has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its
accuracy, completeness or correctness. This research report does not constitute an offer, invitation or inducement to invest in
securities or other investments and DSPL is not soliciting any action based upon it. Before acting on any advice or recommen-
dation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek
professional advice. DSPL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the loss-
es or the damages sustained due to the investments made or any action taken on basis of this report, including but not restrict-
ed to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the
dividend or income, etc. Past performance is not a guide for future performance. Investors are advised to see Risk Disclosure
Document of each product before investing. DSPL and other group companies, its directors, associates, employees may have
various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or
other deals in these securities from time to time or may deal in other securities of the companies / organizations described in
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ommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing among
other things, may give rise to real or potential conflicts of interest.

DSPL is registered under SEBI (Research Analyst) Regulations, 2014 vide Registration No INH300003066 dated 30.05.2016