Research Team October 17, 2019

A year of gradual disruption and re-engineering of India’s old economic

structure

 Over the last ten years, investment growth in India remained subdued. Numerous factors including destabilising impact of the
Global Financial Crisis, 2008, rising global trend towards protectionism, strong capex cycle during 2004-11 and the resultant
excess capacity and asset quality problems in the banking sector were some of the key factors behind this slowdown. Despite
low investment growth, buoyant expansion of consumption by the Indian households (mainly at the cost of savings) sustained.

 GDP growth around 7% in the last ten years. Yet, investment recovery remains crucial for the acceleration and sustainability of
long-term growth. There are some signals that the capex cycle in India is in the early phase of a take-off.

 The recent steps taken by the government suggest that rather than taking shortcuts or populist measures, the government is
taking administrative and structural measures, which would improve the long-term performance of the economy. Such an
approach coupled with the improving outlook of the economy and Indian corporate sector make us more positive about the
outlook of the Indian equity market.

 At close to $70 billion, gross FDI inflows to India over the last twelve months is at record high. After lacklustre performance
since 2014, bank credit to large industries have turned around and accelerating. Reflecting the sharp improvement in project
execution, the ratio of implemented to proposed industrial investment has reached record high of 70%. The recent
announcements by the Union Finance Minister to ease administrative control and provide incentives to sectors such as textiles
and hospitality and also exports are likely to boost investment.

 For long term investors, we have found few key themes one should keep in mind always while identifying for the potential
investments in market. Firstly, what we are witnessing in the Indian economy is more of a gradual disruption happening in
many areas and less of a structural slowdown. Secondly, the increased role technology is playing in every sphere of business
and is also changing dynamics of the businesses along with reducing response time for the incumbents to adjust and react,
making them vulnerable.

 Hence, the simple strategy investors should follow is to invest in simple, scalable business model, high technology intensity like
patents etc., businesses with large brands, large distribution network and in sectors which has higher regression coefficient
with GDP like consumers, services, technology and similar characteristics and avoid complex and cyclical businesses for the
time being.
2
 DiwaliPicks 2019
CMP as on Target Upside Market Cap. PE/PB
Script Name Rationale/Description
17-Oct-19 Price Potential (₹Bn.) (FY20E)
Nippon Life Insurance Japan has completed acquisition of 75%
Reliance Nippon
stake in RNAM from reliance Capital. This could be a potential
Life Asset 271 321 18% 166 29 P/E
game changer. The strategy of the company is to focus on
Management Ltd.
leadership in the retail segment which forms 40% of AUM.
The Retail business has grown phenomenally, registering a 7-
Reliance Industries fold increase in revenue and a 14-fold increase in profit in six
1,396 1,610 15% 8,850 18 P/E
Limited years. With the investment cycle likely having peaked, we
expect RoI trajectory to improve going forward.
With focus on seizing market opportunities, IPRU looks to
drive growth on the back of several initiatives. We believe,
ICICI Pru Life IPRU is well positioned for recovery and growth given its
473 575 22% 678 9 P/B
Insurance Limited focus on strategic initiatives, improving VNB, diversified
product mix, multi-channel distribution platform, cost
reduction efforts and favorable macro traits.
The company remains focused on growing its non-defence
business such as Homeland Security, Smart City, Space
Bharat electronics
113 135 19% 276 16 P/E Electronics, Weather Radars, etc. Management remains
Limited confident in achieving revenue growth of 12% to 15% and
EBITDA margin of 20% to 21% in FY20.
HUL has exhibited a decent track record in terms of revenue
Hindustan
2104 2,422 15% 4,563 69 P/E & margin growth. Monsoon has been good in the year. This
Unilever Limited could aid volume growth to some extent in second half.
IGL’s sales momentum remains strong. Government has
Indraprasth Gas envisaged to provide 1 Crore connections by 2020.
371 450 21% 259 25 P/E
Ltd. We expect the volume growth momentum to continue with
development of CGD networks in new GAs.
Reliance Industries Limited (RIL) CMP: ₹1,396
Target: ₹1,610
Rationale:

 RIL is India’s largest and most profitable private sector company and
continued to be a significant global player in the integrated energy value 52 Week Low / High 1017 /1414
chain while establishing leadership positions in the retail and digital Avg. Daily Volume (3M) 98,01,990
services business in India. No. of Shares O/S (Mn.) / Mkt. Cap (₹Mn.) 6339/88,50,400
 The Retail business has grown phenomenally, registering a 7-fold increase Shareholding (Promoters/Institutional/Others) 47%/36%/17%
in revenue and a 14-fold increase in profit in the last six years. Jio has
already become the largest operator in India and still signing up more than
10 million new customers each month. (In ₹ mn) FY-18 FY-19 FY-20E FY-21E
 The two consumer businesses now collectively contribute nearly 32% to Total Income 39,16,770 56,71,350 61,35,730 67,30,682
the consolidated EBITDA, up from 2% five years ago and the management EBITDA 6,41,760 8,39,180 9,42,618 11,49,832
is targeting their share to be 50% in the next few years. EBITDA Margin 16.4% 14.8% 15.4% 17.1%
 RIL’s consolidated EBITDA in the last year was Rs.92,656 crore. On the PAT 3,60,750 3,95,880 4,66,904 5,70,412
strength of RIL’s existing and new growth engines, the company is PAT Margin 9.2% 7.0% 7.6% 8.5%
confident of growing this by 15% annually over the next 5 years. EPS (₹) 54.8 63.8 76.8 94.4
 RIL has ended the last year with net debt of Rs.154,478 crore. The Debt/Equity 0.7 0.7 0.7 0.6
company have a very clear roadmap to becoming a zero net debt company P/B 1.8 2.1 2.0 1.8
within the next 18 months that is by 31st March 2021. RoE 13.0% 11.6% 12.3% 13.4%
 RIL and Saudi Aramco have agreed to a non-binding letter of intent (LOI),
P/E 14.5 20.4 18.1 14.7
wherein the latter may acquire a 20% stake in the ‘oil-to-chemicals’
division at an enterprise value of USD75b. This signifies perfect synergy
between the world's largest oil producer and the world's largest integrated Source: Company, Anand Rathi Research. Note: Prices are as on 17-Oct-19
refinery and petrochemicals complex.
 RIL have received strong interest from strategic and financial investors in
Price Performance (Oct’18=100)
their consumer businesses, Jio and Reliance Retail. The company will 140
induct leading global partners in these businesses in the next few quarters,
and move towards listing of both these companies within the next five 120
years which will result in significant value unlocking.
 With the investment cycle likely having peaked, we expect RoI trajectory
to improve going forward. The launch of first revenue engine – mobile 100
broadband – was a huge success. RJio is now prepared with the roll out of
the other revenue engines – IOT, home broadband services, enterprise
80
broadband service and broadband for small & medium businesses. The
company will start generating revenue from these businesses from FY20.
 At CMP the stock is trading at 18.1x FY20E earnings and 14.7x FY21E
earnings respectively. We recommend a BUY on the stock with a target Nifty 500 Reliance
price of ₹ 1610 per share. 4
 CMP: 371
Indraprastha Gas Limited (IGL)
Target: 450
Rationale:

 Incorporated in 1998, Indraprastha Gas Ltd (IGL) took over the City Gas
Distribution (CGD) project from GAIL (India) Ltd. IGL is a JV between GAIL 52 Week L/H 232 / 380
(India) and Bharat Petroleum Corporation Ltd (BPCL) where each of the
Avg. Daily Volume (3M) 18,68,330
two holds 22.5%
 The company is into retail gas distribution business and provides No. of Shares O/S (Mn.) / Mkt. Cap (₹Mn.) 700 / 2,59,000
Compressed Natural Gas (CNG) to vehicles and Piped Natural Gas (PNG) to
Shareholding (Promoters/Institutions/Others) 45% / 45% / 10%
domestic and commercial consumers in Delhi and NCR.
 IGL’s sales momentum remains strong in Q1-FY20 wherein revenues have
increased by 22.4% YoY to Rs.1576.1 crore with underlying volume growth (In ₹ mn) FY-18 FY-19 FY-20E FY-21E
of 13.4% YoY to 6.3 mmscmd. CNG volumes came in at 4.7 mmscmd in Total Income 45,921 57,648 68,453 78,978
Q1-FY20 (up 13.7% YoY) whereas PNG volumes have increased by 12.4% EBITDA 11,161 12,593 15,006 17,090
YoY to 1.6 mmscmd. EBITDA Margin 24.3% 21.8% 21.9% 21.6%
 CNG is economical as compared to other liquid fossil fuels such as PAT 7,217 8,421 10,266 11,743
petrol/diesel. This would continue to push the conversion of vehicles to PAT Margin 15.7% 14.6% 15.0% 14.9%
CNG mode. EPS (₹) 10.3 12.0 14.9 17.0
 Government has envisaged to provide 1 Crore connections by 2020 and Debt/Equity 0.0 0.0 0.0 0.0
has set aggressive targets for providing PNG connections. In line of the P/B 5.4 5.0 5.2 4.4
same, the Company has also set high targets for PNG domestic RoE 21.7% 21.2% 21.3% 20.1%
connections. P/E 27.1 25.4 24.9 21.9
 The government of India is in the process of developing smart cities. These
Source: Company, Anand Rathi Research. Note: Prices are as on 17-Oct-19.
cities will have a strong infrastructure of clean and efficient fuel which
would add to the growth prospects of the Company.
 There is a concern for increased population in the country. In order to Price Performance (Oct’18=100)
curb the same, judiciary, central and state governments are giving boost
to eco-friendly fuel i.e. CNG and PNG. 160
 We expect the volume growth momentum to continue for the company as
140
the company plans to invest Rs.11.7bn on capex in FY20 mainly on CNG
stations, PNG pipelines and development of city gas distribution networks 120
in new geographic areas.
 Going forward, we believe given the company’s good pricing power, IGL 100
will continue to pass on any upward revision in domestic gas prices, thus,
maintaining margins. 80
 At CMP the stock is trading at 24.9x FY20E EPS and 21.9x FY21E EPS. We
recommend BUY on the stock with a target price of ₹450 per share.
Nifty 500 IGL
5
Bharat Electronics Ltd. (BEL) CMP: 113
Target: 135
Rationale:

 Bharat Electronics Limited (BEL) is a key supplier of products and turnkey

systems to the Indian Defence Forces. It produces a wide range of state-of- 52 Week L/H 72 /118
the-art equipment in fields such as Defence Communication, Radars, Naval Avg. Daily Volume (3M) 1,17,69,700
Systems, C4I Systems, Weapon Systems, Telecom & Broadcast Systems,
No. of Shares O/S (Mn.) / Mkt. Cap (₹Mn.) 2437 /2,74,726
Electronic Warfare and Tank Electronics. BEL also offers civilian products
including Electronic Voting Machines, Tablet PC, solar-powered traffic signal Shareholding (Promoters/Institutions/Others) 59%/31%/10%
systems and Access Control Systems.
 Commencing operations in 1954, with a single unit in Jalahalli, Bangalore, BEL (In ₹ mn) FY-18 FY-19 FY-20E FY-21E
has expanded its presence across the country by setting up eight other Units: Total Income 1,00,687 1,18,547 1,35,132 1,50,729
Ghaziabad, Pune, Machilipatnam, Panchkula, Kotdwara, Navi Mumbai, EBITDA 20,400 29,062 26,875 29,025
Chennai and Hyderabad. Each unit has a specific product mix and customer
EBITDA Margin 20.3% 24.5% 19.9% 19.3%
focus. BEL has also overseas presence with offices in New York and
PAT 14,317 18,864 17,783 18,842
Singapore.
PAT Margin 14.2% 15.9% 13.2% 12.5%
 Management remains confident in achieving revenue growth of 12% to 15%
EPS (₹) 5.8 7.7 7.3 7.8
and EBITDA margin of20% to 21% in FY20.
Debt/Equity 0.0 0.0 0.0 0.0
 Recently, the company bagged the much awaited large ticket order to deliver
P/B 4.3 2.5 2.7 2.4
surface-to-air Akash Missile System to seven squadrons of the Indian Air
RoE 18.2% 21.9% 16.9% 15.4%
Force over the next three years. For FY20, BEL has already booked order
inflows of ₹90 billion and expects about ₹150 billion for full year. P/E 24.3 12.0 15.5 14.5
 The company remains focused on growing its non-defence business such as
Homeland Security, Smart City, Space Electronics, Weather Radars, etc. The Source: Company, Anand Rathi Research, Consensus Estimates. Note: Prices are as on17-Oct-19.
company plans to maintain the non-defence business share at about 20-25%
level of turnover in coming years. Price Performance (Oct’18=100)
 Further, BEL remains committed to boost its in-house R&D with focused
engagement with DRDO, National Labs, Academia, Foreign Design Houses, 150
etc. BEL is continuously investing 8-10% of its turnover in R&D year-on-year
125
basis.
 Additionally, inventory days fell substantially from 180 days in FY18 to 136 100
days in FY19, reflecting improved inventory control.
 We remain optimistic on BEL given its strong order book position, expertise in 75
executing complex projects, healthy client base, cost reduction efforts and
diversification initiatives. 50
 At CMP the stock is trading at 15.5x FY20E EPS and 2.4x FY21E EPS. We
recommend BUY on the stock with a target price of ₹135 per share.
Nifty 500 BEL 6
 CMP: 271
Reliance Nippon Life Asset Management(RNAM)
Target:321
Rationale:
 Reliance Nippon Life Asset Management (RNAM) isthe fifth largest AMC in
India, The total AUM of the company in mutual funds is ~ 2 lakh Cr which
52 Week L/H 120 / 288
is about 8.4% of the entire market as of FY19. Besides the mutual fund
business, the company has a sizeable AUM under Portfolio Management Avg. Daily Volume 90 Day (‘000) 1,12,517
services and alternate Investment funds. The company also manages No. of Shares O/S (Mn.) / Mkt. Cap (₹Mn.) 612/ 16,55,86
funds for provident fund bodies and government managed pension Funds Shareholding (Promoters/Institutions/Others) 75.0%/14.6% /10.4%
schemes.
 Nippon Life Insurance Japan has completed acquisition of 75% stake in
RNAM from reliance Capital. This could be a potential game changer as (In ₹ mn) FY-18 FY-19 FY-20E FY-21E
Nippon Life Insurance is the largest Insurance company in Japan and the Total Income 17,486 14,786 15,846 17,579
total assets managed by Nippon Life Insurance globally are twice the size EBITDA 6,663 5,390 6,910 7,781
of the entire mutual fund industry of India. EBITDA Margin 38.1% 36.4% 43.6% 44.2%
 The company has a very strong distribution network which includes PAT 4,557 4,861 5,693 6,535
~75000 distributors and 74 banks. This strong network has given the PAT Margin 26.1% 32.9% 35.9% 37.2%
company access to ~47 lakh unique customers. The strategy of the EPS (₹) 7.6 7.9 9.4 10.7
company is to focus on leadership in the retail segment which forms 40% Debt/Equity 0.0 0.0 0.0 0.0
of AUM. This helps the company to reduce its dependency on HNI
P/B 6.4 5.0 6.3 6.0
investments which are cyclical in nature.
RoE 21.7% 19.7% 19.3% 18.6%
 At the industry level, the mutual fund penetration ratio (AUM as % of
GDP) is ~11% which is significantly lower than the world average of 62%. P/E 32.4 26.4 29.0 25.5
This ratio is also greater than 45% for all other emerging economies like Source: Company, Anand Rathi Research. Note: Prices are as on 17-Oct-19.
south Africa, Brazil etc. In addition to this, India has ~30% household
saving rate which is higher than other economies. The Indian mutual fund Price Performance (Oct’18=100)
industry is also highly skewed in nature( Top 5 players have a combined
AUM of ~ 70%).These macro factors indicate a strong outlook for the
industry and strong cash inflow for the industry leaders. 185
 The returns from other asset classes are unfavourable and hence Mutual 160
fund industry is witnessing strong inflows. Increasing fund flow within the
135
industry along with strong distribution network with strong market share
will help the company to grow. The company has grown at a CAGR of 15% 110
over the past 5 years and we believe that it will continue to do so over the 85
next couple of years. We also believe that the change in promoter will
help in attracting inflows from retail as well as corporates. 60
 At CMP the stock is trading at 29.0x FY20E EPS and 25.5x FY21E EPS. We
recommend BUY on the stock with a target price of ₹321 per share.
Nifty 500 RNAM
7
Hindustan Unilever Limited CMP:2,104
Target:2,422
Rationale:

 Hindustan Unilever Limited(HUL) is India’s largest fast-moving consumer 52 Week Low / High 1522 / 2108
goods (FMCG) company with a heritage of over 80 years. It has grown
meaningfully over the years to become a trusted brand and currently nine Avg. Daily Volume 90 Day (‘000) 1,62,937
out of ten Indian households use its products on daily basis. The company No. of Shares O/S (Mn.) / Mkt. Cap (₹Mn.) 2165 / 45,54,764
has a very strong brand recognition with solid market presence. Shareholding (Promoters/Institutional/Others) 67.2% / 19.1%/ 13.7%
 Over the past several years, HUL has exhibited a decent track record in
terms of revenue and margin growth. In Q2Fy20, HUL showedrevenue
growth of 6.7% YoY while EBITDA and PAT grew 21.0% and 21.5% YoY, (In ₹ mn) FY-18 FY-19 FY-20E FY-21E
respectively, Despite near term weak rural growth and economy slowing Total Income 3,55,500 3,93,110 4,15,770 4,68,058
down, HUL had a impressive volume growth of 5% YoY on a large base. EBITDA 75,010 88,800 94,326 1,08,529
 In Q2FY19, Home care segment grew 9.4% YoYled by premiumisation & EBITDA Margin 21.1% 22.6% 22.7% 23.2%
increase in penetration leading to 151bps EBIT margin expansion. The PAT 52,140 60,540 65,959 75,926
beauty & personal care segment grew by 5.3% on YoY basis, growth was PAT Margin 14.7% 15.4% 15.9% 16.2%
led by the premium segment.Foods & refreshments’ revenue rose 8.4% EPS (₹) 24.1 28.0 30.5 35.1
YoY with EBIT margin falling 139bps YoY on account of higher raw material Debt/Equity 0.0 0.0 0.0 0.0
cost. P/B 62.6 57.9 52.6 47.0
 Monsoon has been good during the year. This will aid the volume growth RoE 66.4% 71.6% 77.0% 76.2%
to some extent. In order to address liquidity challenge at wholesale as well P/E 87.3 75.2 69.0 60.0
as well as retail level, and to support volume growth, the company will
take some price cuts in the current quarter. In addition to this, the festive
Source: Company, Anand Rathi Research. Note: Prices are as on 17-Oct-19.
season( Diwali) is likely to give some relief to the slowing demand. If there
is a revival in demand, HUL will be the key beneficiary.
 While current macro economic conditions is likely to keep subdued
Price Performance (Oct’18=100)
demand in near term, we remain optimistic that the company will outgrow 135
the industry . HUL being the largest FMCG company with one of the largest
footprints in terms of products and distribution network and its strategy to 120
target volume growth, should drive healthy growth in medium to long 105
term. In addition to this, the company is also focusing on the rising
90
potential in the natural space. The launch of Ayush Master brand in
different segments is likely to boost the companies top line. 75
 At CMP the stock is trading at 69.0x FY20E EPS and 60.0x FY21E EPS. We
60
recommend BUY on the stock with a target price of ₹2422 per share.

Nifty 500 HUL

8
 CMP: 473
ICICI PRUDENTIAL LIFE INSURANCE COMPANY(IPRU)
Target: 575
Rationale:

 ICICI Prudential Life Insurance Company Limited (IPRU IN) is one of the
leading players in the domestic life insurance sector with a strong presence 52 Week L/H 475 /278
across India offering a range of long term savings and protection products to Avg. Daily Volume (3M) 26,48,000
meet different life stage requirements of customers. As of June 30, 2019, the
No. of Shares O/S (Mn.) / Mkt. Cap (₹Mn.) 1436 /6,73,839
company had an AUM of ₹1,640.24 billion and a Total Sum Assured of about.
₹11.85 trillion. Shareholding (Promoters/Institutions/Others) 75%/18%/7%
 As the company remains focused on growing the margin accretive protection
and annuity business, PAT declined 30% y/y in FY19 stemming from new
(In ₹ mn) FY-18 FY-19 FY-20E FY-21E
business stain. However, management aims to double FY19 Value of New
Business (VNB) in 3 to 4 years and expects protection business to be a key Net Revenue 3,89,644 4,20,539 4,73,410 4,50,362
contributor in margin expansion.
 In Q1FY20, total premium registered a decent growth of 14.7% y/y to ₹ 63.29 PAT 16,192 11,389 13,158 14,788
billion. The share of protection business in Annualised Premium Equivalent
EPS 11.3 7.9 9.4 10.4
(APE) increased from 8.2% in Q1FY19 to 14.6% in Q1FY20. Further, VNB
increased by 27% y/y to ₹3.09 billion in the quarter while PAT improved P/E 34.5 44.2 50.4 45.5
marginally to ₹2.85 billion.
 For Q1FY20, based on Retail Weighted Received Premium (RWRP), IPRU had P/B 8.1 7.1 8.7 8.0
a private market share of 17.2% and overall market share of 10.0%. ROE 24.0% 16.0% 16.0% 16.0%
 With focus on seizing market opportunities, IPRU looks to drive growth on the
back of several initiatives. This includes expanding distribution network
through acquisition of new partners as well investing in creation of new Source: Company, Anand Rathi Research, Consensus Estimates. Note: Prices are as on17-Oct-19.
sourcing channels, increase penetration in under-served customer
segmentsand leveraging technology for process reengineering and drive Price Performance (Oct’18=100)
productivity.
 In terms of macro scenario, the domestic life industry has plenty upside as 160
India remains significantly under-insured, both in terms of penetration and 135
density. Further improving life expectancy, young Indian population, 110
increasing disposable income and rising awareness of risk protection will
85
continue to be the demand drivers in the sector.
 We believe, IPRU is well positioned for recovery and growth given its focus on 60
strategic initiatives, improving VNB, diversified product mix, multi-channel
distribution platform, cost reduction efforts and favorable macro traits.
 At CMP the stock is trading at 8.7x its FY20E Book Valueand 8.0 x its FY21E
Book Value. We recommend BUY on the stock with a target price of ₹575 per Nifty500 ICICIPRU
share.
9
Diwali Picks 2018 Performance (29th Oct 2018)
Hi/Lo for Booked on Nifty500 Alpha Annualized
Company Reco Target CMP/Exit Status Return
Period Date Return Return Return
Asian Paints Limited 1,195 1471 1471 1825 / 1118 Closed 23% 05-Feb-19 5% 18% 66%
HDFC Bank Limited 962 1,210 1,210 1283 / 943 Closed 26% 29-Mar-19 12% 14% 32%
Indraprasth Gas Limited 251 319 319 380 / 232 Closed 27% 07-Feb-19 6% 21% 74%
Return on closed Calls 25%

LTTS 1,669 2042 1548 1820 / 1405 Open -7% - 7% -15% -15%
Sundram Fasteners Limited 521 760 464 596 / 399 Open -11% - 7% -18% -18%
JSW Steel Limited 340 406 283 385 / 202 Open -17% - 7% -24% -24%
Total Return 7% 19%

Status of open calls:

In our last Diwali picks we have closed three calls in profit and three stocks have remained open. The open stock picks witnessed few uncertain business events due
to unprecedented slowdown in automobile sector and liquidity crisis in NBFC space leading to funding squeeze to most of the related businesses. This resulted in
delay in growth of our subject companies. We continue to monitor our recommended companies and review our recommendations accordingly. In this case, we
continue to remain positive on long term growth prospects of these three open stock calls.

L&T Technology Services Limited:

 L&T Technology Services Limited (LTTS) has reported a growth of 17% in its revenues at ₹13,475 million in Q1-FY20 as against ₹11,522 million in Q1-FY19. In US
dollar terms the revenue growth was 14.8% YoY and 1.4% QoQ at $193.9 million. The growth for the company in the quarter was driven by Transportation,
Process and Medical Devices while Telecom and Hi-Tech segment de grew for the quarter. The company’s long terms prospects remains intact an we continue to
remain positive on the stock.

Sundram Fasteners Limited:

 The company had faced slow down in operation on account of unprecedented slowdown in automobile sector. However, to further its growth in non-automotive
segments, the company has incorporated a new wholly-owned subsidiary named "Sunfast TVS Limited" on April 8, 2019. The new company will focus on the
Aerospace and Defence segments. The Company will also focus on parts for armoured vehicles and trucks.
 The long-term prospects of SFL remains intact, as it is well placed to demonstrate superior performance in H2-FY20 driven by expanding its capacity and making
concentrated efforts to improve the product mix with focus on high-value products and increased contribution of exports. We maintain our view on the stock on
back of positive outlook from management. Thus, we continue to remain positive on the stock.

JSW Steel Limited:

 The slowdown was mainly driven by subdued domestic market demand and a weaker sentiment as reflected in slow automotive and consumer durables
momentum leading to lower volumes and inventory build up.
 Management has guided for steel production of 16.95 million tons while sales volume guidance of 16 million tons, a growth of 1.5% each for the financial year FY-
20. Spreads are still favorable for the producers and are expected to normalize in medium term. We continue to track the progress and review the same in
future.
10
Disclaimer:

Analyst Certification

 The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research
analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange
Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have
no bearing whatsoever on any recommendation that they have given in the Research Report.

Ratings Methodology

 Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>₹300 Billion ) and Mid/Small Caps (<₹300 Billion ) or SEBI
definition vide its circularSEBI/HO/IMD/DF3/CIR/P/2017/114 dated 6th October 2017, whichever is higher and as described in the Ratings Table below:

Ratings Guide (12 months) Buy Hold Sell

Large Caps (>₹300Bn.) 15% 5%-10% Below 5%
Mid/Small Caps (<₹300 Bn.) 20% 10%-15% Below 10%

11
Disclaimer:

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Mutual Fund distributor.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received
compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues.

General Disclaimer: - This Research Report (hereinafter called “Report”) is meant solely for use by the recipient and is not for circulation. This Report
does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual
clients. The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice
for the purpose of purchase or sale of any security, derivatives or any other security through ARSSBL nor any solicitation or offering of any investment
/trading opportunity on behalf of the issuer(s) of the respective security (ies) referred to herein. These information / opinions / views are not meant to
serve as a professional investment guide for the readers.No action is solicited based upon the information provided herein. Recipients of this Report
should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an
informed trading/investment decision before executing any trades or making any investments. This Report has been prepared on the basis of publicly
available information, internally developed data and other sources believed by ARSSBL to be reliable. ARSSBL or its directors, employees, affiliates or
representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information / opinions /
views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of the directors, employees,
affiliates or representatives of ARSSBL shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including
lost profits arising in any way whatsoever from the information / opinions / views contained in this Report. The price and value of the investments
referred to in this Report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance
is not a guide for future performance. ARSSBL does not provide tax advice to its clients, and all investors are strongly advised to consult with their tax
advisers regarding taxation aspects of any potential investment.

Continued…

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Contd…

Opinions expressed are our current opinions as of the date appearing on this Research only. We do not undertake to advise you as to any change of our
views expressed in this Report. Research Report may differ between ARSSBL’s RAs and/ or ARSSBL’s associate companies on account of differences in
research methodology, personal judgment and difference in time horizons for which recommendations are made. User should keep this risk in mind and
not hold ARSSBL, its employees and associates responsible for any losses, damages of any type whatsoever.

ARSSBL and its associates or employees may; (a) from time to time, have long or short positions in, and buy or sell the investments in/ security of
company (ies) mentioned herein or (b) be engaged in any other transaction involving such investments/ securities of company (ies) discussed herein or
act as advisor or lender / borrower to such company (ies) these and other activities of ARSSBL and its associates or employees may not be construed as
potential conflict of interest with respect to any recommendation and related information and opinions. Without limiting any of the foregoing, in no
event shall ARSSBL and its associates or employees or any third party involved in, or related to computing or compiling the information have any liability
for any damages of any kind.

Details of Associates of ARSSBL and Brief History of Disciplinary action by regulatory authorities & its associates are available on our website i. e.
www.rathi.com

Disclaimers in respect of jurisdiction: 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 ARSSBL to any registration or licensing requirement within such jurisdiction(s). No action has been or will be taken
by ARSSBL in any jurisdiction (other than India), where any action for such purpose(s) is required. Accordingly, this Report shall not be possessed,
circulated and/or distributed in any such country or jurisdiction unless such action is in compliance with all applicable laws and regulations of such
country or jurisdiction. ARSSBL requires such recipient to inform himself about and to observe any restrictions at his own expense, without any liability
to ARSSBL. Any dispute arising out of this Report shall be subject to the exclusive jurisdiction of the Courts in India.

Copyright: - 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 ARSSBL. 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 ARSSBL. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service
marks of ARSSBL or its affiliates, unless specifically mentioned otherwise.

Contd…

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Contd.

Statements on ownership and material conflicts of interest, compensation - ARSSBL and Associates

Answers to the Best of the

Sr. knowledge and belief of the
Statement
No. ARSSBL/ its Associates/ Research
Analyst who is preparing this report

ARSSBL/its Associates/ Research Analyst/ his Relative have any financial interest in the subject company? Nature of Interest (if
1
applicable), is given against the company’s name?.
NO
ARSSBL/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject
2 company, at the end of the month immediately preceding the date of publication of the research report or date of the public NO
appearance?.
ARSSBL/its Associates/ Research Analyst/ his Relative have any other material conflict of interest at the time of publication of the
3
research report or at the time of public appearance?.
NO
ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation from the subject company in the past twelve
4 NO
months.
ARSSBL/its Associates/ Research Analyst/ his Relative have managed or co-managed public offering of securities for the subject
5 NO
company in the past twelve months.
ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for investment banking or merchant banking or
6 brokerage services from the subject company in the past twelve months. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for products or services other than investment
7 banking or merchant banking or brokerage services from the subject company in the past twelve months. NO

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation or other benefits from the subject company or
8
third party in connection with the research report.
NO
9 ARSSBL/its Associates/ Research Analyst/ his Relative have served as an officer, director or employee of the subject company. NO
10 ARSSBL/its Associates/ Research Analyst/ his Relative has been engaged in market making activity for the subject company. NO

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