Edelweiss Wealth Research

Corporate Connect – Post Conference Notes

Corporate Connect
Jun 29 – 30 2021

Date: June 2021

 Index

Table of Contents
Page No.

Balrampur Chini Mills Ltd. ........................................................................................................................................... 1

Dwarikesh Sugar Ltd. ................................................................................................................................................... 3

eClerx Services Ltd. ...................................................................................................................................................... 5

Jubilant Ingrevia Ltd. ................................................................................................................................................... 7

Mastek Ltd. .................................................................................................................................................................. 9

Max Healthcare Institute Ltd. ...................................................................................................................................... 11

Praj Industries Ltd........................................................................................................................................................ 13

Edelweiss Wealth Research

 Balrampur Chini Mills Ltd.
Big beneficiary of ethanol upcycle
We hosted the management of Balrampur Chini (BMCL) in our ‘Edelweiss Corporate
Connect’ virtual conference on 30th Jun’21. BMCL is one of India’s largest integrated Debashish Mazumdar
sugar producers. The company is a major beneficiary of reforms within the industry and Research Analyst
Debashish.mazumdar@edelweissfin.com
is currently enjoying macro tailwinds on multiple fronts such as (a) improved sugar
realisations, (b) increase in sugar volumes, and (c) a positive policy framework for CMP INR: 361
ethanol. The company has one of the largest cane-crushing capacities in the country RATING: Buy
(76,500TCD). BMCL’s distillery capacity stands at 520KLPD, and the company is planning
to add 320KLPD new capacity at capex of INR425cr, which will take its total capacity to Relative Price Performance
840KLPD by Dec’22. Key takeaways highlighted below:
300

 The government is targeting to lower domestic sugar stock to 6MT (from current 9MT)

(Indexed)
200

within the next two years. 100

 New vehicles launched in 2023 and thereafter will be able to use 20% blended fuel. 0

Jan-17

Oct-17
Jan-18

Oct-18
Jan-19

Oct-19
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Jan-21
Apr-17

Apr-18

Apr-19

Apr-20

Apr-21
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Jul-19

Jul-20
Thus, existing vehicle fleet can be run on 12-14% blending.
Balrampur Sensex
 Typically, UP millers sell sugar at a premium of INR1-1.50/kg over Maharashtra millers.
Therefore, any rise in MSP will propel UP sugar prices above INR34/kg (while Bloomberg: BRCM:IN
Maharashtra will remain at INR33/kg).
52-week range (INR): 123 / 370
 BMCL is investing INR425cr in a new 320KLPD distillery capacity, which will have
payback period of less than four years and will generate an annual revenue of Share in issue (cr): 21
INR625cr. The new facility will be able to use both cane-based as well as grain-based
M cap (INR cr): 7,600
feedstock.
Promoter Holding (%) 41.21
 Management believes 20% blending target is aggressive; hence, achieving it could get
delayed by a year. However, the target has set the company on the right path as
everyone is adding capacities.
 The government has taken multiple steps to expedite installation of new capacities
such as interest subvention loans, tripartite agreements between banks, OMCs and
millers, review of the time taken for environmental clearance, etc.
 Management does not foresee any major risk in the ethanol story, which could derail
the current momentum.

Valuation
BMCL is looking to make the most of the opportunity that has emerged from the recent
revival of the sugar industry (due to the government’s resolve to meet its blending target
of 20% by 2025). We believe BMCL is one of the best plays to capture the ongoing uptick
in the sugar industry. At CMP of INR359, the stock is trading at 13x/12x FY22E/FY23 EPS.

Year to March FY19 FY20 FY21 FY22E FY23E

Revenues (INR Cr) 4,286 4,741 4,812 5,435 5,866
Rev growth (%) (1.3) 10.6 10.8 13.0 7.9
EBITDA (INR Cr) 689 682 714 870 939
Adjusted PAT (INR Cr) 473 471 480 576 611
P/E (x) 3.0 3.3 15.3 12.8 12.0
Price/BV(x) 0.8 0.7 2.8 2.4 2.2
EV/EBITDA (x) 5.1 4.7 11.9 9.9 9.3
RoACE (%) 20% 16% 19% 19% 18% Date: July 2, 2021
RoAE (%) 31% 23% 26% 20% 19%

Edelweiss Wealth Research 1

 Balrampur Chini Mills Ltd. Financials

Income statement (INR cr) Balance sheet (INR cr)

Year to March FY19 FY20E FY21 FY22E FY23E As on 31st March FY19 FY20E FY21 FY22E FY23E
Income from operations 4,286 4,741 4,812 5,435 5,866 Equity share capital 23 22 21 21 21
Total operating expenses 3,597 4,059 4,098 4,565 4,927 Warrants 0 0 0 0 0
EBITDA 689 682 714 870 939 Reserves & surplus 2,095 2,394 2,598 3,078 3,349
Depreciation and amortisation 96 101 112 125 140 Shareholders funds 2,118 2,416 2,619 3,099 3,370
EBIT 593 581 602 745 799 Secured loans 60 86 243 255 268
Interest expenses 41 64 39 45 55 Unsecured loans 1,674 1,397 #REF! 980 1,079
Other income 50 52 27 20 20 Other Liabilities 0 0 7 4 5
Profit before tax 602 568 590 720 764 Minority interest 0 0 0 0 0
Provision for tax 128 97 110 144 153 Sources of funds 2,118 2,416 2,626 3,103 3,375
Core profit 473 471 480 576 611 Gross block 1,816 2,116 0 100 200
Extraordinary items 0 0 0 0 0 Depreciation 395 492 500 550 600
Profit after tax 473 471 480 576 611 Net block 1,422 1,624 -500 -450 -400
Minority Interest 0 0 0 0 0 Capital work in progress 46 12 14 18 24
Total fixed assets 1,467 1,636 -486 -432 -376
Share from associates 0 0 0 0 0
Goodwill 0 0 0 0 0
Adjusted net profit 473 471 480 576 611 Investments 252 260 266 266 266
Equity shares outstanding (Crore) 22.8 22.0 21.0 21.0 21.0 Inventories 2,317 2,296 2,379 2,989 3,226
EPS (INR) basic 25.2 23.6 22.8 27.4 29.1 Sundry debtors 450 239 245 326 352
Diluted shares (mn) 22.8 22.0 21.0 21.0 21.0 Cash and equivalents 5 5 3 4 4
EPS (INR) fully diluted 25.2 23.6 22.8 27.4 29.1 Loans and advances 212 372 128 130 140
Dividend per share 57.1 55.0 0.0 0.0 0.0 Other current assets 0 0 0 0 0
Dividend payout (%) 12.1 11.7 0.0 0.0 0.0 Total current assets 2,984 2,912 2,754 3,449 3,722
Sundry creditors and others 813 867 859 1,155 1,245
Common size metrics- as % of net revenues Provisions 7 21 5 4 4
Year to March FY19 FY20E FY21 FY22E FY23E Total CL & provisions 820 888 865 1,159 1,249
Operating expenses 83.9 85.6 85.2 84.0 84.0 Net current assets 2,164 2,023 1,890 2,290 2,473
Depreciation 2.2 2.1 2.3 2.3 2.4 Net Deferred tax 0 0 0 0 0
Interest expenditure 1.0 1.4 0.8 0.8 0.9 Misc expenditure 0 0 0 0 0
EBITDA margins 16.1 14.4 14.8 16.0 16.0 Uses of funds 2,118 2,416 2,626 3,103 3,375
Net profit margins 11.0 9.9 10.0 10.6 10.4 Book value per share (INR) 93 110 125 148 160
Growth metrics (%) Opearting cash Flow
Year to March FY19 FY20E FY21 FY22E FY23E Year to March FY19 FY20E FY21 FY22E FY23E
Revenues (1.3) 10.6 10.8 13.0 7.9 EBIT 593 581 602 745 799
EBITDA 52.6 (1.0) 58.1 21.8 7.9 Depriciation 96 101 112 125 140
PBT 74.4 (5.6) 70.8 22.1 6.1 Tax 128 97 110 144 153
Net profit after MI 75.7 (0.5) 78.1 20.0 6.1 Chg in WC 1,184 (141) 909 400 183
EPS 153.9 (6.4) 130.0 19.9 6.1 CFO (623) 726 (305) 325 602

Profit & Efficiency Ratios

Year to March FY19 FY20E FY21 FY22E FY23E
ROAE (%) 31% 23% 26% 20% 19%
ROACE (%) 20% 16% 19% 19% 18%
Debtors (days) 18 19 18 19 21
Current ratio 3.6 3.3 3.2 3.0 3.0
Debt/Equity 0.8 0.6 0.4 0.4 0.4
Inventory (days) 186 215 186 215 230
Payable (days) 119 123 106 103 128
Cash conversion cycle (days) 85 110 98 131 123
Working Capital (days) 211 169 211 169 169
Debt/EBITDA 18 15 #REF! 10 10
Adjusted debt/Equity 0.8 0.6 0.4 0.4 0.4

Valuation parameters
Year to March FY19 FY20E FY21 FY22E FY23E
Diluted EPS (INR) 25.2 23.6 22.8 27.4 29.1
Y-o-Y growth (%) 153.9 (6.4) 130.0 19.9 6.1
CEPS (INR) 24.9 26.0 28.2 33.3 35.7
Diluted P/E (x) 3.0 3.3 15.3 12.8 12.0
Price/BV(x) 0.8 0.7 2.8 2.4 2.2
EV/Sales (x) 0.8 0.7 1.8 1.6 1.5
EV/EBITDA (x) 5.1 4.7 11.9 9.9 9.3
Diluted shares O/S 22.8 22.0 21.0 21.0 21.0
Basic EPS 25.2 23.6 22.8 27.4 29.1
Basic PE (x) 3.0 3.3 15.3 12.8 12.0

Edelweiss Wealth Research 2

 Dwarikesh Sugar Ltd.
Riding the ethanol wave
We hosted the management of Dwarikesh Sugar (DWARKESH) in our ‘Edelweiss
Corporate Connect’ virtual conference on 29th Jun’21. DWARKESH is a fully integrated Debashish Mazumdar
Research Analyst
sugar producer with three facilities in Uttar Pradesh. The company has total crushing
Debashish.mazumdar@edelweissfin.com
capacity of 21,500TCD and distillery capacity of 130KLPD. Key risks include (a) hike in
cane procurement prices, and (b) regulatory hurdles in connection with clearance of new CMP INR: 79
projects and funding. Key takeaways highlighted below: RATING: Not Rated

Relative Price Performance

 The sugar industry is currently undergoing a paradigm shift with the elimination of
cyclicality in business through implementation of MSP and diversion of excess 250

sugarcane towards ethanol production. 200

(Indexed)
150

 The government’s thrust on ethanol blending is on account of (a) faster payback of 100
50
dues to farmers, and (b) lower dependence on import of crude oil. 0

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Jan-19

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Apr-19
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Jul-20

Apr-21
 While achievement of 20% blending by 2025 is a tall ask, management believes the
target has set DWARKESH in the right direction (although, the company is late by a
Dwarikesh Sensex
year).
 Reversal of ethanol prices is unlikely, regardless of global crude prices. Bloomberg: DSIL:IN

 Blending up to 12-13% is not a problem for the existing fleet of vehicles. E15 or E20 52-week range (INR): 23 / 81
level of blending will only be possible in new vehicles with engines modified to adjust
Share in issue (cr): 19
to the change in fuel mix.
M cap (INR cr): 1,490
 DWARKESH plans to double ethanol capacity to 260KLPD (from current 130KLPD) at a
cost of INR230cr. The project will be partly funded by a loan, which shall carry interest Promoter Holding (%) 42.08
subvention; the balance will come from internal accruals.
 The government’s objective is to enable the sugar industry to stand on its own feet.
Eventually, exports will stop and domestic sugar production will be used for
consumption and ethanol diversion only.
 The new capacity shall run for more than 300 days annually and will primarily use sugar-
based feedstock; however, it will also be able to use grain-based feedstock if required.

Valuation
We believe DWARKESH can significantly improve its profitability on account of increasing
capacity, improved realisations, regulatory tailwinds, and smooth offtake by OMCs.
Further, climate-related issues in Brazil and Thailand are also helping DWARKESH’s cause
as the rise in global raw sugar prices has enabled it to fetch higher prices for exports. At
CMP of INR79, the stock is trading at 9.7x/7.6x FY22E/FY23E EPS.

Year to March FY19 FY20 FY21 FY22E FY23E

Revenues (INR Cr) 1084 1336 1839 2031 2212
Rev growth (%) (24.2) 23.2 37.6 10.4 8.9
EBITDA (INR Cr) 129 136 201 290 365
Adjusted PAT (INR Cr) 95 74 92 146 188
P/E (x) 15.0 19.3 15.5 9.7 7.6
EV/EBITDA (x) 16.1 16.7 9.8 6.9 5.6
RoACE (%) 11.0 8.4 13.6 21.3 24.4
RoAE (%) 22.9 15.5 17.2 23.1 26.1
Date: July 2, 2021

Edelweiss Wealth Research 3

 Dwarikesh Sugar Ltd. Financials

Income statement (INR crs) Balance sheet (INR crs)

Year to March FY19 FY20 FY21 FY22E FY23E As on 31st March FY19 FY20 FY21 FY22E FY23E
Income from operations 1084 1336 1839 2031 2212 Equity share capital 19 19 19 19 19
Direct costs 775 1010 1431 1512 1599 Preference Share Capital 0 0 0 0 0
Power & Fuel 1 1 1 1 1 Reserves & surplus 445 465 561 667 733
Employee costs 71 79 93 102 111 Shareholders funds 464 484 580 686 752
Other expenses 180 190 207 229 248 Secured loans 641 828 557 580 630
Total operating expenses 955 1200 1638 1741 1847 Unsecured loans 15 18 0 0 0
EBITDA 129 136 201 290 365 Borrowings 656 846 557 580 630
Depreciation and amortisation 33 37 41 45 55 Minority interest 0 0 0 0 0
EBIT 96 99 160 245 310 Sources of funds 1,119 1,330 1,137 1,266 1,382
Interest expenses 21 33 48 60 70 Gross block 761 901 1,050 1,150 1,200
Other income 36 5 7 10 10 Depreciation 442 475 640 710 720
Profit before tax 111 72 120 195 250 Net block 319 426 410 440 480
Provision for tax 16 -2 28 49 63 Capital work in progress 16 2 1 1 1
Core profit 95 73 92 146 188 Total fixed assets 336 428 411 441 481
Extraordinary items 0 0 0 0 0 Unrealised profit 0 0 0 0 0
Profit after tax 95 74 92 146 188 Investments 0 0 4 4 4
Adjusted net profit 95 74 92 146 188 Inventories 824 913 856 1,016 1,107
Sundry debtors 60 98 68 102 111
Equity shares outstanding (mn) 19 19 19 19 19
Cash and equivalents 1 3 1 2 2
EPS (INR) basic 5 4 5 8 10
Loans and advances 64 86 57 63 69
Diluted shares (Cr) 19 19 19 19 19
Other current assets 0 0 0 0 0
EPS (INR) fully diluted 5 4 5 8 10
Total current assets 950 1,099 982 1,182 1,289
Dividend per share 0 0 0 0 0
Sundry creditors and others 213 250 282 380 407
Dividend payout (%) 0 0 0 0 0
Provisions 7 5 4 4 4
Total CL & provisions 220 256 285 383 411
Common size metrics- as % of net revenues
Net current assets 729 844 697 799 878
Year to March FY19 FY20 FY21 FY22E FY23E
Net Deferred tax 40 59 50 50 50
Operating expenses 88.1 89.8 89.1 85.7 83.5
Misc expenditure 14 0 -23 -27 -30
Depreciation 3.0 2.8 2.2 2.2 2.5
Uses of funds 1,119 1,330 1,137 1,266 1,382
Interest expenditure 2.0 2.5 2.6 3.0 3.2
Book value per share (INR) 25 26 31 36 40
EBITDA margins 11.9 10.2 10.9 14.3 16.5
Net profit margins 8.8 5.5 5.0 7.2 8.5
Cash flow statement (INR crs)
Year to March FY19 FY20 FY21 FY22E FY23E
Growth metrics (%) Net profit 95 73 92 146 188
Year to March FY19 FY20 FY21 FY22E FY23E Add: Depreciation 33 37 41 45 55
Revenues (24.2) 23.2 37.6 10.4 8.9 Add: Misc expenses written off -11 14 24 3 3
EBITDA (9.4) 5.4 47.9 44.0 26.1 Add: Deferred tax -7 -19 9 -0 0
PBT 8.6 (35.5) 67.4 62.7 28.5 Gross cash flow 111 105 166 194 246
Net profit (6.3) (22.8) 24.7 59.5 28.5 Less: Changes in W. C. 401 112 -145 102 79
EPS (90.6) (22.6) 24.7 59.5 28.5 Operating cash flow -290 -7 311 92 167
Less: Capex 28 129 24 75 95
Free cash flow -318 -136 287 17 72

Ratios
Year to March FY19 FY20 FY21 FY22E FY23E
ROAE (%) 22.9 15.5 17.2 23.1 26.1
ROACE (%) 11.0 8.4 13.6 21.3 24.4
Debtors (days) 20 27 27 27 27
Current ratio 4.3 4.3 3.4 3.1 3.1
Debt/Equity 1.4 1.7 1.0 0.8 0.8
Inventory (days) 277 249 249 249 249
Payable (days) 72 68 68 68 68
Cash conversion cycle (days) 226 208 208 208 208
Debt/EBITDA 5.1 6.2 2.8 2.0 1.7
Adjusted debt/Equity 1.4 1.7 1.0 0.8 0.8

Valuation parameters
Year to March FY19 FY20 FY21 FY22E FY23E
Diluted EPS (INR) 5.0 3.9 4.9 7.8 10.0
Y-o-Y growth (%) (90.6) (22.6) 24.7 59.5 28.5
CEPS (INR) 7 6 7 10 13
Diluted P/E (x) 15.0 19.3 15.5 9.7 7.6
Price/BV(x) 3.1 2.9 2.5 2.1 1.9
EV/Sales (x) 1.9 1.7 1.1 1.0 0.9
EV/EBITDA (x) 16.1 16.7 9.8 6.9 5.6
Diluted shares O/S 18.8 18.8 18.8 18.8 18.8
Basic EPS 5.0 3.9 4.9 7.8 10.0
Basic PE (x) 15.0 19.3 15.5 9.7 7.6
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

Edelweiss Wealth Research 4

 eClerx Services Ltd.
Back on growth path post period of underperformance

We hosted the management of eClerx in our ‘Edelweiss Corporate Connect’ virtual

Debashish Mazumdar
conference on 29th Jun’20. eClerx is a leading player in high opportunity services
Research Analyst
segments like business process management, automation, and data analytics. It Debashish.mazumdar@edelweissfin.com
provides critical business operation services to Finance, Cable & Telecom, Retail,
Fashion, Media & Entertainment, Manufacturing, Travel & Leisure, Software, and High- CMP INR: 1,793
Tech companies. The company operates across key geographies such as North America RATING: Buy
and Europe among other regions and boasts of both onshore as well as offshore
capabilities. Key takeaways highlighted below: Relative Price Performance

300
 The company lost three major client businesses over the last four years, which led to

(Indexed)
200
flattish growth trajectory. 100

 Order bookings have picked up over the last two quarters, which points towards strong 0

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21
Jul-17

Jul-18

Jul-19
Oct-19

Jul-20
Apr-17
Oct-17
Apr-18
Oct-18
Apr-19

Apr-20
Oct-20
Apr-21
demand scenario.
 The company has developed new platforms over the past 2-3 years to return to the
eClerx Sensex
growth bandwagon.
 eClerx does not sell platforms as an individual product; instead, its strategy is to sell a Bloomberg: ECLX:IN
service bundled with a platform. eclerx operates the platform and the client only gets
the output. 52-week range (INR): 436 / 1,837

 These platforms have helped eClerx to differentiate its offerings from competition – Share in issue (cr): 3.5

key factor that has won the company new deals over the past couple of years. M cap (INR cr): 6,275

 The company has strategically created a large onshore presence over the last 3-4 years Promoter Holding (%) 53.81
to cater to businesses that cannot leave shore. In the process, it has de-risked its
business.
 eClerx is only open to deals that create value at the time of purchase. It is not keen on
strategic deals that are based on future synergies and potential value creation.
 Management does not expect supply-side constraints, except in areas that warrant
niche skills.

Valuation
The efforts put in by eClerx’s management over the past 4-5 years have finally started to
bear fruit. Creation of platforms and focus on the managed services business has now
started to pay off. With macro tailwinds such as offshoring and increased digital adoption,
we believe eClerx is well placed to grow in double digits over the next few years. At CMP
of INR2,100 the stock is trading at 25x/23x FY22E/23E EPS.

Year to March (INR Cr) FY20A FY21E FY22E FY23E

Revenue 1,438 1,565 1,818 2,166
EBITDA 324 448 452 481
Adjusted profit 205 283 284 297
Diluted EPS (INR) 5.6 8.1 8.2 8.6
EPS growth (%) 11.8 44.4 1.4 4.1
RoAE (%) 14.7 19.2 17.2 15.5
P/E (x) 23.9 16.5 16.3 15.7
EV/EBITDA (x) 15.3 10.8 10.2 9.2
Dividend yield (%) 1.0 1.5 1.5 1.6
Date: July 2, 2021

Edelweiss Wealth Research 5

 eClerx Services Ltd. Financials

Income Statement (INR Cr) Balance Sheet (INR Cr)

Year to March FY20A FY21E FY22E FY23E Year to March FY20A FY21E FY22E FY23E
Total operating income 1438 1565 1818 2166 Share capital 37 34 34 34
Cost of revenues 910 938 1130 1403 Reserves 1415 1467 1772 1984
Gross Profit 528 626 688 763 Shareholders funds 1452 1501 1806 2019
SG&A 0 0 0 0 Minority interest 0 1 0 0
EBITDA 324 448 452 481 Borrowings 0 221 0 0
Depreciation 71 82 95 109 Trade payables 26 23 30 37
EBIT 253 366 357 372 Other liabs & prov 156 229 340 403
Add: Other income 24 35 22 24 Total liabilities 1634 1974 2176 2459
Profit before tax 277 381 379 396 Net block 72 217 217 217
Prov for tax 72 98 95 99 Intangible assets 298 511 511 511
Less: Other adj 0 0 0 0 Capital WIP 0 1 0 0
Reported profit 205 283 284 297 Total fixed assets 370 729 728 728
Less: Excp.item (net) 0 0 0 0 Non current inv 0 42 42 42
Adjusted profit 205 283 284 297 Cash/cash equivalent 380 719 733 930
Diluted shares o/s 4 4 3 4 Sundry debtors 244 293 309 368
Adjusted diluted EPS 6 8 8 9 Loans & advances 0 0 0 0
DPS (INR) 1 2 2 2 Other assets 286 191 210 231
Tax rate (%) 25.9 25.7 25.0 25.0 Total assets 1634 1974 2176 2459

Important Ratios (%) Free Cash Flow (INR Cr)

Year to March FY20A FY21E FY22E FY23E Year to March FY20A FY20A FY22E FY23E
Depreciation 12 9.6 8.5 9 Reported profit 205 205 284 297
Yield on cash & cash equivalents (%) 3.5 3.5 3.5 3.5 Add: Depreciation 71 71 95 109
Tax rate as % of PBT 25.9 25.7 25 25 Interest (net of tax) 0 0 0 0
EBITDA margin (%) 22.5 28.6 24.8 22.2 Others 0 0 0 0
Net profit margin (%) 14.3 18.1 15.6 13.7 Less: Changes in WC -10 -10 100 -17
Revenue growth (% YoY) 0.5 8.8 16.2 19.1 Operating cash flow 266 266 479 390
EBITDA growth (% YoY) 5.2 38.5 0.8 6.5 Less: Capex -75 -75 -94 -109
Adj. profit growth (%) 7.1 37.8 0.5 4.5 Free cash flow 191 191 384 281

Valuation Metrics Key Ratios

Year to March FY20A FY21E FY22E FY23E Year to March FY20A FY21E FY22E FY23E
Diluted P/E (x) 23.9 16.5 16.3 15.7 RoE (%) 14.7 19.2 17.2 15.5
Price/BV (x) 3.4 3.1 2.6 2.3 RoCE (%) 19.8 25.3 21.5 20.7
EV/EBITDA (x) 15.3 10.8 10.2 9.2 Inventory days 0.0 0.0 0.0 0.0
Dividend yield (%) 1.0 1.5 1.5 1.6 Receivable days 62.0 63.0 60.0 57.0
Payable days 10.0 9.0 9.0 9.0
Working cap (% sales) 49.0 12.7 23.2 13.1
Gross debt/equity (x) 0.0 0.1 0.0 0.0
Net debt/equity (x) -0.3 -0.3 -0.4 -0.5
Interest coverage (x) 0.0 18.1 0.0 0.0

Valuation Drivers
Year to March FY20A FY21E FY22E FY23E
EPS growth (%) 11.8 44.4 1.4 4.1
RoE (%) 14.7 19.2 17.2 15.5
EBITDA growth (%) 5.2 38.5 0.8 6.5
Payout ratio (%) 25.0 25.0 25.0 25.0

Edelweiss Wealth Research 6

 Jubilant Ingrevia Ltd.
Cost leadership through integration
We hosted the management of Jubilant Ingrevia Ltd. (JUBLINGR) in our ‘Edelweiss
Corporate Connect 2021’ virtual conference on 30th Jun’21. Continuing with Jubilant Swarnabha Mukherjee
Research Analyst
Lifesciences’ four-decade legacy in the chemical business, JUBLINGR operates in three Swarnabha.mukherjee@edelweissfin.com
segments – Life Science Chemicals (LSC), Specialty Chemicals (SC), and Nutrition & Health
Solutions (NHS). The company caters to diversified end-user industries like CMP INR: 550
Pharmaceuticals, Agrochemicals, Nutraceuticals, Paints, Personal Care, etc. JUBLINGR RATING: Not Rated
services its Pharma and Agrochem customers through the CDMO business by developing
and commercialising customised R&D driven innovative products. The company is one Relative Price Performance
of the leading manufacturers of Acetic Acid-based chemicals, and plans to enter the
240
Diketene and Diketene-based derivatives market by setting up a facility. Key takeaways
190
highlighted below:

(Indexed)
140

 In LSC segment, the company witnessed robust demand for Acetic Anhydride owing to 90
40
high demand for Paracetamol and other drugs during the pandemic.

Jun-21
Mar-21

Apr-21

May-21
 While Acetic Acid prices have come off the peak, it is still hovering in the higher price
band. This should aid margins for LSC division in 1QFY22. Jubilant Ingrev Sensex
 In SC, Phase-I Diketene expansion is well on track and production should commence by
Q3FY22 as announced earlier. Bloomberg: JUBLINGR:IN
 Development of high-value Diketene-based products is in progress and will be
52-week range (INR): 241 / 612
commercialised in Phase-II of the expansion.
 JUBLINGR has made some investments in the recently incorporated subsidiary, and Share in issue (cr): 16
thus, production of Agro Active Ingredients should start by early-FY23.
M cap (INR cr): 8.755
 In NHS, the company is upgrading facilities to meet the US FDA and European
Medicines Agency’s compliance criterion. Promoter Holding (%) 50.68
 Post approval from these regulatory authorities, JUBLINGR intends to enter the
regulated pharma market of Niacinamide.
 According to management, the company will invest ~INR900-1,000cr across its three
business segments over the next 2-3 years. Management is aiming to (a) achieve 2-2.5x
asset turnover, (b) increase its existing utilisation levels, and (c) double FY21 revenue
over next five years.
 JUBLINGR’s management has no capacity expansion plans for its legacy business of
Ethanol Blending.

Valuation
JUBLINGR is fairly diversified across segments, in terms of end-user industries,
geographical exposure, low customer concentration and manufacturing footprint. The
company has several products in the pipeline and a sizeable capex plan, which we believe
will drive growth over the next 3-5 years. At CMP, the stock is trading at 28x FY21 EPS.

INR crore FY20 FY21

Revenues (INR cr) 3,179 3,491
EBITDA (INR) cr) 399 612
EBITDA Margin (%) 13 18
Net Profit (INR cr) 220 316
EPS (INR) 14 20
EPS Growth (%) 44
P/E (x) 28 Date: July 2, 2021

Edelweiss Professional Investor Research 7

 Jubilant Ingrevia Ltd. Financials

Income statement (INR Cr) Year to March FY21

Year to March FY20 FY21 Property Pl a nt a nd Equi pment 1745
Income from opera tions 3179 3491 Inta ngi bl e As s ets 13
Tota l Expendi ture 2989 3075 Ri ght of Us e As s ets 49
EBITDA 399 612 Ca pi ta l Work In Progres s 63
Depreci a tion a nd a mortis a tion 122 125 Other Fi na nci a l As s ets 52
EBIT 277 487 Other Non Current As s ets 21
Interes t expens es 88 71 Total Non Current Assets 1943
Other Income 10 15 Inventori es 609
Profi t before ta x 199 431 Tra de Recei va bl es 471
Provi s i on for ta x -23 102 Ca s h a nd Ca s h Equi va l ent 117
Adj. Profi t a fter ta x 222 329 Other Fi na nci a l As s ets 68
Exceptiona l Items 2 13 Other Current As s ets 159
Profi t a fter ta x 220 316 Total Current Assets 1424
Equi ty s ha res outs ta ndi ng (Cr) 16 16 Total Assets 3366
EPS (INR) 14 20 Sha re Ca pi ta l 16
(Note : Pro-forma Income Statement) Res erves a nd Surpl us 1907
Sha rehol ders Funds 1923
Common size metrics- as % of net revenues Long Term Borrowi ngs 456
Year to March FY20 FY21 Other Li a bi l i ties 78
Tota l expens es 94 88 Deferred Ta x Li a bi l i ty (Net) 16
Depreci a tion 4 4 Total Non Current Liabilities 2472
Interes t expendi ture 3 2 Tra de Pa ya bl es 694
EBITDA ma rgi ns 13 18 Other Fi na nci a l Li a bi l i ties 160
Net profi t ma rgi ns 7 9 Other Current Li a bi l i ties 41
Total Current Liabilities 894
Growth metrics (%) Total Liabilities 3,366
Year to March FY21
Revenues 10 Valuation parameters
EBITDA 53 Year to March FY21
PBT 117 Di l uted EPS (INR) 20
Net profi t 44 Y-o-Y growth (%) 44
EPS 44 Di l uted P/E (x) 28
EV/Sa l es (x) 3
EV/EBITDA (x) 15
Di l uted s ha res O/S 16

Edelweiss Professional Investor Research 8

 Mastek Ltd.
Betting on Oracle to drive growth
We hosted the management of Mastek Ltd. (MASTEK) in our ‘Edelweiss Corporate Debashish Mazumdar
Connect’ virtual conference on 29th Jun’21. MASTEK delivers enterprise level digital Research Analyst
Debashish.mazumdar@edelweissfin.com
transformation services and solutions for large public and private enterprises in the UK,
the US and India. The company is a top provider of digital transformation services in CMP INR: 2,321
retail, healthcare, and financial services industries. The company has the experience and
RATING: Not Rated
knowhow of delivering large and complex enterprise-wide transformation projects and
is well-placed to successfully partner businesses in their transformational journeys. Key Relative Price Performance
takeaways highlighted below:
1540
 The UK’s public sector, which grew ~35% in FY21 is a key growth driver for MASTEK.

(Indexed)
The company provides services to the Home Office, Ministry of Defence, Justice 1040

Department, the NHS, etc. 540

 MASTEK’s strategy is to continue mining high growth from existing accounts in the UK 40

Oct-17

Oct-18

Oct-19

Oct-20
Jan-17

Jan-18

Jan-19

Jan-20

Jan-21
Apr-17
Jul-17

Apr-18
Jul-18

Apr-19
Jul-19

Apr-20
Jul-20

Apr-21
while trying to enter new departments. The UK’s public sector consists of ~60
departments; of this, MASTEK services only 4-5 departments. Thus, there is Mastek Sensex
tremendous room for growth.
 MASTEK acquired Evosys to enhance its cloud implementation and consultancy Bloomberg: MAST:IN
services. MASTEK also launched a successful go-to-market strategy with Evosys, which
52-week range (INR): 363 / 2,365
enabled new client wins (a difficult task if both companies had pursued clients
independently). Share in issue (cr): 2.9

 According to management, MASTEK is a reputable name in Oracle’s head office due to M cap (INR cr): 5,866
its exclusive oracle offerings (v/s competitors that offer both Oracle and SAP ERP
Promoter Holding (%) 44.32
solutions).
 The company’s SAP compete strategy is vital in terms of converting SAP users to Oracle,
and thereby, acquiring new clients. Evosys is key in executing this strategy.
 The company is focused on growing in the US and improving its geographical mix.
According to management, MASTEK will grow both organically as well as inorganically,
and the Evosys acquisition is a step in that direction.
 Seeing positive momentum in the UK private sector, MASTEK (a) has hired an employee
to head sales for the segment, and (b) is using Evosys’ European clientele to cross sell
and co sell in the UK and elsewhere.

Valuation
With stable business in the UK and shift in focus towards the US, we believe enough room
exists for MASTEK to grow further. At CMP of INR2,321, the stock trades at 22x/18x
FYY22E/FY23E EPS.

Year to March FY19 FY20 FY21 FY22E FY23E

Revenues (INR Cr) 1,033 1,071 1,722 2,094 2,476
Rev growth (%) 26% 4% 61% 22% 18%
EBITDA (INR Cr) 132 155 365 448 534
Adjusted PAT (INR Cr) 101 109 209 287 348
P/E (x) 6 4 17 22 18
EV/EBITDA (x) 8 4 15 13 10
RoACE (%) 14% 9% 22% 16% 17% Date: July 2, 2021
RoAE (%) 27% 15% 40% 15% 15%

Edelweiss Wealth Research 9

 Mastek Ltd. Financials

Income statement (INR cr) Balance Sheet (INR cr)

Year to March FY19 FY20 FY21 FY22E FY23E As on 31st March FY19 FY20 FY21E FY22E FY22E
Income from operations 1,033 1,071 1,722 2,094 2,476 Equity share capital 12 12 13 14 14
Direct costs 0 0 0 0 0 Preference Share Capital 0 0 0 0 0
Employee costs 587 584 883 1,060 1,237 Reserves & surplus 701 778 846 1,895 2,243
Other expenses 315 332 475 586 706 Shareholders funds 713 790 859 1,910 2,258
Total operating expenses 902 916 1,357 1,646 1,942 Secured loans 100 584 574 574 574
EBITDA 132 155 365 448 534 Unsecured loans 0 0 0 0 0
Depreciation and amortisation 17 25 45 54 60 Borrowings 100 584 574 574 574
EBIT 114 130 320 394 474 Minority interest 0 137 182 0 0
Interest expenses 6 4 8 11 11 Sources of funds 715 835 951 1,804 2,152
Other income 22 28 28 68 84 Gross block 177 384 400 450 500
Profit before tax 131 154 339 450 546 Depreciation 76 209 254 308 368
Provision for tax 32 30 88 113 137 Net block 101 175 147 142 132
Core profit 99 124 252 338 410 Capital work in progress 1 2 2 2 2
Extraordinary items 3 -10 0 0 0 Total fixed assets 102 177 148 144 134
Profit after tax 101 114 252 338 410 Unrealised profit 0 0 0 0 0
Minority Interest 0 -5 -43 -51 -61 Non Current Assets 248 89 73 73 73
Share from associates 0 0 0 0 0 Inventories 0 0 0 0 0
Reported profit 101 109 209 287 348 Sundry debtors 244 446 555 654 708
Equity shares outstanding (mn) 24 24 25 28 28 Cash and equivalents 93 221 591 1,353 1,664
EPS (INR) basic 79 49 137 102 123 Loans and advances 0 2 9 0 0
Diluted shares (mn) 24 24 25 28 28 Other current assets 182 234 256 265 265
EPS (INR) fully diluted 79 49 137 102 123 Total current assets 521 903 1,411 2,272 2,636
Dividend per share 0 0 0 0 0 Sundry creditors and others 151 323 681 685 691
Dividend payout (%) 0 0 0 0 0 Provisions 6 11 0 0 0
Total CL & provisions 156 334 681 685 691
Common size metrics- as % of net revenues Net current assets 364 569 730 1,587 1,945
Year to March FY19 FY20 FY21 FY22E FY23E Net Deferred tax 0 0 0 0 0
Operating expenses 87.3 85.5 78.8 78.6 78.4 Misc expenditure 0 0 0 0 0
Depreciation 1.7 2.3 2.6 2.6 2.4 Uses of funds 715 835 951 1,804 2,152
Interest expenditure 0.6 0.3 0.5 0.5 0.5 Book value per share (INR) 297 387 412 677 800
EBITDA margins 12.7 14.5 21.2 21.4 21.6
Net profit margins 9.8 10.2 12.1 13.7 14.1 Cash flow statement (INR cr)
Year to March FY19 FY20 FY21 FY22E FY23E
Growth metrics (%) Net profit 101 109 209 287 348
Add: Depreciation 17 25 45 54 60
Year to March FY19 FY20 FY21 FY22E FY23E
Add: Others -227 -37 99 0 0
Revenues 26.4 3.7 60.7 21.6 18.3
Gross cash flow -108 97 353 341 408
EBITDA 32.0 18.1 134.6 22.8 19.3 91 77 -209 -114 47
Less: Changes in W. C.
PBT 39.2 18.3 119.8 32.7 21.3 Operating cash flow -199 20 562 455 361
Net profit 45.6 25.9 102.8 34.1 21.3 Less: Capex 9 207 16 50 50
EPS 179.2 -38.4 182.2 -25.8 21.3 Free cash flow -207 -187 546 405 311

Ratios
Year to March FY19 FY20 FY21 FY22E FY23E
ROAE (%) 27% 15% 40% 15% 15%
ROACE (%) 14% 9% 22% 16% 17%
Total Asset Turns 1.9 0.8 1.1 0.9 0.9
EBIT Margins 11% 12% 19% 19% 19%
Debtors (days) 86 152 118 114 104
Inventory (days) 0 0 0 0 0
Payable (days) 3 36 7 6 6
Cash conversion cycle (days) 83 116 111 108 98
Debt/EBITDA 1 2 1 1 1

Valuation parameters
Year to March FY19 FY20 FY21 FY22E FY23E
Diluted EPS (INR) 78.8 48.6 137.2 101.7 123.4
Y-o-Y growth (%) 179% -38% 182% -26% 21%
CEPS (INR) 86.1 61.0 171.9 138.8 166.4
Diluted P/E (x) 5.6 4.1 16.6 22.4 18.4
Price/BV(x) 1.5 0.5 5.5 3.4 2.9
EV/Sales (x) 1.0 0.6 3.1 2.7 2.2
EV/EBITDA (x) 7.9 3.8 14.8 12.6 10.0
Diluted shares O/S 24.0 24.0 25.2 28.2 28.2
Basic EPS 78.8 48.6 137.2 101.7 123.4
Basic PE (x) 5.6 4.1 16.6 22.4 18.4
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

Edelweiss Wealth Research 10

 Max Healthcare Institute Ltd.
A sustainable growth story
We hosted the management of Max Healthcare Institute Limited (MHI) in our ‘Edelweiss
Corporate Connect’ virtual conference on 30th Jun’21. The company is one of India’s leading Praveen Sahay
hospital chains with 16 facilities and ~3,400 beds. MHI was formed after the merger of Max Research Analyst
Praveen.sahay@edelweissfin.com
Healthcare and Radiant (effective 1st Jun’20). Besides the core hospital business, MHI also has two
related businesses Max@Home and MaxLab. Key takeaways highlighted below: CMP INR: 258

 Whenever Covid cases rise, MHI experiences higher occupancy with lower ARPOB (relative to the RATING: Buy
non-Covid business), and when Covid cases decline, the company witnesses strong bounce-back
in the non-Covid business. As Covid ARPOB is lower than non-Covid ARPOB due to pricing Relative Price Performance

regulations, it is detrimental to MHI’s overall ARPOB. Also, this trend in ARPOB does not affect 240
other hospital chains as much as it affects MHI.
190

(Indexed)
 Last year, MHI could not perform to its full strength owing to the nationwide lockdown and the
140
farmers agitation. Business was impacted severely – OPD business has not yet fully recovered
90
and International business (contributing 10-12%) has recovered only 60% of pre-Covid levels.
40
 MHI is aiming to achieve 79-80% occupancy rates. Currently, the Institutional business (pricing

Mar-21
Sep-20

Jan-21

May-21
Feb-21
Nov-20
Dec-20

Apr-21
Aug-20

Oct-20
at ~40% discount to other segments) accounts for 35% of MHI’s occupied beds, which it plans to
lower to 15% over the next 2-3 years. The consequent 20% difference will yield 40% higher MAX Healthcare Sensex
pricing, and 85% of this higher pricing will increase MHI’s EBITDA.
 Many mature hospitals (older than five years) in Mumbai and NCR do not cater to the Bloomberg: MAXHEALT:IN
institutional business. Despite all MHI hospitals being in the mature category, the company has
35% share in the Institutional business (v/s Fortis’ 22% and Apollo’s 13% share). 52-week range (INR): 97 / 265
 In FY19, MHI’s consolidated EBITDA (Max + Radiant) stood at ~INR356cr. MHI achieved structural
Share in issue (cr): 96.6
cost savings of ~INR220cr in FY20 and additional cost savings of ~INR108cr in FY21, which are
permanent in nature. The cost savings has resulted in EBITDA increasing by INR328cr on a base M cap (INR cr): 25,138
of ~INR356cr, while EBITDA/bed has soared from ~INR28lakh in Q4FY20 to ~INR47lakh in
Q4FY21. Further, due to the pandemic, MHI did transient cost savings in terms of salary cuts; Promoter Holding (%) 70.46
however, as the situation improved, original salaries have been restored.
 MHI enjoys higher EBITDA margins despite 9% of its total beds being reserved for free services
to EWS.
 In Nanavati Hospital, personnel cost forms 35% of revenue. MHI plans to reduce this to 23% by
implementing VRS in a phased manner, which should result in EBITDA margin increasing to mid-
teens from high single-digit/low double-digit level.
 Brownfield projects were delayed by 1-2 months due to the second wave of Covid-19, and thus,
new bed capacities will be available only after 2-3 years. MHI expects no capacity addition for
the next two years. Further, while expanding organically or inorganically, MHI plans to maintain
geographical concentration of its hospital clusters.
 Currently, MHI has ~INR800cr free cash flows, which it will use to pay debt (net debt stands at
INR550cr) and explore inorganic expansion opportunities.
 MHI experienced robust growth in its adjacency/asset-light businesses. MaxLab and Max@Home
are growing at high rates and generating high-teens EBITDA margins. Plans are afoot to move
the lab business to a separate subsidiary, which will enable MHI to focus on both organic and
inorganic growth in the diagnostic space.
 Due to strong brand power, MHI’s third-party diagnostic business achieved revenue of
~INR100cr. Its ~4,600 full-time doctors and clinicians and 12,000+ GPs refer business to MHI.
Doctors usually rely on renowned labs for high-end tests, which is a major entry-barrier for
smaller diagnostic players.
 Digital revenue contributes 7-8% of MHI’s total revenue and is growing at a high rate. Digital will
remain an inherent part of MHI’s core strategy, according to management.
Valuation and outlook:
We believe MHI deserves superior valuations as it meets all our key investment considerations – it
has a superior case mix v/s peers, brand power, quality of care, cost efficiencies and presence in
premium markets (Mumbai and Delhi NCR). Further, management is focusing on (a) optimising
capacity utilisation in existing facilities/resources and patient mix, (b) increasing ARPOB, (c) scaling
up capital-light businesses (Max@Home and MaxLab), and (d) potential targets for M&As. At CMP
of INR255, the stock is trading at FY23E EV/EBITDA of 22.3x. Maintain ‘BUY’ with a target price of
INR286/share. Date: July 2, 2021

Edelweiss Wealth Research 11

 Max Healthcare Institute Ltd. Financials
Income statement (INR Cr) Balance sheet (INR Cr)
Year to March FY19 FY20 FY21 FY22E FY23E As on 31st March FY19 FY20 FY21 FY22E FY23E
Income from operations 2,671 4,023 3,629 4,450 5,319 Equity share capital 537 537 966 966 966
Direct costs 672 1,715 1,508 1,120 1,338 Preference Share Capital 0 0 0 0 0
Employee costs 746 997 941 1,113 1,276 Reserves & surplus 749 2,016 4,673 5,121 5,857
Other expenses 1,775 1,719 1,485 2,448 2,872 Shareholders funds 1,287 2,553 5,639 6,087 6,823
Total operating expenses 2,447 3,434 2,993 3,567 4,210 Secured loans 390 853 1,078 1,028 678
EBITDA 224 589 636 883 1,108 Unsecured loans 0 0 0 0 0
Depreciation and amortisation 0 208 216 220 224 Borrowings 390 853 1,078 1,028 678
EBIT 224 381 420 663 885 Minority interest 0 0 0 0 0
Interest expenses 0 215 187 165 68 Sources of funds 1,677 3,406 6,717 7,115 7,501
Other income 0 0 0 0 0 Gross block 653 1,234 7,132 7,715 8,059
Profit before tax 224 166 233 498 817 Depreciation 174 383 596 816 1,039
Provision for tax 0 -3 50 50 82 Net block 479 851 6,537 6,899 7,019
Core profit 224 169 182 449 735 Capital work in progress 10 28 27 27 27
Extraordinary items 0 -40 -277 0 0 Total fixed assets 489 879 6,563 6,926 7,046
Profit after tax 224 129 -95 449 735 Unrealised profit 0 0 0 0 0
Minority Interest 0 0 0 0 0 Investments 770 2,182 1 1 250
Inventories 15 27 54 73 87
Share from associates 0 0 0 0 0
Sundry debtors 285 96 485 305 364
Adjusted net profit 224 129 -95 449 735 Cash and equivalents 4 122 655 648 640
Equity shares outstanding (cr) 54 54 97 97 97 Loans and advances 55 456 362 394 471
EPS (INR) basic 4.2 2.4 (1.0) 4.6 7.6 Other current assets 0 0 0 0 0
Diluted shares (Cr) 53.7 53.7 96.6 96.6 96.6 Total current assets 360 700 1,557 1,421 1,563
EPS (INR) fully diluted 4.2 2.4 (1.0) 4.6 7.6 Sundry creditors and others 242 270 672 366 437
Dividend per share 0.0 0.0 0.0 0.0 0.0 Provisions 12 48 100 122 146
Dividend payout (%) 0.0 0.0 0.0 0.0 0.0 Total CL & provisions 254 318 772 488 583
Net current assets 106 382 785 933 980
Common size metrics- as % of net revenues Net Deferred tax 0 0 -581 -581 -581
Year to March FY19 FY20 FY21 FY22E FY23E Misc expenditure 312 -37 -51 -163 -194
Operating expenses 91.6 85.4 82.5 80.2 79.2 Uses of funds 1,677 3,406 6,717 7,115 7,501
Depreciation 0.0 5.2 6.0 4.9 4.2 Book value per share (INR) 24 48 58 63 71
Interest expenditure 0.0 5.3 5.2 3.7 1.3
EBITDA margins 8.4 14.6 17.5 19.8 20.8 Cash flow statement
Net profit margins 8.4 3.2 (2.6) 10.1 13.8 Year to March FY19 FY20 FY21 FY22E FY23E
Net profit 224 209 459 449 735
Growth metrics (%) Add: Depreciation 0 208 216 220 224
Year to March FY19 FY20 FY21 FY22E FY23E Add: Misc expenses written off 71 349 15 112 32
Revenues 2.0 50.6 (9.8) 22.6 19.5 Add: Deferred tax 5 0 581 0 0
EBITDA 0.9 162.9 8.0 38.8 25.5 Add: Others 0 0 0 0 0
PBT 0.9 (25.9) 40.1 114.4 63.9 Gross cash flow 299 766 1,271 780 991
Net profit 0.9 (24.6) 7.8 146.2 63.9 Less: Changes in W. C. 106 159 -131 155 56
EPS 0.9 (42.4) (140.9) (573.4) 63.9 Operating cash flow 193 607 1,402 625 935
Less: Capex -20 598 5,901 582 344
Free cash flow 213 10 -4,500 43 591

Ratios
Year to March FY19 FY20 FY21 FY22E FY23E
ROAE (%) 17.3 8.8 4.4 7.7 11.4
ROACE (%) 13.3 15.0 7.8 8.8 11.2
Debtors (days) 39 9 49 25 25
Current ratio 1.4 2.2 2.0 2.9 2.7
Debt/Equity 0.3 0.3 0.2 0.2 0.1
Inventory (days) 2 2 5 6 6
Payable (days) 33 24 68 30 30
Cash conversion cycle (days) 8 -13 -13 1 1
Debt/EBITDA 1.7 1.4 1.7 1.2 0.6
Adjusted debt/Equity 0.3 0.3 0.1 0.1 0.0

Valuation parameters
Year to March FY19 FY20 FY21 FY22E FY23E
Diluted EPS (INR) 4.2 2.4 (1.0) 4.6 7.6
Y-o-Y growth (%) 0.9 (42.4) (140.9) (573.4) 63.9
CEPS (INR) 4.2 7.0 4.1 6.9 9.9
Diluted P/E (x) 61.9 82.0 136.8 55.6 33.9
Price/BV(x) 10.8 5.4 4.4 4.1 3.7
EV/Sales (x) 5.3 3.6 7.0 5.7 4.7
EV/EBITDA (x) 63.6 24.8 39.8 28.7 22.5
Diluted shares O/S 53.7 53.7 96.6 96.6 96.6
Basic EPS 4.2 2.4 (1.0) 4.6 7.6
Basic PE (x) 61.9 82.0 136.8 55.6 33.9
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

Edelweiss Wealth Research 12

 Praj Industries Ltd.
Robust order book offers ample revenue visibility
We hosted the management of Praj Industries (PRAJ) in our ‘Edelweiss Corporate
Connect’ virtual conference on 30th Jun’21. PRAJ is one of India’s most accomplished Debashish Mazumdar
Research Analyst
industrial biotechnology companies. Over the past three decades, PRAJ has focused on
Debashish.mazumdar@edelweissfin.com
environment, energy, and agri-process industries and boasts of over 750 customer
references spanning 75 countries across five continents. PRAJ’s diverse portfolio CMP INR: 375
comprises of Bioenergy Solutions, High-Purity Water Systems, Breweries, Critical Process RATING: Not Rated
Equipment and Skids, and Zero Liquid Discharge (ZLD) systems. Key takeaways
highlighted below: Relative Price Performance

400
 PRAJ has significant international experience in grain-based technology. This should 300

(Indexed)
200
help it to capture majority market share in India.
100

 The company has no plans to build new capacities for the next two years. 0

Mar-19

Sep-19

Mar-20

Sep-20

Mar-21
Jan-19

May-19

Nov-19
Jan-20

May-20

Nov-20
Jan-21

May-21
Jul-19

Jul-20
 PRAJ provides holistic service to its clients revolving around technology, engineering,
manufacturing, processing, etc. – a key factor that differentiates it from competition. Praj Sensex

 PRAJ’s core competence is fermentation – in foods, energy, chemicals, etc. Further,

Bloomberg: PRJ:IN
management believes that PRAJ’s understanding of feedstock is superior to other
players, which enables it to make better products. 52-week range (INR): 59 / 407

 Also, management believes margins are a factor of the value that PRAJ creates for its Share in issue (cr): 18
customers. The company hopes to create more value for its customers v/s others in
M cap (INR cr): 6,578
the market.
Promoter Holding (%) 32.91
 While the pandemic made workforce mobilisation difficult, the persistent rise in
commodity prices is also a challenge for PRAJ.
 Currently, PRAJ is building four biogas plants; of these, one has started producing gas.
Management believes there is a need to build infrastructure for gas-based energy
sources on a country level to tap full potential of the resource.

Valuation
With significant investments in R&D, collaboration with strategic partners and sound
management, we believe PRAJ is perfectly placed to capture opportunities in the ethanol
space. At CMP of INR370, the stock is trading at 59x/35x FY22E/FY23E.

Year to March FY19 FY20 FY21 FY22E FY23E

Revenues (INR Cr) 1141 1102 1305 1573 2061
Rev growth (%) 24% -3% 18% 21% 31%
EBITDA (INR Cr) 79 78 112 172 276
Adjusted PAT (INR Cr) 60 66 81 115 193
P/E (x) 113.3 103.2 84.2 59.2 35.4
Price/BV(x) 9.1 9.5 8.5 7.2 5.5
EV/EBITDA (x) 85 87 60 39 24
RoACE (%) 7.7 7.8 12.0 17.8 24.5
Date: July 2, 2021
RoAE (%) 9.3 9.6 10.7 13.2 17.7

Edelweiss Wealth Research 13

 Praj Industries Ltd. Financials

Income statement (INR crs) Balance sheet (INR crs)

Year to March FY19 FY20 FY21 FY22E FY23E As on 31st March FY19 FY20 FY21 FY22E FY23E
Income from operations 1141 1102 1305 1573 2061 Equity share capital 37 37 37 37 37
Direct costs 610 552 736 787 1031 Preference Share Capital 0 0 0 0 0
Power & Fuel 6 6 0 6 6 Reserves & surplus 708 683 766 916 1,194
Employee costs 161 164 172 236 309 Shareholders funds 745 719 803 953 1,231
Other expenses 452 472 456 614 755 Secured loans 0 0 0 0 0
Total operating expenses 1062 1024 1192 1401 1785 Unsecured loans 0 0 0 0 0
EBITDA 79 78 112 172 276 Borrowings 0 0 0 0 0
Depreciation and amortisation 23 22 22 21 23 Minority interest 0 0 0 0 0
EBIT 56 56 90 151 253 Sources of funds 745 719 803 953 1,231
Interest expenses 1 3 -4 4 5 Gross block 528 566 583 627 659
Other income 32 30 19 0 0 Depreciation 238 273 300 322 338
Profit before tax 88 83 113 147 248 Net block 290 294 284 305 320
Provision for tax 20 13 32 32 55 Capital work in progress 2 2 1 1 1
Core profit 68 70 81 115 193 Total fixed assets 292 296 284 305 321
Extraordinary items -8 -4 0 0 0 Unrealised profit 0 0 0 0 0
Profit after tax 60 66 81 115 193 Investments 211 164 369 350 350
Adjusted net profit 60 66 81 115 193 Inventories 126 111 129 236 309
Sundry debtors 305 330 453 488 639
Equity shares outstanding (mn) 18 18 18 18 18
Cash and equivalents 88 49 132 157 206
EPS (INR) basic 3 4 4 6 11
Loans and advances 175 166 226 283 371
Diluted shares (Cr) 18 18 18 18 18
Other current assets 0 0 0 0 0
EPS (INR) fully diluted 3 4 4 6 11
Total current assets 695 656 940 1,164 1,525
Dividend per share 1 3 0 0 0
Sundry creditors and others 473 402 739 850 950
Dividend payout (%) 13 70 0 0 0
Provisions 13 7 41 45 50
Total CL & provisions 485 409 780 895 1,000
Common size metrics- as % of net revenues
Net current assets 210 247 160 269 525
Year to March FY19 FY20 FY21 FY22E FY23E
Net Deferred tax 9 18 0 55 65
Operating expenses 93.0 92.9 91.4 89.0 86.6
Misc expenditure 23 -5 -11 -27 -30
Depreciation 2.0 2.0 1.7 1.3 1.1
Uses of funds 745 719 803 953 1,231
Interest expenditure 0.1 0.3 (0.3) 0.3 0.2
Book value per share (INR) 41 39 44 52 67
EBITDA margins 7.0 7.1 8.6 11.0 13.4
Net profit margins 5.3 6.0 6.2 7.3 9.4
Cash flow statement (INR crs)
Year to March FY19 FY20 FY21 FY22E FY23E
Growth metrics (%) Net profit 76 75 81 115 193
Year to March FY19 FY20 FY21 FY22E FY23E Add: Depreciation 23 22 22 21 23
Revenues 24.5 (3.4) 18.4 20.6 31.0 Add: Misc expenses written off -12 28 6 16 3
EBITDA 54.0 (1.6) 43.9 53.5 60.1 Add: Deferred tax -5 -9 18 -55 -10
PBT 65.9 (5.5) 36.1 30.3 68.2 Gross cash flow 82 116 128 97 209
Net profit 72.8 3.2 15.1 42.4 67.2 Less: Changes in W. C. -13 76 -170 84 207
EPS 73.5 9.8 22.5 42.4 67.2 Operating cash flow 95 40 297 13 2
Less: Capex 14 26 10 42 38
Free cash flow 81 14 287 -29 -36

Ratios
Year to March FY19 FY20 FY21 FY22E FY23E
ROAE (%) 9.3 9.6 10.7 13.2 17.7
ROACE (%) 7.7 7.8 12.0 17.8 24.5
Debtors (days) 98 109 109 109 109
Current ratio 1.4 1.6 1.2 1.3 1.5
Debt/Equity 0.0 0.0 0.0 0.0 0.0
Inventory (days) 40 37 37 37 37
Payable (days) 151 133 133 133 133
Cash conversion cycle (days) -13 13 13 13 13
Debt/EBITDA 0.0 0.0 0.0 0.0 0.0
Adjusted debt/Equity -0.1 -0.1 -0.2 -0.2 -0.2

Valuation parameters
Year to March FY19 FY20 FY21 FY22E FY23E
Diluted EPS (INR) 3.3 3.6 4.4 6.3 10.5
Y-o-Y growth (%) 73.5 9.8 22.5 42.4 67.2
CEPS (INR) 5 5 6 7 12
Diluted P/E (x) 113.3 103.2 84.2 59.2 35.4
Price/BV(x) 9.1 9.5 8.5 7.2 5.5
EV/Sales (x) 5.9 6.2 5.1 4.2 3.2
EV/EBITDA (x) 84.7 86.9 59.6 38.7 24.0
Diluted shares O/S 18.3 18.3 18.3 18.3 18.3
Basic EPS 3.3 3.6 4.4 6.3 10.5
Basic PE (x) 113.3 103.2 84.2 59.2 35.4
Dividend yield (%) 0.1 0.7 0.0 0.0 0.0

Edelweiss Wealth Research 14

 Edelweiss Broking Limited, 1st Floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla(W)
Board: (91-22) 4272 2200

Vinay Khattar
Head Research
VINAY Digitally signed by VINAY KHATTAR
DN: c=IN, o=Personal, postalCode=400072,
st=MAHARASHTRA,

KHATTAR
serialNumber=cd5737057831c416d2a5f7064cb693183887e7f
f342c50bd877e00c00e2e82a1, cn=VINAY KHATTAR
Date: 2021.07.06 11:00:49 +05'30'

vinay.khattar@edelweissfin.com

Rating Expected to

Buy appreciate more than 15% over a 12-month period

Hold appreciate between 5-15% over a 12-month period

Reduce Return below 5% over a 12-month period

Edelweiss Wealth Research 15

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Edelweiss Wealth Research 17