Oil & Gas: The electric avalanche and ICEs

India Strategy |

| February 2018

Thematic

Get on track please !

Oil & Gas

FY40

FY30

FY20

FY10

The Electric Avalanche

Swarnendu Bhushan

(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529

Abhinil Dahiwale

(Abhinil.Dahiwale@motilaloswal.com); +91 22 3980 4309

Still sometime away

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Oil & Gas

Contents

The electric avalanche and ICEs ............................................................................................ 3

Back to square one?.............................................................................................................. 4

Is the comeback real? ........................................................................................................... 7

India’s electric drive ............................................................................................................ 10

Make hay while the sun shines (1/2) – OMCs ..................................................................... 13

Make hay while the sun shines (2/2) – CGDs ...................................................................... 21

Apendix I............................................................................................................................. 24

Apendix II ........................................................................................................................... 26

Apendix III .......................................................................................................................... 27

IOCL: Financials and Valuations .......................................................................................... 28

IGL: Financials and Valuations............................................................................................. 30

19 February 2018

Sector Update | 19 February 2018

Oil & Gas

The electric avalanche and ICEs

Not a medium-term shock for the OMCs/CGDs



After being sent into oblivion almost a century ago, electric vehicles (EVs) finally seem

more a reality than fiction.

China, Norway and a few other countries have taken meaningful strides in raising the

penetration of EVs. Some other countries have committed to reducing the usage of

fossil auto fuels in the coming years.



This report looks at various aspects of EVs and the impact on the Indian Oil & Gas

industry, going forward.

Necessity is the mother of invention!



But challenges remain



Transportation accounts for as much as 30% of total greenhouse gases

(GHGs)

in the developed countries; hence the emphasis on greener options. While the

share is just 6.5% in India, urban areas are worse off. Transportation accounts

for 83% of CO, 36% of NOx, 20% of PM2.5 and 9% of PM10 in Delhi.

Similarly, transportation accounts for just 7.5% of GHGs in China. However,

urban areas have been battling severe pollution, and EVs with zero emissions,

offer the best alternative.

China has taken giant strides

in the penetration of EVs, with almost 1m BEVs

(battery EVs) and PHEVs (plug-in hybrid EVs) plying, largely led by government

subsidies. In other developments, France and Britain have already banned the

sale of petrol and diesel cars by 2040 while a few others including Norway and

Germany are mulling similar bans.

Cost is the foremost:

The cost of

Tata Tigor’s

electric variant appears to be

twice that of its petrol/diesel variant. Battery is the biggest contributor to the

difference, despite 80% drop in battery prices in the last six years. Additionally,

the batteries are based on lithium, whose reserves are limited.

Range anxiety is another:

Despite 56% increase in the past six years, a median

BEV has a range of ~180km/charge versus ~500km/tank-full for a fossil-fuel car.

Lack of charging infrastructure:

There’s a classic chicken and egg situation, with

not many companies coming forward due to lack of demand.

Considering the large subsidy required in ensuring significant penetration of EVs

in the current scenario, India still appears far away from the ‘wired’ drive.

In the meantime, petrol and diesel sales are expected to continue growing at

10% and 5%, respectively (drivers explained in our report,

The Three

Musketeers,

January 2017).

We reiterate our positive stand on the oil marketing

companies (OMCs). Our preference is IOCL, with a target of INR513.

CNG sales are also unlikely to be significantly impacted by EVs in the next

decade or so. On the contrary, faster rollout of new geographical areas (GAs)

could provide the much-needed reason for long-term volume growth for the

companies. IGL remains our top pick with a target price of INR416.



Make hay while the sun shines



19 February 2018

Oil & Gas

Back to square one?

After being in oblivion for almost a century, EVs make a comeback

Initial sparks flew in the late nineteenth century



Gasoline cars muffled both

EVs and steam cars by the

early twentieth century



The first electric cars were made by French and English inventors in the 2

half

of the nineteenth century. In the US, the first EV was made by William Morrison

in 1890. His 6-seater car could achieve a maximum speed of 14mph.

In fact, there were three competing fuel sources for cars in the early twentieth

century: steam, electricity and gasoline. Steam cars required long start-up time

and had limited range. Gasoline cars required manual gears and hand-cranking.

They were noisy and the exhaust was unpleasant.

EVs did not have any of those problems. Despite being expensive, the share of

EVs in the stock of cars was ~33% in 1900s. Ferdinand Porsche came up with its

EV, P1 in 1898. It also launched the first hybrid EV as well as gasoline cars.

Henry Ford’s first mass-produced gasoline car, Model T, which had a price tag

one-third of EVs, dealt the final blow to EVs. Technological advancements

helped the gasoline cars overtake the EVs in a big way.

Oil embargo and environmental concerns rev up EVs again



The 1973 oil embargo resulted in oil prices almost tripling to USD11.6/bbl within

a year. This led to fresh attempts to rev up the almost dead EV segment. The US

Congress passed the Electric and Hybrid Vehicle Research, Development and

Demonstration Act, 1976 to support EVs and hybrids. However, the internal

combustion engine (ICE) technology had advanced by leaps and bounds by then

and the EVs could not keep pace with the rising needs of the consumers.

Due to environmental concerns, California introduced a zero emission vehicle

(ZEV) requirement in 1990, mandating 2% of the cars manufactured for sale in

California to be ZEVs. The percentage was to rise to 5% in 2001 and to 10% in

2003.

GM introduced its first electric car, EV1. However, manufacturers were not

interested in investing in new technologies. They filed a lawsuit against the

California Air Resources Board and the ZEV mandate was subsequently dropped.

While the American automobile manufacturers broadly shunned research on

EVs, the Japanese car manufacturers sensed a turning point. Toyota introduced

its first mass-produced HEV, Prius in 1997. The worldwide launch was in 2000.

A little-known startup, Tesla Motors received funding of USD465m to establish a

manufacturing facility for EVs in California. By 2010, many more models were

seen in the market – Chevy Volt, Nissan LEAF, etc.

Few recent electric moments



Battling severe pollution, countries like France and Britain have banned the sale

of petrol and diesel cars by 2040. Such moves would accelerate development of

EVs and other greener fuels.

Pension funds in particular have come under immense pressure to divest

exposure to fossil fuels. As many as 700 large investors have committed to cut

their exposure to fossil fuels in recent years.

19 February 2018

Oil & Gas



The Electric Vehicle Initiative (EVI), a multi-government policy forum formed in

2009, launched a campaign EV30@30 in 2017, which set an aspirational

collective goal of achieving 30% market share of EVs in new sales of all

passenger cars, light commercial vehicles, buses and truck by 2030.

While we have seen lot of electric moments recently, it remains to be seen how

real a threat they are to the ICEs.

Keeping aside the economics, EVs rule the roost…



EVs are superior to ICEs in

terms of emissions,

maintenance and torque-

speed characteristics



Combustion inside ICEs produces pollutants like CO2, CO, NOx, SOx, unburned

hydrocarbons and particulate matter (PM). One may use various after treatment

packages to bring down the level of these pollutants. Reports suggest that in

Delhi, vehicular pollution accounts for 83% of CO emissions, 36% of NOx

emissions, 20% of PM2.5 and 9% of PM10. In winter, the contribution to PM

rises to as much as 20-25%.

EVs have three major subsystems: electric motor propulsion, energy source and

auxiliary units. They do not require any combustion, and hence, they are ZEVs.

Against 18,000-20,000 moving parts, EVs have hardly 18-20 moving parts. This

results in much lower maintenance cost.

Typical stop-and-go driving pattern in urban areas results in higher fuel

consumption through frequent braking. EVs and PHEVs have the ability to

convert the kinetic or potential energy into electric energy (regenerative

braking), which can be stored and reused, a feature not possible in ICEs.

Ideally, power output for vehicular applications should be constant over full

speed range. ICEs have a relatively flat torque-speed profile, and hence, multi-

gear transmission is deployed. Comparatively, EVs are much closer to the ideal

torque-speed curve. Hence, they do not require multi-gear transmission.

Exhibit 2: Traction for EVs

Exhibit 3: How ICEs imitate

Exhibit 1: Ideal characteristics

Source: Modern, Electric, Hybrid Electric and Fuel Cell Vehicles- Mehrdad Ehsani, Yimin Gao, Sebastien E. Gay, Ali Emadi, MOSL

19 February 2018

Oil & Gas

Exhibit 4: Multiple benefits of EVs

Source: PNGRB, MOSL

19 February 2018

Oil & Gas

Is the comeback real?

Are EVs fast and furious enough to replace ICEs this time?

Sale of EVs has been increasing at breakneck speed



Sale of new BEVs/PHEVs in 2017 is estimated to have crossed 1m globally, a

CAGR of 116% in the last decade. Even if we were to ascribe this to low base,

the sales CAGR in the last five years has been a staggering 53%!

Of the ~1m EVs sold in 2017, China alone accounted for 57.7%. Although the

share of EVs in new car sales stands at a meager 1.4% in China, we need to keep

in mind that it is the largest consumer of automobiles in the world. The total

stock of BEVs and PHEVs has crossed 1.2m in 2017.

EVs in Norway have already achieved a market share of more than 30% in 2017,

the highest in the world. However, their market share is a meager 0.6-1.4% in

larger developed countries like the US, Japan, UK, Germany, and France.

China has been very aggressive in developing enabling infrastructure. It boasts

of the largest battery manufacturing facility. It also boasts of 80%+ of all global

publicly accessible fast chargers.

Exhibit 5: Share of BEVs/PHEVs in new vehicle sales (%)

2012

2013

2014

2015

2016

Source: IEA EV Outlook, 2017, MOSL

China

Netherlands

Norway

Sweden

Global

US, Japan, UK, Germany, France- 0.6-1.5%

China, the largest automobile consumer- 1.5%

India lags far behind at 0.02%

Exhibit 6: Country-wise market share of BEVs/PHEVs in 2016 (%)

United States,

21.2

United Kingdom,

5.0

Sweden, 1.8

Norway, 6.7

Netherlands, 3.3

Korea, 0.7

Japan, 3.3

Germany, 3.3

Source: IEA EV Outlook, 2017, MOSL

France, 3.9

India, 0.1

China, 44.6

Others, 4.7

Canada, 1.5

19 February 2018

Oil & Gas

Exhibit 7: Publicly accessible slow chargers

China

60000

45000

30000

15000

2012

2013

2014

2015

2016

Source: IEA EV Outlook, 2017, MOSL

25% of slow chargers globally are in China

France

Germany

Japan

Netherlands

Norway

United Kingdom

United States

Exhibit 8: Publicly accessible fast chargers

China

100000

75000

50000

25000

2012

2013

2014

2015

2016

Source: IEA EV Outlook, 2017, MOSL

France

Germany

Japan

Netherlands

Norway

United Kingdom

United States

81% of fast chargers globally are in China

Limitations exist, but technology is evolving fast



India’s EV story is in bits and

pieces so far –

not much has been done in

the most critical

component: battery

manufacturing



Base cost of an electric car is almost 1.6-2x that of an ICE. The most expensive

component is the battery, which accounts for ~50% of the total base cost.

However, with technological advancements and mass production, the cost is

expected to decline to ~18% of the base cost by 2030.

Raw material availability for batteries itself is concentrated in a few locations

like Australia, China, Chile and Argentina. Major players like Rockwood Lithium,

SQM, FMC and Chengdu Tianqi control ~50% of global production. Demand is

likely to outweigh supply, unless new reserves are found and developed.

Range remains limited, with ICEs running ~500km per tank fill compared with

~200km/charge for an EV. Range has improved by 56% over the past six years

and is expected to rise to ~300km/charge by the end of this decade.

Speed of charging and lack of charging infrastructure is also an issue, but is

much easier to overcome, with changing technology and rising population of

EVs.

19 February 2018

Oil & Gas

Exhibit 9: Battery cost is prohibitive

Vehicle

Powertrain

Battery

ICE

Exhibit 10: But cost is expected to decline further

1,000

800

642

599

540

269

227

Battery cost (USD/kWh)

Battery cost expected to decline from

48% in 2016 to 18% by 2030

140

Source: Bloomberg New Energy Finance, MOSL

Source: IEA, McKinsey, MOSL

Till the economics improve, government needs to push the cart



Behind the wired revolution in China lies an enormous subsidy, both monetary

and non-monetary. It subsidizes as much as ~50% of the cost of an EV. Although

subsidies are being withdrawn steadily, decrease in battery cost with rising

demand and technological advancement is likely to warrant much lesser

subsidies, going forward.

Norway exempts EVs from acquisition cost (~USD11,600). BEVs are further

exempt from 25% VAT and enjoy other incentives like exemption from road

tolls. The earlier exemption from parking fees has been withdrawn in 2016,

though.

The Netherlands has a CO2-based taxation scheme. ZEVs are exempt from

registration tax while PHEVs attract much lesser taxation than conventional cars

due to lower CO2 emission.

19 February 2018

Oil & Gas

India’s electric drive

Intentions noble; concrete and focused policies required

But first, the dance of the dragon – the Chinese electric aggression



China realized the need to promote greener fuels early. In 2001, the central

government began promoting EVs through the launch of the National High Tech

R&D Program, which included 863 scientific and technological projects.

In 2006, the New Energy Vehicle promotion plan was explicitly included in the

Eleventh Five Year Plan, 2006-10.

The

first major phase

was in 2009-12, when the government launched the

Ten

Cities - Thousand Vehicles

program aimed at the sale of thousands of vehicles in

ten cities each year with the help of government subsidies. Six cities also

extended the program to include private EVs.

During the

second major phase

in 2013-15, the program was extended to all EV

purchases. Average subsidy stood at 51.1% for BEVs and 24.6% for PHEVs.

Incentives also included exemption from bidding for license plates, exemption

from tariff restrictions/tolls and incentives for installing charging points. Total

subsidy outgo is estimated to be USD4.5b/annum (link).

However, in the

third major phase,

the government has been cutting down the

subsidies during 2016-20. Our own calculation suggests that the government

would need to provide for a subsidy of USD3.1-3.5b per year during 2017-20

only on BEV cars. Then there would be additional subsidies on two/three

wheelers, buses and charging infrastructure.

Exhibit 12: Subsidies for buses in China in 2013-15

Subsidies for buses

PHEVs

Bus length (m)

>10

6-8

8-10

>10

Subsidies (CNY

'000) 2013-15

250

300

400

500

500 in 2013

450 in 2014

400 in 2015

Source: Oak Ridge National Laboratory, 2017, MOSL

Exhibit 11: Subsidies for cars in China, 2015 (% of vehicle

cost)

PHEVs

68.6

33.2 28.1

12.5

BEVs

51.8 56.6 58.9 58.9 53.0 57.9

EVs

Fuel cell EVs

Source: Oak Ridge National Laboratory, 2017, MOSL

Exhibit 13: Subsidy outgo is substantial in China

Subsidy in year (CNY '000)

Type of car

Electric range

2016

2017-18

2019-20

PHEVs

>50km

100-150km

EVs

150-200km

>250km

Fuel cell EVs

200

160

Average subsidy per car

Number of BEVs sold (‘000)

257

577^

1,298^

Total subsidy outgo (USDb) per year

1.7

3.1

3.5

^average in both calendar years assuming 50% YoY growth each year

Source: Oak Ridge National Laboratory, 2017, MOSL

19 February 2018

Oil & Gas

India – a late starter



The government of India approved the National Mission on Electric Mobility in

2011, as a part of which it published the National Electric Mobility Mission Plan,

2020 in 2013. The plan set up several sub-groups and task forces to chart a

roadmap for EVs/HEVs in India.

As part of the mission, Department of Heavy Industries (DHI) came up with

Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India

(FAME).

Phase-I of FAME proposed investments of INR8b altogether by the government

in FY16 and FY17, INR5b being on demand incentives. The demand incentives

were restricted to certain cities. For four-wheelers, subsidy is INR76,000-

124,000 per vehicle for BEVs less than 4 meters.

Phase-I was further extended by six months post FY17. It was further extended

to FY18-end. For BEV buses, incentives of 60% or INR8.5m, whichever is lower

have been provided, with mandatory localization of 15-35%.

We further estimate that if we were to use all INR5b of the demand incentive

for procuring buses, it would result in the procurement of only 588 buses,

considering that subsidy is INR8.5m for each bus.

2017-

GoI

extends Phase-

II by six

months twice,

validity till

FY18-end

Jan 2018-

clarity on

Phase-II

2015-

GoI

launches FAME,

Phase-I- demand

incentives of

INR5b in total in

FY16 & FY17

Exhibit 14: Important milestones for electric mobility in India

2013-

Publishes

National Electric

Mobility Mission,

2020- sets up

committees to

chart a roadmap

to achieve total

sales of 6-7mn

xEVs by 2020

Lack of long-term clear

direction from the

government has impeded

investments

2011-

GoI

aproves

National

Mission on

Electric

Mobility

Source: Department of Heavy Industries, MOSL

Exhibit 15: Subsidies envisaged in FAME, Phase-I

Total incentives budgeted in

three years is INR5b, which

could have bought just ~588

buses

2W-scooter

2W-motorcycle

Buses

76-124

51-61

17-22

23-29

60% of bus cost or INR8.5mn whichever is lower

Source: Department of Heavy Industries, MOSL

India’s baby steps – too small, too late and still sauntering!



On the one hand, the government wants electrification. On the other, the

country is planning to increase refining capacity by 50% in another seven years.

Niti Aayog has also talked about methanol substitution for transportation fuels

to bring down the oil import bill.

19 February 2018

Oil & Gas



The government also leapfrogged by skipping BS-V altogether and moving from

BS-IV to BS-IV, that too only within three years of launch of BS-IV.

While Phase-I of FAME has been extended twice in the absence of Phase-II, the

subsidy envisaged is much lower than what could make a meaningful impact.

Our estimate is that the demand-side incentive of INR5b allocated in FAME-I

could just suffice for 588 EV buses.

Committing to an entirely different technology (R&D and investments in

capacities) requires a clear long-term strategy. In the absence of the same, we

have not seen much enthusiasm from industry participants so far – both from

automobile manufacturers and component manufacturers.

India’s electric story has primarily been in bits and pieces (see

Appendix 1).

We lack any reserve of Lithium, the primary ingredient for batteries. No serious

research also appears ongoing in the development of batteries, the most costly

part of an EV currently.

Any valuation metric implies certain terminal growth. If EVs become a game

changer, then the terminal growth assumption of the oil and gas players would

come down, which would impact their valuation metric drastically.

However, our study of a few global players does not suggest

any

downward

course so far. In fact, the stocks show a re-rating due to increase in oil prices and

refining margins.

Exhibit 17: Shell’s EV/EBITDA still above long term average

Taking a cue from global valuations



Exhibit 16: Exxon Mobil’s EV/EBITDA still above long term

average

20.0

15.0

10.0

5.0

0.0

Source: Bloomberg, MOSL

Exhibit 18: No impact on Valero’s EV/EBITDA

20.0

15.0

10.0

5.0

0.0

Exhibit 19: No impact on Petro China’s EV/EBITDA

10.0

8.0

6.0

4.0

2.0

0.0

Source: Bloomberg, MOSL

19 February 2018

Oil & Gas

Make hay while the sun shines (1/2) – OMCs

OMCs remain invincible; pecking order: IOCL > BPCL > HPCL



EVs are not a direct threat to ICEs in the medium term in India; we expect

consumption growth of 10% for MS and 5% for HSD over FY17-20.

Auto fuel marketing margins have improved post the lull in 2017-end; no major threat

is seen from private players.

Continued lower utilization of Latin American refiners should support GRMs in the

near future; expect SG GRM of USD6/bbl over FY19-20.

OMCs are trading at par with global peers but offer much higher dividend yield.

IOCL remains our top pick, with free cash flow generation of ~20% of current market

cap during FY18-20.



Auto-fuel consumption to remain strong; OMCs – key beneficiaries



We believe EVs are not a threat to ICEs in India in the near future. We expect

strong auto-fuel consumption growth to continue.

In FY17, road construction activity registered 35% growth, with highest ever

construction rate of 23km/day. The government awarded 16,270km (up 56%)

and constructed 8,230km (up 37%) in FY17. It has set steep targets for FY18 to

award 25,000km and construct 15,000km. Allocation for road capital

expenditure has been increased in FY19 budget to INR1.33t (+11% YoY).

With improving road connectivity, rising urbanization and expansion of urban

centers, we expect strong auto-fuel demand to continue. In 9MFY18, MS

consumption grew 8.8% and HSD consumption grew 5.7%. In FY16/17, MS

consumption grew 14.5%/6% and HSD consumption grew 15%/7%.

Rising auto-fuel consumption is positive for OMCs and would aid marketing

EBITDA.

Exhibit 20: Road construction at all-time high

Construction (Km)

15.7

11.7

12.1

Construction (Km/day)

16.5

22.5

13.7

5,013

FY12

5,732

FY13

4,260

FY14

4,410

FY15

6,029

FY16

8,230

FY17

Source: MORTH, MOSL

19 February 2018

Oil & Gas

Exhibit 21: Expect MS/HSD to grow at 10%/5% over FY18-20

Consumption growth (YoY %)

11.4

7.5

1.5

(1.0)

FY12

FY13

FY14

FY15

FY16

FY17

FY18 YTD

Source: PPAC, MOSL

HSD

14.5

7.8

5.0

6.7

8.8

1.8

8.8

5.7

5.6

Competition has remained at bay



Despite more than three years of deregulation, we have not seen significant

competition so far. Essar Oil appears to be having 4,175 retail outlets while RIL

has about 1,300, together less than 10% of retail outlets of the OMCs.

OMCs own 92% of terminals/depots, 87% of ATF stations and 91% of retail

outlets. They also own almost all product pipelines. Absence of a large number

of terminals and product pipelines has been the major bottleneck for the non-

OMCs.

However, quality and quantity have remained a concern with respect to the

outlets of the OMCs. Aggressive competition with a reliable brand could have an

adverse impact on the market share of the OMCs.

Exhibit 22: OMCs dominate marketing infrastructure

IOCL

BPCL

HPCL

Terminals/depots (#)

127

ATF stations (#)

106

Retail Outlets (#)

26,663 14,255 14,783

LPG distributors (#)

9911

4868

4690

LPG bottling plants (#)

LPG active consumers (mn) 103

RIL

1,300

Essar

4,175

Shell

Others

Total

312

224

61381

100

Source: PPAC, MOSL

Exhibit 23: Market share in petrol (%)

IOCL

2.2

25.8

28.1

43.9

FY14

2.0

26.2

28.0

43.8

FY15

BPCL

HPCL

3.4

25.7

27.5

43.4

FY16

non-OMCs

5.1

25.2

27.0

42.7

FY17

6.6

24.8

26.8

41.8

9MFY18

Exhibit 24: Market share in diesel (%)

IOCL

0.2

23.4

26.8

1.0

22.8

26.5

BPCL

HPCL

3.5

22.6

25.9

non-OMCs

5.9

22.3

25.1

46.6

FY17

8.1

21.9

24.8

45.3

9MFY18

49.6

49.7

48.0

FY16

FY14

FY15

Source: Company, MOSL

19 February 2018

Oil & Gas

Marketing margins appear to be recovering



Marketing margins of auto fuels declined in 2017-end, as the OMCs did not pass

on the rising oil prices to end consumers. However, since early 2018, they have

been taking price hikes consistently to increase their margins. We estimate that

4QFY18YTD gross marketing margins (including pipeline freight) on petrol and

diesel stand at INR1.27/liter and INR2.02/liter respectively, compared to

INR2.8/liter and INR2.5/liter in FY17.

However, considering the upcoming assembly and general elections, we build in

gross marketing margin per liter of INR1.6/INR2.5/INR2.75 in FY18/19/20 on

petrol and INR2.0/INR2.5/INR2.75 in FY18/19/20 on diesel.

Exhibit 25: Marketing margins have improved in 4QFY18YTD (INR/liter)

3.5

2.8

2.0

1.3

0.5

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

4QFY17

1QFY18

2QFY18

3QFY18 4QFY18YTD

Source: Company, MOSL

Petrol

Diesel

Margins have

started recovering

after a dismal

3QFY18

Sensitivity to INR0.10/liter change in retail auto fuel margins

Exhibit 26: IOCL

FY19/20E

2.0%

1.7%

2.0%

2.7%

Exhibit 27: HPCL

FY19/20E

3.5%

3.3%

Exhibit 28: BPCL

FY19/20E

3.0%

2.4%

2.7%

EBITDA

EPS

EBITDA

EPS

EBITDA

EPS

Source: Company, MOSL

Refining margins to remain strong



We had highlighted in our report,

Latin Touch,

13 November 2017 that Latin

America and Africa, home to 12% of global refining capacity, have been

witnessing persistent low utilization in the past few years.

Both Mexico and Venezuela appear to be running at ~40% utilization. Current

utilization of ~75% in Brazil and Argentina is also at multi-year lows.

Despite capacity additions going forward, this persistent underutilization in the

region is expected to keep global refining margins strong.

Over FY14-17, OMCs have improved their MS/HSD yields, which has resulted in

better refining performance for them. While BPCL has increased its MS/HSD

19 February 2018

Oil & Gas

yields by ~6%/4%, HPCL has increased its MS/HSD yields by 1%/5%. IOCL has

increased its MS/HSD yields by ~3% and ramp-up of its Paradip refinery is

expected to further improve its refining performance.

Exhibit 29: Increase in petrol yield (%)

20.0

18.0

16.0

14.0

12.0

10.0

FY13

FY14

FY15

FY16

FY17

Source: PNG Stat, MOSL

IOCL

BPCL

HPCL

Exhibit 30: Increase in diesel yield (%)

55.0

50.0

45.0

40.0

35.0

30.0

FY13

FY14

FY15

FY16

FY17

Source: PNG Stat, MOSL

IOCL

BPCL

HPCL

Exhibit 31: Improving core refining margins of OMCs

IOCL

BPCL

HPCL

Singapore GRM

8.6

5.7

11.0

6.7 6.8

3.9

6.0

11.4

6.1 6.3 7.0

6.1

4.8 4.2

4.2

5.1 5.9

3.9

6.9 6.0

8.5 7.7

4.9

1QFY18

8.8

6.9

8.0

5.6

7.9 7.9

6.1

7.7

3.6

3.1

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

4QFY17

2QFY18

3QFY18

*Using reported GRM for BPCL as data for core GRM is not available for few quarters Source: Company, MOSL

Sensitivity to USD1/bbl change in GRM

Exhibit 32: IOCL

FY19/20E

10.6%

8.7%

8.3%

6.9%

Exhibit 33: HPCL

FY19/20E

8.9%

6.1%

Exhibit 34: BPCL

FY19/20E

11.1%

8.9%

7.3%

EBITDA

EPS

EBITDA

EPS

EBITDA

EPS

Source: Company, MOSL

OMCs appear to have lined up INR3.3t of projects in next 7-10 years



IOCL has identified INR500b in refining, INR400b in marketing, INR300b in

petchem and the rest in pipelines and E&P in the next 6-7 years. However, we

do not expect major capex on any of these in the next 2-3 years.

19 February 2018

Oil & Gas



BPCL aims to invest INR550b in refining, INR250b in E&P and the rest on

marketing in the next few years.

HPCL plans to invest INR274b in refining, INR262b in marketing and pipelines,

and INR22b in others.

Exhibit 36: Capex for HPCL & BPCL

INR b

1,750

500

110

115

400

235

300

220

179

300

HPCL

Total

Refining

Mumbai expansion from 6.5mmtpa to 9.5mmtpa

Fuel up gradation

Vizag expansion from 8.3mmtpa to 15mmtpa

HMEL from 9mmtpa to 11.3mmtpa

Marketing & Pipeline

Palanpur-Vadodara

VVSPL Phase II (Vizag)

LPG bottling etc

Others

Renewables

R&D

Others

BPCL

Total

Refining

Kochi IREP/petchem/Euro-VI

Bina expansion to 15mmtpa

Mumbai

E&P

Marketing

Depot/terminals/Ros

INR b

558

274

208

262

159

INR b

1000

550

210

200

140

250

200

Source: Company, MOSL

Exhibit 35: Capex for IOCL

IOC

Total capex in seven years

Refining

6mmtpa @ Gujarat

5mmtpa @ Panipat

3mmtpa @ Barauni

Indmax @ Bongaigaon

Fuel up gradation

Debottlenecking etc

Marketing infrastructure

LPG cylinders/bottling plants

Terminals/Depots

Retails outlets- new and automation

Misc

Petrochem

PP @ Paradip

C2, C3, C4, C5 @ Panipat

PX/PTA expansion @ Panipat

Acrylics @ Gujarat

PX-PTA @ Paradip

MEG @ Paradip

Misc

Pipelines

Paradip-Hyderabad

Paradip-Raipur-Ranchi

Others- upgradation of existing networks, spur

lines, extensions

E&P (M&As mainly)

Miscellaneous

Source: Company, MOSL

IOCL and BPCL would generate good free cash flows



Both IOCL and BPCL have completed their major expansion plans. IOCL’s Paradip

refinery has already ramped up to ~100% for the last three months. BPCL has

ramped up its Kochi expansion in 3QFY18 itself. We expect IOCL and BPCL to

generate free cash flows of INR428b (20% of its current market cap) and INR75b

(~20% of its current market cap), respectively during FY18-20.

HPCL is embarking on its Vizag expansion project, which requires capex that is

almost half the size of its market cap. We expect negative free cash flow of

INR116b during FY18-20 at the consolidated level.

19 February 2018

Oil & Gas

Exhibit 37: Free cash flow generation for OMCs during FY18-20

300

200

100

(100)

FY18E

FY19E

FY20E

Source: Company, MOSL

205

(14)

(18)

IOCL

BPCL

HPCL

124

(85)

Global valuations suggest value for OMCs



Global peers are trading at 10x one-year forward P/E and 7x one-year forward

EV/EBITDA. Their average RoE stands at 16%. Their dividend yield stands at 3-

4%.

Compared to this, OMCs offer dividend yield of 4-6%. IOCL/BPCL/HPCL have

RoEs of 14.4%/21.8%/20.2% in FY19. IOCL is trading at 11.7x FY19E EPS and 7.1x

FY19E EBITDA, BPCL at 11.5x FY19E EPS and 9.5x FY19E EBITDA, and HPCL at

12.6x standalone FY19E EPS and 8.8x FY19E EBITDA.

Exhibit 38: Valuation of global peers

ROE (%)

FY19/

CY18

Caltex Australia Ltd

Petron Corp

Esso Thailand PCL

Thai Oil PCL

S-Oil Corp

Idemitsu Kosan Co Ltd

SK Innovation Co Ltd

Phillips 66

Marathon Petroleum Corp

Valero Energy Corp

Indian Oil Corp Ltd

Bharat Petroleum Corp Ltd

Hindustan Petroleum Corp Ltd

Reliance Industries Ltd

MRPL

Chennai Petroleum Corp Ltd

Average excluding Indian peers

Bloomberg consensus for all companies

15.8

12.4

15.3

16.4

16.0

19.3

23.7

26.1

11.3

21.9

25.4

16.5

14.2

11.9

14.6

15.9

14.5

17.5

24.2

22.6

11.4

19.1

23.4

14.2

7.9

6.5

4.7

8.4

7.5

6.0

9.4

5.8

11.1

5.9

4.9

7.0

6.5

6.3

4.4

8.0

7.3

5.8

7.8

5.5

9.8

6.2

4.7

6.8

1.0

0.9

2.0

2.5

1.9

1.7

2.9

2.5

1.9

1.8

1.3

1.7

0.9

0.8

1.8

2.3

1.8

1.5

2.6

2.2

1.7

1.6

1.1

1.5

6.7

7.4

13.4

12.4

12.1

9.1

12.3

10.1

16.6

8.6

9.1

10.4

6.4

7.1

12.3

11.3

9.1

10.7

9.9

14.5

8.5

9.1

10.1

Sector: MOSL

19.3

14.9

22.2

16.0

FY20/

CY19

18.1

15.3

18.8

14.6

EV/EBITDA

FY19/

CY18

8.1

5.7

8.1

6.2

FY20/

CY19

8.1

5.5

8.4

6.3

PBV (x)

FY19/

CY18

2.1

1.1

2.2

1.6

FY20/

CY19

1.9

1.0

1.9

1.5

FY19/

CY18

13.9

7.6

10.2

10.3

PE (x)

FY20/

CY19

13.9

7.5

10.7

10.5

19 February 2018

Oil & Gas

Exhibit 39: OMCs v/s global peers (our estimates)

Div yield (%)

IOCL

BPCL

HPCL

Global peers

5.6%

3.5%

4.8%

3-4%

ROE (%)

14.4%

21.8%

20.2%

16.5%

FY19 EV/EBITDA (x)

7.3x

9.5x

8.8x

7.0x

FY19 PE (x)

11.7x

11.5x

12.6x

10.4x

Source: Bloomberg, MOSL

IOCL remains top pick



Free cash flow generation of 20% of market cap, strong refining environment

and least vulnerability to marketing margins makes IOCL our top pick.

For IOCL, we estimate adjusted standalone EBITDA growth of 28% over FY17-20.

We expect adjusted consolidated PAT to grow by 18% during FY17-20. However,

including one-offs, we do not expect any increase during FY17-20E.

The stock is trading at 8.8x FY20E EPS and 5.8x FY20E EBITDA. We value its

refining at 6x, petchem at 5.5x and others segment at 5x, and marketing and

pipeline businesses at 7.5x next 12-months EBITDA. We further add investments

to arrive at a target price of INR513 (March 2019E). We reiterate

Buy.

Although the government has not provided adequately for subsidies on LPG and

Kerosene in the FY19 budget, we do not see major concern, as substantial

proceeds of the envisaged divestment of INR800b are expected to come from

the sector itself and any return of subsidy regime could hamper the proceeds

drastically.

Exhibit 40: Key assumptions

Y End: March 31

Exchange Rate (INR/USD)

Brent Crude (USD/bbl)

Domestic direct sales refined pdts (MMT)

YoY (%)

Reported GRM (USD/bbl)

Singapore GRM (USD/bbl)

Prem/(disc) (USD/bbl)

Refining capacity (mmt)

Refining capacity utilization (%)

Total Refinery throughput (MMT)

YoY (%)

Pipeline throughput (mmt)

YoY (%)

Marketing Margin (INR/ltr)

Blended gross marketing margin excld

inventory

Net sharing

Net sharing (%)

Cons EPS

2013

54.4

110

2.3

7.9

(6)

101%

54.7

-2%

75.7

2014

60.6

108

-1%

4.2

5.6

(1)

98%

53.1

-3%

73.3

-3%

2015

61.4

0.3

6.4

(6)

99%

53.6

75.7

2016

65.5

5.1

7.5

(2)

98%

56.7

79.8

2017

67.1

7.8

5.8

94%

65.2

15%

82.5

2018E

64.7

8.6

7.0

101%

69.8

85.5

2019E

65.5

6.0

(0)

104%

72.0

93.7

10%

2020E

65.7

6.0

(0)

104%

72.0

97.7

3.9

9.4

4.3

11.3

4.9

6.8

4.0

20.8

3.8

41.9

3.8

38.7

3.5

35.0

3.7

42.4

Source: Company, MOSL

19 February 2018

Oil & Gas

Exhibit 41: Standalone EBITDA adjusted for one-offs (INR b)

Adjusted stand EBITDA

28% increase during FY17-20

333

283

FY16

FY17

363

301

316

FY18E

FY19E

FY20E

Source: Company, MOSL

Exhibit 42: SOTP valuation (March 2019E TP)

Valuation

Refining

Marketing

Pipeline

Petrochem

Others

Total

Net debt excluding oil bonds

Standalone valuation

Value per share

Stake in Chennai Petro

Stake in Lanka IOC

Stake in Petronet

Stake in ONGC

Stake in GAIL

Stake in Oil India

Total value

EBITDA (INR b)

116.7

108.9

79.7

77.8

EV/EBITDA (x)

6.0

7.5

5.0

EV (INR b)

700.5

817.0

597.6

388.9

2,504

325.5

2,178.5

460

513

Source: Company, MOSL

19 February 2018

Oil & Gas

Make hay while the sun shines (2/2) – CGDs

CGDs likely to be re-rated soon: IGL > Gujarat Gas > MGL



EVs are not a direct threat to ICEs in the medium term in India; we expect strong

volume growth for CGDs, going forward.

PNGRB is working on bid reforms and is expected to come up with bids of ~100 cities

in the few weeks. This would provide longevity to volume growth for the sector.

IGL is best positioned to benefit from green corridors and intra-city travel. The stock is

trading at 23x FY19E EPS; reiterate Buy with a target of INR416.



Expect strong volume growth for IGL and Gujarat Gas



We believe that EVs are not a threat to ICEs in India in the near future. We

expect no threat to CNG from EVs in the medium term.

We expect 11/12% volume growth for IGL in FY19/20, led by pollution concerns,

aggregators as well as new areas. In the longer term, BS-VI implementation,

inter-city travel, green corridors and newer areas would be the main drivers of

volume growth.

Gujarat Gas is yet to ramp up its volume in the newer areas of Ahmedabad rural,

Amreli, Dahod, Dahej, Anand, and Thane. This would result in volume growth of

12%/14% during FY19/20.

Comparatively, we expect only 6%/8% volume growth in MAHGL in FY19/20.

Exhibit 43: CNG volume growth for CGDs (%)

IGL

Gujarat Gas

Mahanagar Gas

12.8

4.3

FY15

6.6

4.9

FY16

13.1

9.7

5.5

FY17

FY18E

9.5

4.0

9.7

13.2

4.0

FY19E

10.2

12.8

7.1

1.7

FY20E

Source: Company, MOSL

Exhibit 44: PNG volume growth for CGDs

30.0

20.0

10.0

0.0

-10.0

FY15

FY16

FY17

FY18E

FY19E

FY20E

3.3

(7.2)

3.4

1.6

(5.8)

18.8

6.3

15.613.4

15.7

15.414.2

11.9

11.711.2

IGL

Gujarat Gas

Mahanagar Gas

8.2

Source: Company, MOSL

19 February 2018

Oil & Gas

Bidding of new cities could re-rate the sector



Our interaction with PNGRB suggests that it could be coming up with bidding of

as many as 100 GAs in the next few weeks.

Our analysis suggests that even award of 10 cities each year for the next 10

years could result in volume CAGR of 8.5% for the next 20 years. We believe this

longevity to growth prospects would result in re-rating of the stocks

Exhibit 45: 100/10 could result in volume CAGR of 8.5% for next 20 years

Sales from existing areas

Existing GAs:

10% vol

growth for 5yrs, 5% next

5yrs and 3% henceforth

Sales from new areas

New GAs:

Peak of 0.2mmscmd

achieved in 10yrs, 3% henceforth

Source: Company, MOSL

IGL best pick, with strong volume growth and low volatility in EBITDA/scm



IGL and MAHGL, due to their high exposure to CNG segment, provide more

stable volume and EBITDA/scm, unlike GUJGA, which has ~70% exposure to the

industrial segment.

However, MAHGL has been commanding EBITDA/scm of INR8 recently. We

believe this is not sustainable. Combined with 6-7% growth, a decline in

EBITDA/scm does not result in any significant growth in EPS for the company.

Comparatively, IGL provides EPS CAGR of 12% during FY17-20. GUJGA also, due

to expected ramp-up in newer areas, is expected to see volume CAGR of 38%

during FY17-20.

Exhibit 46: EBITDA/scm of CGDs

10.0

7.5

5.0

2.5

0.0

FY15

FY16

FY17

FY18E

FY19E

FY20E

Source: Company, MOSL

5.6

5.3

5.8

3.6

5.8

6.9

3.8

5.6

IGL

Gujarat Gas

Mahanagar Gas

8.2

3.9

5.9

4.3

7.5

5.8

7.0

4.4

Reiterate Buy on IGL, with target of INR416



Indian CGDs offer 3x volume growth prospects and 2x RoE spread over long

term yield compared to their US peers. US peers trade at ~21x one-year forward

EPS.

We value IGL at 30x FY20E EPS and reiterate

Buy

with a target of INR416.

19 February 2018

Oil & Gas



Due to higher volatility, we value GUJGA at 27x FY20E EPS, and reiterate Buy

with target of INR1,014.

We value MAHGL at 22.5x due to much lower volume growth prospects and

expected decline in EBITDA/scm. We recommend buy with target of INR1,228.

Exhibit 47: Valuation of IGL IN

Standalone FY20 EPS (INR)

Target PE (x)

Standalone target price (INR)

JV valuation post 20% discount (INR)

Target price (INR)

12.5

376

416

Source: Company, MOSL

Exhibit 48: Key assumptions for IGL

Y-End: March (INR m)

Exchange Rate (Rs/US$)

Gas sales

CNG realization (INR/kg)

PNG realization (INR/scm)

Gas volumes

CNG volumes (mmscm)

PNG volumes (mmscm)

Total sales volume (mmscm)

Gas purchase volumes (mmscmd)

APM

LNG

Total

EPS

FY13

54.5

37.6

26.5

1,005

333

1,338

2.70

1.11

3.81

5.1

FY14

60.6

42.0

30.1

1,028

356

1,384

2.87

1.05

3.92

5.1

FY15

60.0

37.3

31.7

1,072

330

1,402

3.24

0.73

3.97

6.3

FY16

65.4

36.9

28.5

1,125

342

1,466

3.38

0.77

4.15

6.0

FY17

67.0

35.4

22.2

1,269

406

1,675

3.94

0.80

4.74

8.8

FY18E

64.7

37.2

22.2

1,435

469

1,905

4.59

0.80

5.39

9.4

FY19E

65.5

37.8

22.4

1,574

543

2,118

5.12

0.88

6.00

11.1

FY20E

65.7

38.0

22.7

1,734

627

2,362

5.84

0.85

6.69

12.5

Source: Company, MOSL

Exhibit 49: Relative valuation of CGDs

PE (x)

FY18

IGL

GUJGA

MAHGL

31.0

40.9

17.4

FY19

26.5

25.6

18.1

FY20

23.4

19.9

17.9

FY18

18.4

16.0

10.2

EV/EBITDA (x)

FY19

15.5

12.7

10.3

FY20

13.6

10.6

9.9

FY18

20.8

16.1

28.0

ROE (%)

FY19

20.8

22.0

24.4

FY20

20.2

23.5

22.5

FY18

19.7

15.5

27.8

ROCE (%)

FY19

19.8

19.6

24.2

FY20

19.3

23.1

22.4

Source: Company, MOSL

19 February 2018

Oil & Gas

Apendix I

Commentary on EVs from few industry leaders

Dr Kirit Parikh, former member, Planning Commission

“For India and the world, transition to EV is inescapable. Reducing battery weight

and cost and creating charging or swapping infrastructure are the main challenges.

We can begin with bus fleets, which can be charged at their station, and two-

wheelers, whose small-sized batteries can be swapped easily.”

Mr Rajeev Mathur, Managing Director - Mahanagar Gas

“EV is a good step in environment protection. There are of course, challenges on the

front of costs associated, infrastructure availability and improvement required in

charging time for battery. Also, EVs will displace the pollution from one point to

another, if the additional electricity generation required is coal based. With

relatively less filling/ queuing time required, already well developed infrastructure in

cities like Mumbai, Delhi and significant cost advantage over liquid fuels, CNG is

contributing significantly towards air quality improvement. Going forward, both

CNG and EV can co-exist, probably reducing the share of diesel in the entire

transport system.”

Mr Sudhakar Rao, Oil and gas consultant

The basic need for EVs to replace the conventional Hydrocarbon based vehicles

using Petrol/HSD/Natural Gas etc. has come due to three areas:

1. Energy Security: The dependence of imported Crude oils/LNG and whether we

should in the long run rely on such sources or find alternative sources of energy

which are cheaper and efficient.

2. Climate Change: With increased pollution coming out of traditional sources of

fuel and the effect on the general health of the population there is demand to

reduce Sulphur/NOX/CO2 emissions.

3. Increased availability of Electric Power thru alternate sources of energy and

better management of the power grid.

The advent of electrical vehicles in some of the Western countries has given impetus

to developing countries like India to look into the emerging alternative for

conventional fuels. However, India’s energy needs are growing and will continue to

grow till the basic and secondary needs of energy are met which probably take

another 15 to 20 years. In my opinion till such time the various sources of energy

need to coexist with all sources contributing to the needs of the society. The

electrical vehicles would at the most complement the existing vehicle population to

the extent of incremental demands. I expect that we will see a trickle of electrical

vehicles in India by 2022 and may reach a sizable number by 2030.

The issues and concerns regarding the introduction of Electrical Vehicles are:



Vehicle Cost



Arrangement for efficient charging. A whole new set up must be made where

vehicles can be charged with parking arrangements

19 February 2018

Oil & Gas

It is estimated that for charging about 5 million vehicles an additional capacity of

5000 MW would be needed which can be met by the present plans for power

generation.



The climate change and pollution cost of the power generation thru thermal

means like coal and fossil fuels shall be less than the pollution contributed by

the vehicles running on oil/gas.

As of now there are no established and fool proof methods of disposing the used

batteries. The harmful effects of metals and toxic materials of the used batteries

need highly sophisticated disposal facilities and should not affect the environment

or ground water.



Mr Vinod Papal, Head CGD, Ratnagiri, Unison Enviro

Future will be solar energy, electrical energy and natural gas. Movement of electrical

vehicles will begin from metro cities for two reasons:

1. Considering high capital cost, it is more suitable for public transport cars, where

utilization is high in metro cities. EVs are more suitable for taxi application

rather than private ownership.

2. It will bring down noise/air pollution in cities. It is the most compelling reason,

besides cost of travel.

CNG vehicles will gradually replace petrol cars in small towns. Small towns cannot

afford high capital cost of EV. LNG trucks will be more popular than diesel trucks,

once LNG infrastructure is in place in India. Already, it is hugely popular in China.

Cheaper electrical energy derived from solar energy will make electrical energy the

most efficient. Natural gas and solar energy will also be used as direct source of

heating. Gas-based power plants will augment electrical production from solar

energy plants. Gas-based plants can sustain frequent start-stop operation, unlike

coal-based plants. The future is solar energy, electrical energy and natural gas.

Vipin Chittoda, ex-MD, Mahanagar Gas

“EVs are getting a good push from environmental perspective aided by government

initiatives and technological improvements. It would start to have an impact on

urban passenger (with in city) segment- autos, taxis and buses after around next

five- seven years. Two wheelers with not so high incremental cost and small battery

size giving ease of managing are expected to get a larger penetration in the next 4-

7 year. One may expect some erosion in consumption of petroleum products/CNG in

these segments. However, light and heavy duty vehicles are not likely to witness any

significant impact in next 5-10 years due to prohibitive cost of batteries.”

19 February 2018

Oil & Gas

Apendix II

India’s EV story so far – still in nascent phase

Automobile manufacturers have stayed away so far



India’s EV story is yet to

start full throttle, but offers

immense potential for

alternative investment

funds



Reva/Mahindra Electric Mobility:

Reva Electric Car Company (RECC) was

founded in 1994 as a JV between Maini Group and Amerigon Electric Vehicle

Technology, USA. It launched India’s first EV, Reva in 2001. It entered into

collaboration with General Motors in 2009 to develop affordable EVs for the

Indian market. However, post-acquisition of 55.2% stake in RECC by Mahindra &

Mahindra in 2010, GM walked out of the collaboration. The company has been

renamed as Mahindra Electric Mobility Limited and has launched a few more

EVs since then: e20plus, eVerito, eSupro, and eAlfa (3W). However, sales are not

that impressive.

Tata Motors:

Tata Motors has launched Tata Tigor. It has won a tender to

supply 10,000 EVs to Energy Efficiency Services Limited (EESL) and has delivered

the first batch of 250 vehicles in 2017. It is also expected to launch more EVs at

the upcoming Auto Expo 2018.

2W/3W:

Much larger forays have been attempted in this category. More than

0.4m electric 2W are plying. However, most are low speed EVs (<25km/hour),

which do not require registration/licenses. Additionally, most use lead batteries

to keep cost low. Apart from larger players like Hero Electric and TVS, there are

several new comers like Ather Energy, Tork Motors, Lohia Auto, Yo Bykes, and

BSA Motors. Low-speed e-rickshaws are also quite popular in places like Delhi.

Among the few companies that have launched electric autos are Volta Motors,

Kinetic Green, Gayam Motors, Mahindra Electric, Ampere Vehicles, Go Green,

and OK Play.

Bicycles:

Few companies like Ampere Vehicles, Hulikkal Electro, BSA Motors, E

Bike and Electrotherm are also working on electric bicycles.

Service providers:

Lithium Technologies has launched fully electric cab service

for corporates in Bangalore. Bhagirathi Travel Services also offers electric cab

services.

19 February 2018

Oil & Gas

Apendix III

List of models covered for subsidies under FAME

Manufacturer

Ajanta

Manufacturing

Model Name

J-50 PLUS

V60

Ampere-V48

Ampere REO

AVON ESCOOT

207

AVON E MATE

AVON E-STAR

Breeze lite

Electrowheelz

WIND

Incentiv

Vehicle

e (INR,

Type

'000)

7.5

9.4

7.5

9.4

7.5

9.4

7.5

9.4

124

Okinawa Autotech

Shema E-vehicle & Solar

Tata Motors

Mahindra Reva Electric Vehicles

Mahindra & Mahindra

Manufacturer

Kalinga Ventures India

Model Name

Vehicle Incentive

Type (INR, '000)

Unknown

37.5

7.5

138

187

124

138

124

9.4

7.5

9.4

7.5

124

7.5

Ampere Vehicles

VIDHYUT-P1

VIDHYUT-P3

Kinetic SAFAR

Champ

Kinetic Green Energy & Power Solutions

Kinetic SAFAR

Superb

OMA STAR

OMA STAR DX

GENIUS

OMA STAR

E-VERITO

Mahindra e-Supro

Cargo Van

Mahindra E-Supro

e-VERITO D2

e-VERITO D4

e-VERITO D6

E2O T2 - 48V Li-on

Winston 450 Amp

E2O T1 -72V Li-ion

ATL 550 Amp

E2O T6 - 48V Li -ion

CALB 450 AMP

e2o Plus P4

e2o Plus P2

e2o Plus P6

e2o Plus P8

Maruti Ciaz Diesel

SHVS Std.

MARUTI ERTIGA LDI

SHVS

RIDGE

RIDGE 30

PRAISE

FLY

TATA TIGOR EV

TATA TIGOR EV - XM

TATA TIGOR EV - XE

TATA TIGOR EV - XT

TOYOTA CAMRY

HYBRID

Elektrika 48

Sport 63

STORM ZX

STORM ZX Li

SPORT 63 LI

Lithino Li

Avon Cycles

Lohia Auto Industries

Chris Motors

Yo Electron ER

Yo Xplor

Yo Spark

Yo Exl ER

Electrotherm (India)

ET Uvraj

ET LOADER

YO EDGE

Envee Wheels Pvt

Surprise

Maxi

Zion

Optima Plus

E Sprint

Photon

Cruz

Hero Wave

Hero Wave DX -

Extra Mile

OPTIMA DX

NYX

OPTIMA DX LI

Maxi LI

NYX-LI

OPTIMA BX LI

Cruz LI

PHOTON LI

FLASH

FLASH LI

PHOTON 72 V.

OPTIMA PLUS LI

NEO

Maruti Suzuki India

Hero Electric

Vehicles

Toyota Kirloskar Motor

Tunwal E-vehicle India

Jayem Automotive

19 February 2018

Oil & Gas

IOCL: Financials and Valuations

Consolidated - Income Statement

Y/E March

Total Income from Operations

Change (%)

Raw Materials

Other Operating Costs

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Total Tax

Tax Rate (%)

Minority Interest

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

FY13

4,607,497

13.1

4,146,106

334,015

4,480,120

97.2

127,377

2.8

56,915

70,462

70,835

45,416

45,042

8,770

19.5

-8,217

44,490

-62.7

1.0

FY14

4,872,595

5.8

4,328,076

384,808

4,712,884

96.7

159,711

3.3

63,600

96,111

59,079

45,278

82,310

17,468

99,778

30,113

30.2

-1,190

70,856

53,388

20.0

1.1

FY15

4,483,152

-8.0

3,991,213

398,514

4,389,727

97.9

93,424

2.1

52,190

41,234

41,746

53,975

53,463

16,681

70,143

21,426

30.5

-402

49,120

32,439

-39.2

0.7

FY16

3,460,447

-22.8

2,850,235

375,783

3,226,019

93.2

234,429

6.8

56,984

177,445

34,690

21,865

164,620

13,643

178,263

56,584

31.7

1,454

120,225

98,550

203.8

2.8

FY17

3,553,101

2.7

2,751,190

461,779

3,212,969

90.4

340,132

9.6

68,486

271,646

37,213

38,724

273,157

75,704

27.7

-1,042

198,495

101.4

5.6

FY18E

4,138,823

16.5

3,366,863

425,231

3,792,094

91.6

346,729

8.4

75,207

271,522

30,964

39,731

280,289

28,081

308,370

106,752

34.6

201,617

183,258

-7.7

4.4

(INR Million)

FY19E

4,758,891

15.0

4,043,012

384,084

4,427,096

93.0

331,794

7.0

80,508

251,287

24,860

24,184

250,611

84,567

33.7

166,044

-9.4

3.5

FY20E

5,191,472

9.1

4,411,444

400,080

4,811,524

92.7

379,948

7.3

83,647

296,301

17,814

25,063

303,549

102,399

33.7

201,150

21.1

3.9

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Total Loans

Deferred Tax Liabilities

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Goodwill on Consolidation

Capital WIP

Total Investments

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Provisions

Net Current Assets

Appl. of Funds

E: MOSL Estimates

FY13

48,559

581,813

630,372

12,618

867,894

63,323

1,574,207

1,151,002

484,133

666,869

870

272,400

173,508

1,303,597

666,043

125,021

12,198

500,336

843,037

619,702

223,335

460,560

1,574,207

FY14

48,559

630,571

679,130

11,706

889,325

64,228

1,644,389

1,269,522

544,856

724,666

878

380,609

158,950

1,401,345

723,394

125,517

37,045

515,389

1,022,058

751,018

271,040

379,287

1,644,389

FY15

48,559

639,764

688,323

10,733

581,541

68,356

1,348,952

1,375,223

608,119

767,104

705

403,781

160,687

1,004,677

499,174

76,448

12,211

416,845

988,001

707,229

280,773

16,676

1,348,952

FY16

23,697

876,099

899,796

14,260

481,492

69,707

1,465,256

1,048,008

47,685

1,000,323

262,190

311,848

741,183

422,567

76,845

10,504

231,267

850,299

725,383

124,916

-109,116

1,465,256

FY17

47,393

973,568

1,020,961

19,046

588,300

68,887

1,697,194

1,271,518

111,950

1,159,568

167,784

436,872

971,376

658,843

88,992

4,098

219,443

1,038,417

815,492

222,925

-67,041

1,697,194

FY18E

47,393

1,048,723

1,096,116

19,046

510,000

68,887

1,694,049

1,494,995

187,157

1,307,838

122,807

436,872

958,752

638,165

96,587

4,555

219,443

1,132,230

909,306

222,925

-173,479

1,694,049

(INR Million)

FY19E

47,393

1,157,708

1,205,101

19,046

470,000

68,887

1,763,034

1,682,490

267,665

1,414,826

113,811

436,872

1,082,011

745,029

111,058

6,481

219,443

1,284,498

1,061,573

222,925

-202,486

1,763,034

FY20E

47,393

1,289,703

1,337,096

19,046

415,000

68,887

1,840,028

1,862,789

351,311

1,511,478

112,012

436,872

1,156,335

809,723

121,153

6,015

219,443

1,376,680

1,153,755

222,925

-220,345

1,840,028

19 February 2018

Oil & Gas

IOCL: Financials and Valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Fixed Asset Turnover (x)

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

FY13

9.4

21.4

133.0

6.2

77.3

FY14

11.3

24.7

143.3

8.7

68.1

FY15

6.8

17.9

145.2

3.4

39.3

FY16

20.8

32.8

189.9

6.1

28.7

18.0

11.4

2.0

0.6

9.6

1.6

23.7

7.2

6.4

5.0

4.0

2.9

1.5

1.0

1.1

8.2

6.4

6.1

3.8

3.0

1.4

1.6

1.0

4.7

3.1

3.3

1.0

0.6

12.4

10.3

14.7

3.3

2.4

0.9

5.1

0.2

FY17

41.9

56.3

215.4

22.3

64.1

9.0

6.7

1.7

0.7

6.9

5.9

17.8

20.7

15.0

19.9

2.8

2.1

0.9

7.3

0.1

FY18E

38.7

54.5

231.3

22.8

62.7

9.7

6.9

1.6

0.6

6.6

6.1

43.3

17.3

12.7

16.0

2.8

2.4

0.8

8.8

0.1

FY19E

35.0

52.0

254.3

10.3

34.4

10.7

7.2

1.5

0.5

6.8

2.7

20.9

14.4

11.1

14.3

2.8

2.7

0.8

10.1

0.0

FY20E

42.4

60.1

282.1

12.5

34.4

8.8

6.2

1.3

0.4

5.8

3.3

26.1

15.8

12.4

15.8

2.8

0.8

16.6

0.0

Consolidated - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

CF from Investments

Inc/(Dec) in Debt

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY13

45,043

56,915

-8,770

-4,001

89,187

11,851

101,038

-195,878

-94,841

1,746

-194,132

121,746

-34,378

9,706

97,074

3,979

8,219

12,198

FY14

99,779

63,600

-30,113

105,788

239,054

2,428

241,481

-229,606

11,876

14,549

-215,056

21,431

-41,232

18,223

-1,579

24,846

12,198

37,044

FY15

70,144

52,190

-21,425

372,225

473,133

-10,986

462,147

-94,988

367,159

-217,542

-312,529

-335,456

-16,020

171,697

-179,780

-30,162

37,044

6,882

FY16

178,263

56,984

-56,584

89,976

268,638

15,075

283,712

-171,425

112,287

65,511

-105,914

-72,377

-28,675

-73,125

-174,178

3,621

6,882

10,503

FY17

273,157

68,486

-75,704

-48,481

217,458

221

217,679

-133,324

84,355

-125,025

-258,349

106,808

-105,454

32,909

34,264

-6,406

10,503

4,097

FY18E

308,370

75,207

-106,752

106,896

383,720

-178,500

205,220

-178,500

-78,300

-108,092

-18,370

-204,762

458

4,097

4,555

(INR Million)

FY19E

250,611

80,508

-84,567

30,933

277,485

-178,500

98,985

-178,500

-40,000

-48,770

-8,289

-97,059

1,926

4,555

6,481

FY20E

303,549

83,647

-102,399

17,392

302,189

-178,500

123,689

-178,500

-55,000

-59,110

-10,046

-124,155

-466

6,481

6,015

19 February 2018

Oil & Gas

IGL: Financials and Valuations

Income Statement

Y/E March

Net Sales

Change (%)

Raw Materials Cons

Employee Costs

Other Exp (incl Stock Adj)

EBITDA

% of Net Sales

Depreciation

Interest

Other Income

Prior Period Inc./(Exp.)

PBT

Tax

Rate (%)

PAT

Adj. PAT

Change (%)

Adj. PAT

2013

33,661

33.8

21,970

567

3,551

7,572

22.5

1,867

562

138

5,282

1,741

33.0

3,541

15.3

0.11

2013

1,400

13,530

14,930

3,491

843

19,264

27,186

8,713

18,473

2,913

1,426

2014

39,174

16.4

26,815

596

3,990

7,773

19.8

2,195

441

259

5,395

1,795

33.3

3,600

1.7

0.09

2014

1,400

16,232

17,632

3,212

963

21,807

29,733

10,780

18,953

2,624

1,173

2015

36,699

-6.3

23,816

660

4,404

7,820

21.3

1,487

298

456

6,490

2,113

32.6

4,377

21.6

2016

36,858

0.4

22,761

784

5,566

7,747

21.0

1,563

299

6,385

2,194

34.4

4,191

-4.3

2017

38,148

3.5

20,837

917

6,756

9,638

25.3

1,671

652

8,607

2,896

33.6

5,711

6,156

46.9

2018E

45,638

19.6

24,158

1,055

9,675

10,751

23.6

1,828

1,091

10,014

3,405

34.0

6,609

7.4

(INR Million)

2019E

51,490

12.8

27,294

1,213

10,555

12,428

24.1

2,009

1,318

11,736

3,990

34.0

7,746

17.2

2020E

57,727

12.1

30,409

1,395

12,123

13,800

23.9

2,190

1,671

13,281

4,516

34.0

8,766

13.2

Balance Sheet

(INR Million)

2015

1,400

19,581

20,981

1,453

1,272

23,706

31,761

12,203

19,558

2,541

2,909

2016

1,400

23,764

25,164

1,650

26,815

33,752

13,560

20,192

2,669

2,592

2017

1,400

27,866

29,266

1,806

31,072

36,402

15,231

21,172

3,518

6,770

2018E

1,400

32,837

34,237

1,806

36,043

40,402

17,059

23,343

3,518

6,770

2019E

1,400

38,945

40,345

1,806

42,151

44,402

19,068

25,334

3,518

6,770

2020E

1,400

45,254

46,654

1,806

48,460

48,402

21,258

27,144

3,518

6,770

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets, L & Adv.

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Current Assets

Current Liab. & Prov.

Liabilities

Provisions

Net Current Assets

Application of Funds

E: MOSL Estimates

397

1,789

510

654

119

6,032

984

-3,548

19,264

371

2,196

2,514

493

197

5,712

1,001

-943

21,808

409

2,352

2,315

489

163

5,866

1,163

-1,302

23,706

576

2,511

4,538

655

6,847

151

1,362

26,815

517

2,014

6,086

103

682

9,580

210

-388

31,072

724

2,997

7,685

103

682

9,569

210

2,411

36,043

816

3,378

12,555

103

682

10,794

210

6,528

42,151

914

3,782

17,781

103

682

12,024

210

11,027

48,460

19 February 2018

Oil & Gas

IGL - Financials and Valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

Book Value

DPS

Payout

Valuation (x)

P/E

Cash P/E

EV / EBITDA

EV / Sales

Price / Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

RoIC

Turnover Ratios

Debtors (No. of Days)

Asset Turnover (x)

Leverage Ratio

Net Debt / Equity (x)

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Others

Direct Taxes Paid

(Inc)/Dec in Wkg. Capital

CF from Op. Activity

(Inc)/Dec in FA & CWIP

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Inv. Activity

Issue of Shares

Inc / (Dec) in Debt

Dividends Paid (incl.tax)

Interest paid

Others

CF from Fin. Activity

Inc / ( Dec) in Cash

Add: Opening Balance

Closing Balance

E: MOSL Estimates

2013

5.1

7.7

21.3

5.5

108.7

2014

5.1

8.3

25.2

5.5

106.9

2015

6.3

8.4

30.0

6.0

96.0

2016

6.0

8.2

35.9

6.0

100.2

2017

8.8

11.2

41.8

2.0

22.7

2018E

9.4

12.1

48.9

2.0

21.2

2019E

11.1

13.9

57.6

2.0

18.1

2020E

12.5

15.7

66.6

3.0

24.0

62.6

45.6

33.3

7.0

10.4

1.6

42.6

33.5

26.6

6.7

9.0

0.5

31.0

24.3

18.4

4.3

6.0

0.7

26.5

21.0

15.5

3.7

5.1

0.7

23.4

18.7

13.6

3.2

4.4

1.0

26.0

21.7

29.9

1.9

22.1

19.0

26.0

1.9

22.7

20.1

29.1

1.6

18.2

16.8

25.8

1.5

21.0

19.8

36.1

1.3

20.8

19.7

40.3

1.4

20.8

19.8

41.4

1.3

20.2

19.3

44.2

1.3

0.2

0.0

-0.2

-0.3

-0.4

2013

5,282

1,867

506

-1,530

309

6,433

-3,716

2,716

-347

-4,063

-806

-814

-561

-2,180

190

320

510

2014

5,398

2,195

283

-1,698

297

6,476

-2,493

3,982

-692

180

-3,005

-1,060

-901

-451

-2,411

1,060

510

1,569

2015

6,490

1,487

-1,770

411

6,638

-2,148

4,490

-1,805

316

-3,637

-2,072

-901

-299

-3,272

-271

2,514

2,242

2016

6,385

1,563

-1,812

-440

5,795

-2,119

3,676

317

766

-1,036

-1,453

-983

-99

-2,535

2,223

2,315

4,538

2017

8,607

1,671

-2,735

3,298

10,852

-3,499

7,353

-4,179

-304

-7,982

-1,310

-12

-1,322

1,548

4,538

6,086

2018E

10,014

1,828

-3,405

-1,201

7,237

-4,000

3,237

-4,000

-1,638

1,599

6,086

7,685

(INR Million)

2019E

2020E

11,736

13,281

2,009

2,190

-3,990

-4,516

753

728

10,508

11,683

-4,000

6,508

7,683

-4,000

-1,638

4,870

7,685

12,555

-2,457

5,227

12,555

17,781

19 February 2018

Oil & Gas

NOTES

19 February 2018

THEMATIC/STRATEGY RESEARCH GALLERY

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

> - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

Oil & Gas

*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures to make the recommendation consistent with the investment rating legend.

NOTES

Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,

Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of

which are available on

www.motilaloswal.com.

MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited

(BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of

Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf

Regulatory Enquiries against Motilal Oswal Securities Limited by SEBI:

SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and

adjudge violation of SEBI Regulations; MOSL requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice. The matter is closed and MOSL had to pay Rs. 2

lakhs towards penalty for misplacement of original POA of client.

MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in the subject company at

the end of the month immediately preceding the date of publication of the Research Report.

MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act

as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial

instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.;

however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though there

might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have

received any compensation from the subject company in the past 12 months.

In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:

managed or co-managed public offering of securities from subject company of this research report,

received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,

received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.

Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.

MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in

this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result,

the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions.

Terms & Conditions:

This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part

or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report

is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied,

is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to

buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by

virtue of their receiving this report.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the

specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement



Analyst ownership of the stock

Companies where there is interest

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or

its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have

expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject

MOSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities

and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong)

Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only

available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from

registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered

investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption

under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional

Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional

investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule

15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,

MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of

this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject

to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal

Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the

Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced

in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in

this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of

independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document

(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including

those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy,

completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the

views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.

MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform

investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this

into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and

the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or

published, copied, in whole or in part, for any purpose. This report is not directed 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, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all

jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall

be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees

to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL

or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm

Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:

na@motilaloswal.com,

Contact No.:022-30801085.

Registration details of group entities.: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MSE); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100.

Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth

management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities Products. * Motilal Oswal Real

Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products

19 February 2018