23 March 2021
Update | Sector: Metals
SAIL
SAIL
Buy
BSE SENSEX
50,051
S&P CNX
14,815
CMP: INR72
TP: INR104 (+44%)
Best play on higher steel prices
Strong FCF to drive deleveraging and higher dividend yield
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E March
2021E 2022E
Sales
695.1 809.8
EBITDA
137.7 157.8
Adj. PAT
59.6
76.6
Adj. EPS (INR)
14.4
18.5
EPS Gr. (%)
-3,167.0
28.5
BV/Sh. (INR)
110.7 124.8
RoE (%)
13.7
15.8
RoCE (%)
11.6
13.6
Payout (%)
10.5
25.9
Valuations
P/E (x)
5.0
3.9
P/BV
0.7
0.6
EV/EBITDA (x)
5.1
4.2
Div. Yield (%)
4.2
5.5
SAIL IN
4,130
298.4 / 4.1
82 / 20
2/75/122
2271
We see Steel Authority of India (SAIL) as the best play on higher steel prices as it: 1) is
backward integrated with captive iron ore, 2) has a higher operating leverage due to
high conversion cost, and 3) has a higher financial leverage. With limited capex, higher
pricing should drive significant deleveraging and boost equity value. We estimate net
debt to decline by INR232b (INR56/sh, 76% of CMP) over FY20-23E to INR305b. We
also expect higher dividend payouts going forward (implying ~5% yield), supported by
strong FCF of INR19/sh (25% yield). We are raising our FY22E/FY23E EBITDA estimate
by 34%/37% and TP by 28% on expectation of higher realization and volumes. The
stock trades at 4.2x FY22E EV/EBITDA, a 25-30% discount to peers TATA and JSTL.
Higher realization and volume growth to drive earnings
2023E
823.8
145.1
70.0
17.0
-8.6
136.2
13.0
12.0
35.5
4.3
0.5
4.2
6.9
Given a strong steel cycle, we expect realization to remain high in the
medium term, which, coupled with an inefficient cost structure (higher
conversion cost), should provide disproportionate margin gains to SAIL.
Every INR1,000/t of higher steel price improves SAIL’s FY22E EBITDA by 11%.
Supported by under-utilized capacities, volume growth is expected to be
strong at 9% CAGR over FY21-23E. There is also a likelihood of product mix
improvement (higher finished steel sales).
We estimate 36% EBITDA CAGR over FY20-23E.
Strong FCF to drive deleveraging and higher dividend yield
Shareholding pattern (%)
As on
Promoter
DII
FII
Others
Dec-20 Sep-20 Dec-19
75.0
75.0
75.0
13.0
13.7
14.8
4.2
3.2
3.6
7.9
8.1
6.7
FII Includes depository receipts
Stock performance (one-year)
SAIL
90
70
50
30
10
Sensex - Rebased
With robust EBITDA and limited capex, we estimate FCF to be strong at
INR78b/INR86b in FY22E/FY23E, implying a FCF yield of 25-28%.
Higher FCF should drive significant deleveraging, which should boost its
equity value. We estimate net debt to decline by INR232b (INR56/share,
76% of CMP) over FY20-23E to INR305b (2.1x of FY23E EBITDA). Net debt has
already declined by INR94b (INR23/share) to INR443b in 9MFY21.
As SAIL swings to profit and has limited capex needs, we expect a higher
dividend payout going forward. As against an inconsistent dividend of INR1-
2/sh (nil in FY16-18), we expect a consistent higher payout of INR4-5/sh,
implying a yield of 5-7%.
Valuation is attractive, lower steel price the key risk
At the CMP, the stock is trading at 4.2x FY22E EV/EBITDA, which is at a 25-
30% discount to peers TATA and JSTL. Even on FY22E P/BV, it is trading at an
attractive 0.6x, despite an expected strong RoE of 16%.
We value the stock at 5x FY22E EV/EBITDA at INR104/share, implying a
target P/B of 0.8x (historical average of 0.7x).
Key risks are lower steel price and higher capex.
Amit Murarka – Research Analyst
(Amit.Murarka@MotilalOswal.com)
Basant Joshi – Research Analyst
(Basant.Joshi@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
4 November 2020
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
SAIL
Best play on higher steel prices
Captive iron ore and high opex provide higher sensitivity to steel prices
Our steel price outlook remains strong as demand is on an upsurge led by a recovery
from COVID-19 lows and higher sea-borne iron ore prices. We see SAIL as the best
play in India on higher steel prices as it:
1) is backward integrated with captive iron ore, which cushions raw material cost,
2) has a higher operating leverage due to high conversion cost, which provides
disproportionate margin gains from rising steel prices, and
3) has a higher financial leverage, which amplifies EPS growth.
We are raising our FY21-23E realization and volume assumption, which is driving an
increase in our EBITDA estimate by 7-37% and EPS by an even higher 12-89% (due to
financial leverage gains). At the same time, we have raised our target price by 28%.
Our volume expectation now factors in a consistent ramp-up in SAIL’s volumes as
the demand outlook is strong, which should help sweat its expanded capacities.
Exhibit 1: Change in estimates
INR b
Sales (mt)
Realization/t (INR)
EBITDA/t (INR)
Revenue
EBITDA
PAT
Net debt
Target price (INR)
FY21E
14.8
47,011
9,300
695.1
137.7
59.6
403.3
Revised
FY22E
16.6
48,778
9,499
809.8
157.8
76.6
358.3
104
FY23E
17.5
47,071
8,283
823.8
145.1
70.0
304.8
FY21E
14.8
46,116
8,704
681.8
128.8
53.2
402.3
Old
FY22E
16.0
45,974
7,377
734.7
118.1
46.4
372.0
81
FY23E
17.0
45,000
6,233
764.1
106.0
37.0
333.3
Change (%)
FY21E
FY22E
FY23E
0.0
3.9
3.1
1.9
6.1
4.6
6.9
28.8
32.9
1.9
10.2
7.8
6.8
33.7
36.9
12.1
65.2
89.1
0.2
-3.7
-8.5
29
Source: MOFSL
Estimate 36% EBITDA CAGR over FY20-23E
Supported by 7% volume CAGR over FY20-23E and better realization, we
estimate revenue/EBITDA to grow at 10%/36% CAGR over FY20-23E.
Due to financial leverage benefit and lower interest cost from deleveraging, we
estimate SAIL to swing to profit in FY21E (from a loss in FY20) and sustain an 8%
EPS CAGR over FY21-23E.
FY20-23E
CAGR (%)
6.6
7.1
2.8
27.5
10.1
36.5
3.2
3.2
-16.2
43.6
Exhibit 2: Key operating metrics and financials
Y/E March
Production
Sales
Realization/t
EBITDA/t
Revenue
EBITDA
Other income
Depreciation
Finance cost
PBT
Adjusted PAT
Adjusted EPS
Unit of measurement
mt
mt
INR
INR
INR b
INR b
INR b
INR b
INR b
INR b
INR b
INR
FY16
11.85
12.10
32,290
-2,773
391.0
-29.0
24.0
24.0
23.0
-70.8
-41.8
-10.1
FY17
13.30
13.15
33,814
29
445.0
0.7
26.8
26.8
25.3
-49.1
-26.3
-6.4
FY18
13.23
14.08
40,877
3,693
575.6
52.2
30.7
30.7
28.2
-8.1
1.1
0.3
FY19
14.32
14.12
47,444
6,896
669.7
97.6
33.9
33.9
31.5
33.3
26.0
6.3
FY20
14.43
14.23
43,328
4,000
616.6
57.1
37.6
37.6
34.9
31.1
-1.9
-0.5
FY21E
14.37
14.78
47,011
9,300
695.1
137.7
39.3
39.3
29.2
79.7
59.6
14.4
FY22E
FY23E
16.60
17.50
16.60
17.50
48,778 47,071
9,499
8,283
809.8
823.8
157.8
145.1
40.6
41.2
40.6
41.2
24.1
20.5
100.9
92.0
76.6
70.0
18.5
17.0
Source: Company, MOFSL
23 March 2021
2
 Motilal Oswal Financial Services
SAIL
Higher sensitivity to steel prices, spot price implying significant upside
Every INR1,000/t of higher steel prices improves SAIL’s FY22E EBITDA by 11%
and EPS by 17%. At the same time, valuation rises by 22%.
If we assume spot steel prices to sustain in FY22E, it would imply an upside of
63% to our base case EBITDA and a 130% upside to our valuation of INR240 per
share.
Exhibit 3: Every INR1000/t higher realization raises EBITDA by 11% and EPS by 17%
INR b
Revenue
EBITDA
PAT
Net debt
Volume - mt
Realization/t
EBITDA/t
TP (5x EV/EBITDA)
Base case
FY21E
695.1
137.7
59.6
403.3
14.8
47,011
9,300
FY22E
809.8
157.8
76.6
358.3
16.6
48,778
9,499
104
INR1,000/t sensitivity
FY22E Change (%)
826.4
2
174.4
11
89.4
17
348.6
-3
16.6
0
49,778
2
10,499
11
127
22
Bull case - spot
FY22E Change (%)
909.8
12
257.8
63
153.5
100
299.9
-16
16.6
0
54,802
12
15,523
63
240
130
Source: MOFSL
Captive raw material advantage
SAIL has captive iron ore mines that meet its entire raw material requirement for
steel production. It has nine iron ore mines and seven flux mines (limestone,
dolomite, etc.), which provides captive raw materials. The iron ore mines have a
capacity of 37.5mtpa and produced 29.3mt of ore in FY20. Being a PSU, its mines will
get auto-renewed as per the MMDR Act when the leases come up for expiry in CY30.
Backward raw material integration protects the company in a rising raw material
environment, while at the same time benefitting from higher steel prices.
Exhibit 4: SAIL’s iron ore mines have a production capacity of 37.5mtpa
Name of the mine
Kiriburu
Meghahatuburu
Bolani
Gua
Rajhara, Dalli
Barsua, Kalta, Taldih
Chiria
Total
Capacity (mtpa)
5.5
5.0
7.5
4.0
8.7
6.0
0.8
37.5
Source: MOFSL, Company
SAIL, however, is vulnerable to increase in coking coal prices due to its dependence
on imported coal and higher coal consumption rate. It consumes ~0.9mt of coking
coal per tonne of crude steel as against the industry benchmark of ~0.7mt. This is
due to likely lower coke yield from coking coal. Despite captive iron ore and fluxes,
its raw material cost is higher compared to TATA and at par with JSP, but lower
compared to JSTL in FY20.
23 March 2021
3
 Motilal Oswal Financial Services
SAIL
Exhibit 5: Comparative cost structure of steel companies in FY20
INR/t
Raw material cost
Employee cost
49,067
Other expenses
42,139
7824
10699
992
EBITDA
46,015
10136
14904
1191
19784
JSP
Source: Company, MOFSL
43,328
4,000
13,367
6,171
19,790
SAIL
12066
17969
4089
14943
TATA
22624
JSTL
Expansion phase nearly complete….
SAIL’s capacity expansion and modernization plan, which started in CY09, has seen
significant delays in completion as well as cost overruns. The original plan, which
was expected to get completed in FY13, entailed a capex of INR391b on expansion
of crude steel capacity (to 21mtpa from 14mtpa), INR122b on sustenance (including
debottlenecking), and INR35b on modernization/technological upgradation. Against
that, it has spent a much higher total capex of INR880b over FY09-20.
With most projects having been completed or nearing completion (like slab caster at
Bhilai), we expect incremental capex to be low over the next two years as the
management’s focus shifts to ramp-up of these capacities. The expansion provides
an opportunity for potential volume growth of 34% over FY20 production levels.
Exhibit 6: See potential to grow production by 34% over FY20 levels
mt
Plant
BSP
DSP
RSP
BSL
ISP
VISL
ASP
SSP
Total
Potential growth (%)
Hot Metal
FY20
Capacity
4.8
7.5
2.4
2.5
3.6
4.5
4.1
5.8
2.5
2.9
0.0
0.3
0.0
0.0
0.0
0.0
17.5
23.5
34.7
Crude Steel
FY20 Capacity
4.5
7.0
2.2
2.2
3.5
4.2
3.7
4.6
2.1
2.5
0.0
0.2
0.1
0.5
0.1
0.2
16.2
21.4
32.4
Finished Steel
FY20
Capacity
4.0
6.6
2.1
2.1
3.2
4.0
3.4
4.2
2.1
2.4
0.0
0.2
0.1
0.4
0.2
0.3
15.1
20.2
33.9
Source: Company
…which should drive 9% volume CAGR over FY21-23E…
Supported by improving demand and spare capacity, we expect SAIL to register 9%
volume CAGR in FY21-23E – a growth of 12%/5% YoY to 16.6mt/17.5mt in
FY22E/FY23E. Growth is likely to continue in coming years as it would have saleable
steel capacity of 20.2mtpa (19.3mtpa excluding special steel plants). The
management has guided at 17mt of sales in FY22E, ~2% above our estimate.
SAIL has shown strong resilience in 9MFY21, despite challenges posed by the COVID-
19 pandemic, and has achieved 1% YoY volume growth to 10.6mt (supported by
inventory liquidation). In 3QFY21, it achieved saleable production of 4.15mt,
implying a run-rate of 16.6mtpa.
23 March 2021
4
 Motilal Oswal Financial Services
SAIL
Exhibit 7: Sales volumes to grow by ~9% CAGR over FY21-23E
Sales (m tons)
8.6
11.7
3.3
0.2
-3.0
12.1
13.1
14.1
14.1
0.8
14.2
14.8
16.6
17.5
Vol growth (%)
12.3
7.1
3.9
5.4
Source: Company, MOFSL
…as well as improve product mix
With the completion of modernization projects and finished steel capacities, we
expect operating costs to stay under control and product mix to improve, which
should be supportive of margin. At rated steel capacity, the share of semis is
expected to decline to 12% v/s 20%/27% in FY20/9MFY21. The share of value added
products like CRC and GP sheets is likely to improve. In long steel product mix, we
expect the share of structural and TMT rods/bar in volumes to improve at the
expense of semis (billets etc.).
Exhibit 8: Flats contribute ~50% of volumes, share of semis to fall post completion of its expansion plans
Share (%)
Flats
Longs
Semis
Products
HRC
CRC
GP/GC
Plates
TMT, rods
Structurals
Rail
PET
Semis
FY14
58
33
9
33
4
2
14
13
4
7
1
22
FY15
60
28
12
32
4
2
15
12
3
6
1
25
FY16
48
25
26
26
4
2
16
15
3
7
1
26
FY17
51
25
24
30
5
2
15
18
6
6
1
17
FY18
53
28
19
28
7
2
17
18
7
8
1
12
FY19
51
28
22
FY20
50
30
20
9MFY21
46
27
27
Capacity mix*
46
42
12
28
28
27
16
6
6
5
11
2
1
1
3
16
15
14
16
18
17
15
19
7
6
6
14
9
10
10
8
1
1
1
1
13
16
21
12
Source: Company, MOFSL; *potential mix on rated capacity
Operating leverage to offset higher employee costs
Despite ~16% reduction in its employee count over FY18-20, employee cost has
fallen by just 2% to INR87.8b due to higher retirement costs. Its employee cost of
INR6,171/t of steel volumes is the highest in the industry. Employee cost is likely to
rise by 12-15% YoY in FY21 as SAIL plans to retrospectively (from 1
st
Apr’20)
implement the impending wage revision under the 7
th
Pay Commission, 2017 in
4QFY21. This implementation is happening at an opportune time as higher steel
price at present would help absorb the entire wage hike. Given the 9% volume CAGR
over FY21-23E, we expect operating leverage benefits to result in lower employee
cost per tonne at INR5,893 in FY23E (v/s INR6,771 in FY21E).
23 March 2021
5
 Motilal Oswal Financial Services
SAIL
Exhibit 10:
Employee cost/t to decline on higher
Exhibit 9:
Employee count reducing
'000s
volumes
Avg. salary INR (LHS)
1,560
1,641
6,807
6,256
5,872
6,171
Employee cost - INR b
6,771
6,151
5,893
Cost/t - INR
No. of employee
1,467
1,184
1,043
83
1,035
77
72
69
66
1,239
64
62
89.5
82.7
88.3
87.8
100.1
102.1
103.1
Source: Company, MOFSL
Source: Company, MOFSL
23 March 2021
6
 Motilal Oswal Financial Services
SAIL
Pricing strength to drive strong FCF
Elevated steel prices to keep profitability high in the near term
Regional steel demand-supply situation looks strong. While demand continues to be
on an upsurge from the pandemic lows, supply is getting disrupted in China due to
output cuts being implemented to control pollution. We expect this supply shortfall
to continue to support regional steel prices.
Even in India, we have seen a strong rebound in demand which is now growing at 8-
10% YoY. Given the thrust on infrastructure expenditure in the Union Budget for
FY22, we expect steel demand to remain strong which coupled with strong regional
prices to support steel prices in India. Currently, India HRC price is at a ~10%
discount to imports from Korea. Moreover, India primary rebar price is now only at a
~INR3,000/t discount to secondary rebar (v/s historical average of INR4,800/t).
We however conservatively factor in FY22 realization at a ~12% discount to spot
price. We also assume higher coking coal prices (USD160/t CNF India) in FY22E and
FY23E. Even with these conservative assumptions, we estimate SAIL’s EBITDA to
grow by 36% CAGR to INR145b over FY20-23E.
Exhibit 11:
Spot HRC/rebar prices 17%/13% above
Exhibit 12:
Gap between primary and secondary rebar
3QFY21 average
60,000
50,000
Domestic HRC (INR/t)
Primary rebar
down to INR3,000/t, below the average of INR4,800/t
(INR/t)
Secondary rebar
Primary rebar
55,000
45,000
40,000
30,000
Gap - RHS
15,000
10,000
5,000
-
35,000
25,000
Source: Steelmint, MOFSL
Source: Steelmint, MOFSL
Exhibit 13:
Even on conservative estimates, we expect
SAIL’s EBITDA/t and…
EBITDA per ton - INR
Exhibit 14: …
EBITDA to remain strong in FY22-23E
EBITDA - INR b
Source: Company, MOFSL
Source: Company, MOFSL
23 March 2021
7
 Motilal Oswal Financial Services
SAIL
Iron ore sales – another stream of cash flows
SAIL has sub-grade iron ore inventory of 43mt lying in its mines in Odisha,
Jharkhand, and Chhattisgarh at the end of FY20. Since sub-grade ore could not be
consumed internally and the company was not allowed to sell this inventory, the
same was valued at nil. In FY20, the Central Govt allowed the company to sell this
inventory. Accordingly, it valued the same at INR38b as of FY20-end, valuing it at
average prices for the past three-years. In addition to this, it is also allowed to sell
~25% of its iron ore production. While it has been selling sub-grade ore from Odisha
mines, it is in the process of obtaining clearances from Chhattisgarh and Jharkhand
for moving the material for sale.
In 3QFY21, it sold 1.3mt of iron ore at INR4.8b, implying a realization of INR3,750/t.
This contributed an EBITDA of INR3.5b. We expect SAIL to record sales of 2.4mt in
4QFY21, leading to a revenue of INR8.3b and contributing EBITDA of INR4.5b. While
iron ore realization is expected to decline in line with domestic iron ore prices,
assuming 4mt of sales at INR2,500/t, iron ore sales should still contribute ~INR10b
to FY22E cash flows.
Exhibit 15: Iron ore auction data for SAIL
Month
Apr’20
May’20
Jun’20
Jul’20
Aug’20
Sep’20
Oct’20
Nov’20
Dec’20
Jan’21
Feb’21
Mar’21 (up to the 10
th
)
YTD total
Quantity offered (t) Quantity booked (t)
0
0
1,00,000
40,000
2,00,000
60,000
2,00,000
0
4,04,000
3,56,000
5,76,000
5,48,000
7,40,000
7,12,000
2,56,000
2,56,000
9,76,000
8,12,000
10,72,000
7,76,000
10,92,000
7,80,000
1,88,000
1,04,000
58,04,000
44,44,000
Bid price/t
INR m
0
1,300
52
1,473
88
0
2,033
724
3,004
1,646
2,561
1,823
4,388
1,123
4,031
3,273
3,389
2,630
2,771
2,161
2,250
234
3,095
13,756
Source: Steelmint
Exhibit 16: Iron ore sales contribute ~7% to EBITDA in 3QFY21
INR m
Sales (mt)
Revenue
EBITDA
Realization/t
EBITDA/t
Contribution to total EBITDA (%)
2QFY21
0.5
1,520
1,030
3,167
2,146
5.4
3QFY21
1.3
4,760
3,450
3,748
2,717
6.8
4QFY21E
FY22E
FY23E
2.5
4.0
4.0
8,250 10,000 10,000
4,500
4,000
4,000
3,300
2,500
2,500
1,800
1,000
1,000
6.4
2.5
2.8
Source: Company, MOFSL
Higher cash flows to deleverage the Balance Sheet to comfortable levels
SAIL’s debt woes started with delays in its capacity expansion and modernization
plan to 21mtpa from 14mtpa, which started in FY09 and lasted a decade. A major
part of its expansion is complete, with some modernization projects still continuing.
SAIL has spent ~INR880b towards capital expenditure over FY09-20, of which a large
part has been spent towards growth capex. In FY08, SAIL reported a net cash
balance of ~INR100b. However, due to delays in capacity expansion, declining
profitability on weak pricing cycles, and higher fixed cost structure, SAIL saw a
23 March 2021
8
 Motilal Oswal Financial Services
SAIL
massive debt addition of INR630b over FY08-20, resulting in a net debt position of
INR533b at the end of FY20. Returns ratios too depleted with SAIL reporting a RoE of
-10% in FY16 v/s 24% in FY09. Weaker earnings and higher debt led net debt/EBITDA
to rise to 9.3x in FY20, with an interest coverage ratio of 0.8x.
During 9MFY21, SAIL deleveraged its balance sheet by INR94.5b (INR23/share) to
INR443b (INR107/share) on the back of higher free cash flow generation. We expect
it to further deleverage by INR40b (INR9/share) in 4QFY21. Massive deleveraging of
INR134b in FY21 has been supported by higher free cash flow generation, which in
turn has been due to: a) higher EBITDA (INR158b), and b) working capital release of
INR58b, supported by inventory destocking.
We expect FCF generation to remain strong in FY22E/FY23E at INR78b/INR86b.
However, the same should normalize from higher levels achieved in FY21E due to
working capital normalization. This should drive a further debt reduction of INR99b
to INR305b over FY21-23E. We expect SAIL to reduce its debt by INR233b over FY20-
FY23E on the back of: a) strong EBITDA growth (36% CAGR) over FY20-23E to
INR145b, b) working capital release through liquidation of iron ore inventory and
realization of Railways’ debtors (~INR69b in 3QFY21), d) lower finance costs, and e)
limited annual capex of INR50b.
Exhibit 17: EBITDA back at FY08 levels; interest coverage ratios and net leverage seen improving
INR b
EBITDA
Net debt
Net debt/EBITDA (x)
Interest paid
Interest coverage ratio (x)
RoE (%)
FY08
125.9
-100.5
-0.80
3.4
55.7
41.7
FY09
86.8
-98.2
-1.13
2.8
43.1
24.2
FY12
64.0
107.0
1.67
7.2
10.3
9.7
FY15
FY16
FY17
FY18
FY19
FY20
FY21 FY22E FY23E
49.0
-29.0
0.7
52.2
97.6
57.1
137.7
157.8
145.1
279.7
348.0
410.2
450.6
448.8
533.6
403.3
358.3
304.8
5.71 -11.99
-
8.64
4.60
9.35
2.93
2.27
2.10
15.0
23.0
25.3
28.5
33.1
36.5
29.2
24.1
20.5
3.8
-1.0
0.2
2.0
3.3
1.9
5.0
6.9
7.5
4.9
-9.9
-7.1
0.3
6.8
-0.5
13.7
15.8
13.0
Source: Company, MOFSL; Int. coverage ratio (Int. cost/EBITDA including other income)
Exhibit 18: SAIL to see cumulative equity addition of INR56/share over FY20-23E
INR b
Net debt at the end of
Per share (INR)
Debt reduction
Debt reduction per share (INR)
Cumulative equity addition (per share)
4QFY20 1QFY21 2QFY21 3QFY21 4QFY21E FY22E FY23E
537.6 540.4 504.2 443.1
403 358
305
130.2 130.9 122.1 107.3
97.7 86.8
73.8
-2.8
36.2
61.1
39.8 45.0
53.5
-0.7
8.8
14.8
9.6 10.9
12.9
-0.7
8.1
22.9
32.5 43.4
56.4
Source: Company, MOFSL
23 March 2021
9
 Motilal Oswal Financial Services
SAIL
Exhibit 19: FCF to remain strong on higher EBITDA and
limited capex
OCF
FCF post finance cost
195
126
128
62
22
72
0
-33
-6
-87
54
Exhibit 20: Net debt/EBITDA to decline significantly (below
2.5x) in FY22E
Net Debt (INR b)
534
Net Debt/EBITDA (RHS)
136
65
451
410
9.3
4.6
FY17
FY18
FY19
FY20
2.9
FY21E
449
403
358
8.6
305
-58
2.3
FY22E
2.1
FY23E
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 21: Finance cost to fall on declining debt
Finance cost - INR b
Exhibit 22: Interest coverage ratio to improve significantly
Interest coverage ratio (x)
Source: Company, MOFSL
Source: Company, MOFSL
23 March 2021
10
 Motilal Oswal Financial Services
SAIL
Dividend likely to rise sharply…
…implying a 6% dividend yield
Due to weak profitability in the past five years (FY16-20), SAIL has had a patchy
record of dividend payouts. It paid dividend only once in these five years (FY19) and
that too a measly INR0.5/share. As per its Dividend Distribution Policy, 2017, it may
not declare dividend or declare one at a lower rate if:
a) the company is making losses or profits are inadequate,
b) the company requires funds for meeting higher capex, working capital, or
repayment of loans taken in the past,
c) there is inadequate cash, and
d) cost of raising funds from alternate sources is high.
As PAT outlook is much stronger over FY21-23E, which should support deleveraging,
we expect a dividend payout ratio of 25-30%. We expect a FY22E/FY23E dividend of
INR4/INR5 per share. This would imply an attractive 6-7% dividend yield on its CMP.
Exhibit 23: SAIL’s dividend history
Year
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY19
Dividend
1.5
3.7
2.6
3.3
2.4
2.0
2.0
2.0
2.0
0.5
EPS
15.2
20.5
15.1
16.5
11.9
9.1
6.0
4.6
5.2
6.3
Payout (%)
9.9
18.1
17.2
20.0
20.1
21.9
33.3
44.0
38.3
8.0
Source: Company, MOFSL
23 March 2021
11
 Motilal Oswal Financial Services
SAIL
Valuation and view
Volume growth to take care of higher fixed cost:
While employee cost is
expected to rise by over 12% on account of wage revisions, we expect the
impact to be absorbed by volume growth and higher realization. We have
factored in a hike of ~14% in staff cost over FY20.
Expect 36% EBITDA CAGR over FY20-23E even on a conservative basis:
Despite
factoring in conservative realization (~12% discount to spot) and higher coking
coal prices (USD160/t CNF India) in FY22-23E, we estimate SAIL’s EBITDA to
grow at 36% CAGR to INR145b over FY20-22E.
Net leverage to remain comfortable:
We estimate a net debt reduction of
INR233b (INR56/share) to INR305b (INR74/share) over FY20-23E on the back of
higher operating cash flows. Realization of Railways’ debtors would lead to
further deleveraging (not fully factored in). With a significant debt reduction and
higher earnings, net debt/EBITDA should decline to ~2.3x by Mar’22.
Valuations remain comfortable:
At the CMP, the stock is trading at 4.2x FY22E
EV/EBITDA and 0.5x P/B. We value the stock at 5x FY22E EV/EBITDA at
INR104/share, implying a target P/B of 0.8x (historical average of 0.7x).
Reiterate
Buy.
Exhibit 24: Target price calculation
Year
Sales (mt)
EBITDA (INR per tonne)
EBITDA – INR m
Target EV/EBITDA (x)
Target EV
Less: Net debt (INR m)
Equity value
Target price (INR/share)
FY17
13.1
51
671
FY18
14.1
3,705
52,176
FY19
14.1
6,916
97,615
FY22E
16.6
9,509
1,57,849
5.0
7,89,243
5,33,576 4,03,299 3,58,308
4,30,934
104
Source: MOFSL, Company
FY20
14.2
4,012
57,097
FY21E
14.8
9,311
1,37,660
4,10,168
4,50,632
4,48,823
Exhibit 25: SAIL trading at 4.2x one-year forward EV/EBITDA
15.0
12.0
9.0
6.0
3.0
EV/EBITDA (x)
Max (x)
Avg (x)
Min (x)
Exhibit 26: SAIL trading at 0.6x P/B
2.0
1.5
P/B (x)
Min (x)
Avg (x)
+1SD
13.2
12.1
9.3
1.9
Max (x)
-1SD
1.0
1.0
0.7
6.5
0.6
0.4
0.2
4.2
3.5
0.5
0.0
Source: MOFSL
Source: MOFSL
23 March 2021
12
 Motilal Oswal Financial Services
SAIL
Risks
Risk of higher capex on government push:
While SAIL’s original capex plan for
FY22 stands at INR40b, the Center has budgeted higher capex (INR80b) to
support its post-pandemic economic recovery. We have factored in a capex of
INR50b for FY22. While we see a lower likelihood of higher capex as there are no
projects on the anvil, any potential capex increase would pose a risk to our free
cash flow projection and debt reduction.
Decline in demand and steel prices:
We have factored in a 12% discount to spot
prices. However, a sharp slump in demand and prices beyond our estimate
poses a risk to our estimates.
Contingent liabilities materializing into demands:
SAIL has contingent liabilities
of INR373b, ~90% of net worth, as of FY20-end. While these matters are sub
judice, materialization of contingent liabilities into liabilities could pose a serious
risk to Balance Sheet health.
Exhibit 27: Contingent liabilities are ~90% of net worth
Contingent liabilities (INR b)
FY20
FY19
In respect of SAIL:
Claims against the SAIL pending for appellate/judicial decisions
298.4
247.3
Other claims against SAIL not acknowledged as debt
49.6
33.1
Disputed income tax/service tax/other demands of joint venture company
0.4
0.4
Bills drawn on customers and discounted with banks.
0.8
1.9
Price escalation claims by contractors/suppliers and claims by employees.
3.6
4.0
In respect of subsidiaries/jointly controlled entities:
Claims pending for appellate/judicial decisions
0.0
0.1
Other claims not acknowledged as debt
20.4
12.4
373.3
299.2
Net worth
415.1
396.5
Contingent liabilities as a percentage of net worth
89.9
75.5
Source: Company, MOFSL
(i)
(ii)
(iii)
(iv)
(v)
(i)
(ii)
23 March 2021
13
 Motilal Oswal Financial Services
SAIL
Story in charts
Exhibit 28: Volumes to grow ~9% CAGR over FY21-23E
Sales (m tons)
13.1
11.7
12.1
8.6
Vol growth (%)
14.2
17.5
Exhibit 29: Realization to remain strong in FY22E
(INR/t)
40,877
33,814
47,444
43,328
47,011
48,778
47,071
14.1
7.1
14.1
14.8
16.6
12.3
3.3
-3.0
0.2
0.8
3.9
5.4
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 30: EBITDA to grow ~36% CAGR over FY20-23E
EBITDA (INR b)
6,896
4,000
3,693
29
0.4
EBITDA per ton
9,300 9,499
Exhibit 31: Operating cash flows to remain strong
INR b
OCF
FCF post finance cost
195
126
128
62
22
72
0
-33
-6
-87
54
136
65
8,283
52.0
97.3
56.9
137.5
157.7
145.0
-58
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 32: Net debt to decline to comfortable levels
Net Debt (INR b)
534
451
410
9.3
4.6
FY17
FY18
FY19
FY20
449
403
358
8.6
305
Net Debt/EBITDA (RHS)
Exhibit 33: Return ratios to improve over FY21-23E
RoE
RoCE (pre-tax)
11.6
3.3
6.8
0.3
-0.5
13.7
13.6
15.8
12.0
13.0
8.6
3.4
-2.9
2.9
FY21E
2.3
FY22E
-7.1
2.1
FY23E
Source: Company, MOFSL
Source: Company, MOFSL
23 March 2021
14
 Motilal Oswal Financial Services
SAIL
Annexure: Improvement in efficiency parameters
Exhibit 34: Coke rate reduced by ~10% as over last 5 years…
Coke rate (kg/thm)
504
489
473
456
453
457
40
49
Exhibit 35: …as coal dust injection rate has improved
CDI Rate (kg/thm)
70
60
76
76
75
454
FY15
FY16
FY17
FY18
FY19
FY20
9MFY21
FY15
FY16
FY17
FY18
FY19
FY20
9MFY21
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 36: Productivity has improveed over the years
BF productitivty (T/m3/day)
1.80
1.78
Exhibit 37: CO2 emissions remain high
CO2 emission m3/tcs
2.65
2.60
2.61
2.56
2.57
2.54
2.60
1.67
1.58
1.70
1.65
FY16
FY17
FY18
FY19
FY20
9MFY21
FY15
FY16
FY17
FY18
FY19
FY20
9MFY21
Source: Company, MOFSL
Source: Company, MOFSL
23 March 2021
15
 Motilal Oswal Financial Services
SAIL
Exhibit 38: Plant-wise quarterly performance
INR b
Segment revenue
Bhilai Steel Plant
Durgapur Steel Plant
Rourkela Steel Plant
Bokaro Steel Plant
IISCO Steel plant
Special Steel plants
Alloy Steel Plant
Salem Steel Plant
Visvesvaraya
Others
Total segment revenue
Less: Inter-segment revenue
Sales/income from operations
Segment results
Bhilai Steel Plant
Durgapur Steel Plant
Rourkela Steel Plant
Bokaro Steel Plant
IISCO Steel plant
Special Steel plants
Alloy Steel Plant
Salem Steel Plant
Visvesvaraya
Others
Less: Interest expenses
Less: Exceptional item
Total profit (+)/Loss (-) before Tax
1QFY20
40.2
18.9
32.7
35.4
18.1
19.5
2.0
4.4
0.2
12.9
164.9
16.7
148.2
1.6
0.5
2.4
2.9
-0.6
2.1
-0.1
-0.8
-0.2
3.2
8.9
7.9
2QFY20
47.1
17.0
29.1
28.2
17.7
17.7
2.1
3.8
0.2
11.6
156.9
15.6
141.3
8.6
-1.2
-1.9
-0.3
-1.9
0.9
0.0
-0.6
-0.2
1.8
4.2
9.4
3QFY20
53.2
20.8
31.8
36.3
21.7
16.6
1.7
4.2
0.3
10.4
180.3
14.9
165.4
7.1
-0.8
-2.1
-0.7
-1.5
0.5
-0.2
-0.6
-0.2
1.5
2.6
8.5
4QFY20*
54.3
20.6
31.8
34.2
20.0
17.4
1.4
3.3
0.2
12.5
178.4
16.6
161.7
1QFY21
31.3
12.8
15.3
16.1
14.7
12.3
0.6
1.9
0.2
9.6
102.5
11.8
90.7
2QFY21
45.0
21.9
37.0
41.3
20.0
18.9
1.4
4.4
0.3
12.7
184.0
14.8
169.2
3QFY21
56.7
25.6
45.8
49.2
21.5
23.3
1.6
5.4
0.4
15.9
222.1
23.8
198.3
16.7
-1.6
5.4
7.7
0.5
-0.6
0.8
4.5
4.7
-4.0
3.3
10.7
2.7
-3.4
2.1
10.6
-0.3
-2.8
-2.1
1.5
33.6
1.5
1.5
8.2
-0.2
-0.3
-0.2
-0.1
-0.3
-0.6
-0.4
0.1
-0.1
-0.2
-0.2
-0.1
34.2
2.6
2.2
8.3
57.8
-11.0
11.1
43.1
9.1
8.9
7.2
6.7
7.7
-2.2
0.0
1.0
-5.2
-5.9
41.0
-19.8
6.1
36.4
Source: Company, MOFSL, *higher profitability due to recognition of iron ore inventories
23 March 2021
16
 Motilal Oswal Financial Services
SAIL
Financials and valuations
Income Statement (Consolidated)
Y/E March
Net Sales
Change (%)
EBITDA
Change (%)
EBITDA per tonne (INR)
Depreciation
EBIT
Interest
Other income
PBT before EO
Extraordinary Item
PBT
Total Tax
Effective Rate (%)
Reported PAT
Change (%)
Share of Associates/JV
Minority Interest
Adjusted PAT
Change (%)
Balance Sheet (Consolidated)
Y/E March
Sources of Funds
Share Capital
Reserves and Surplus
Shareholders’ funds
Loans
Deferred Tax Liability
Minority Interest
Capital Employed
Application of Funds
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Sundry Debtors
Cash and Bank Balances
Other assets
Loans and Advances
Current Liabilities
Sundry Creditors
Other Current Liabilities
Provisions
Net Current Assets
Application of Funds
FY17
445.0
13.8
0.7
-102.3
51
26.8
-26.1
25.3
4.5
-46.9
-2.2
-49.1
-19.6
39.9
-29.5
-28.8
1.9
0.0
-26.3
-37.1
FY18
575.6
29.3
52.2
7,677.0
3,705
30.7
21.5
28.2
4.2
-2.6
-5.6
-8.1
-2.5
30.2
-5.7
-80.8
2.8
0.0
1.1
-104.0
FY19
669.7
16.4
97.6
87.1
6,916
33.9
63.8
31.5
4.9
37.2
-3.9
33.3
12.0
36.1
21.3
-475.4
2.2
0.0
26.0
2344.1
FY20
616.6
-7.9
57.1
-41.5
4,012
37.6
19.5
34.9
9.1
-6.3
37.3
31.1
11.8
38.0
19.3
-9.4
1.9
0.0
-1.9
-107.5
FY21E
695.1
12.7
137.7
141.1
9,311
39.3
98.4
29.2
8.3
77.4
2.2
79.7
33.5
42.0
46.2
139.9
1.9
0.0
59.6
-3167.0
FY22E
809.8
16.5
157.8
14.7
9,509
40.6
117.2
24.1
7.8
100.9
0.0
100.9
26.2
26.0
74.7
61.5
1.9
0.0
76.6
28.5
(INR b)
FY23E
823.8
1.7
145.1
-8.1
8,293
41.2
103.9
20.5
8.7
92.0
0.0
92.0
23.9
26.0
68.1
-8.8
1.9
0.0
70.0
-8.6
(INR b)
FY23E
41.3
521.5
562.8
358.0
34.3
0.0
955.1
1,311.3
562.1
749.2
47.5
32.4
237.0
67.7
53.2
100.4
15.3
94.8
188.1
64.7
126.0
955.1
FY17
41.3
329.1
370.4
414.0
-38.5
0.0
745.9
841.9
338.9
503.0
232.8
24.8
157.4
29.3
3.8
81.4
5.3
52.3
174.3
65.2
-14.6
745.9
FY18
41.3
328.2
369.5
454.1
-41.6
0.0
781.9
955.8
369.6
586.3
184.0
26.3
170.2
38.7
3.5
98.7
5.2
75.3
192.7
62.9
-14.6
781.9
FY19
41.3
355.2
396.5
451.7
-28.7
0.0
819.5
1,017.2
403.4
613.7
160.1
29.7
195.1
45.0
2.9
98.1
6.2
72.3
192.9
66.1
15.9
819.5
FY20
41.3
373.8
415.1
538.0
-20.2
0.0
932.9
1,131.3
441.0
690.3
87.5
32.4
238.4
88.4
4.5
100.4
7.1
63.3
188.1
64.7
122.6
932.9
FY21E
41.3
415.9
457.2
438.0
13.2
0.0
908.4
1,191.3
480.3
711.0
67.5
32.4
209.5
76.2
34.7
100.4
9.5
80.0
188.1
64.7
97.5
908.4
FY22E
41.3
474.0
515.3
388.0
24.2
0.0
927.6
1,261.3
520.9
740.4
47.5
32.4
232.9
77.6
29.7
100.4
12.6
93.2
188.1
64.7
107.2
927.6
23 March 2021
17
 Motilal Oswal Financial Services
SAIL
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value per Share
Dividend Per Share
Valuation (x)
P/E
Cash PE
EV/EBITDA
EV/Sales
EV (USD/tonne)
Price-to-Book Value
Profitability Ratios (%)
EBITDA Margin
RoE
RoCE (pre-tax)
RoIC (pre-tax)
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
EBITDA
(Inc.)/Dec. in WC
Direct Taxes Paid
Other Items
CF from Oper. Activity
(Inc.)/Dec. in FA & CWIP
Free Cash Flows to Firm
Interest and Dividend
(Pur.)/Sale ofInvest.
CF from Inv. Activity
Issue of Shares
Inc./(Dec.) in Debt
Interest Paid
Dividends Paid
CF from Finan. Activity
Inc./(Dec.) in Cash
Add: Opening Balance
Closing Balance
FY17
-6.4
-0.6
89.7
0.0
FY18
0.3
6.1
89.4
0.0
FY19
6.3
13.3
96.0
0.5
FY20
-0.5
13.8
100.5
0.0
FY21E
14.4
20.7
110.7
3.0
5.0
3.5
5.1
1.0
1,158
0.7
0.2
-7.1
-2.9
-5.3
110
24
129
43
0.6
1.1
9.1
0.3
3.4
4.1
80
25
108
53
0.7
1.2
14.6
6.8
8.6
10.7
85
25
106
46
0.8
1.1
9.3
-0.5
3.3
2.7
152
52
141
41
0.7
1.3
19.8
13.7
11.6
12.4
108
40
110
42
0.8
0.9
FY22E
18.5
27.9
124.8
4.0
3.9
2.6
4.2
0.8
965
0.6
19.5
15.8
13.6
14.7
98
35
105
42
0.9
0.7
FY23E
17.0
26.5
136.2
5.0
4.3
2.7
4.2
0.7
841
0.5
17.6
13.0
12.0
12.7
93
30
105
42
0.9
0.5
(INR b)
FY23E
145.1
7.5
-16.7
0.0
136.0
-50.0
86.0
8.7
0.0
-41.3
-30.0
-20.5
-20.7
-71.2
23.5
29.7
53.2
FY17
0.7
17.5
0.1
3.3
21.6
-54.3
-32.7
0.0
0.0
-54.3
58.3
-25.3
0.0
33.0
0.3
3.5
3.8
FY18
52.2
11.2
-1.4
-0.4
61.6
-66.0
-4.4
0.1
1.3
-64.7
31.2
-28.5
0.0
2.7
-0.3
3.8
3.5
FY19
97.6
-26.6
0.0
1.2
72.2
-38.8
33.3
1.3
0.3
-37.2
-2.4
-33.1
0.0
-35.5
-0.6
3.5
2.9
FY20
57.1
-106.6
-0.9
44.2
-6.2
-43.8
-50.0
1.5
0.1
-42.3
89.1
-36.5
-2.5
50.0
1.6
2.9
4.5
FY21E
137.7
57.8
-2.4
2.2
195.3
-40.0
155.3
8.3
0.0
-31.7
-100.0
-29.2
-4.1
-133.3
30.3
4.5
34.7
FY22E
157.8
-11.8
-18.3
0.0
127.8
-50.0
77.8
7.8
0.0
-42.2
-50.0
-24.1
-16.5
-90.7
-5.0
34.7
29.7
23 March 2021
18
 Motilal Oswal Financial Services
SAIL
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
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 Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, 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. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on
www.motilaloswal.com.
MOFSL (erstwhile Motilal Oswal Securities Limited - 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), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL 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 MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL 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 MOFSL 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. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
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 MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL 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 MOFSL & 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 Financial Services Limited (MOFSL) 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 MOFSL 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 MOFSL , 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., MOFSL 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
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
23 March 2021
19
 Motilal Oswal Financial Services
SAIL
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- 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 MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- 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)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
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.
Terms & Conditions:
This report has been prepared by MOFSL 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 MOFSL. 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. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
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. MOFSL, 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 MOFSL. 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 MOFSL 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 MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL 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 71934200/ 022-71934263;
Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
23 March 2021
20