25 March 2014
Update | Sector: Cement
Dalmia Bharat
BSE Sensex
22,055
S&P CNX
6,590
CMP: INR229
TP: INR319
Buy
Acquires JPA’s Bokaro grinding unit at ~USD90/ton
Strengthens its presence in East, but net debt:EBITDA rise to ~4.6x FY16
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
DBEL IN
81.2
266/95
20/71/41
18.6
0.3
Financial Snapshot (INR Million)
2014E 2015E 2016E
Y/E March
Net Sales
27,855 41,459 49,557
EBITDA
Adj EPS (INR)
Gr. (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/ton (USD)
2,904 5,859 8,996
-10.0 -12.9
-141.2
-5.7
0.6
0.6
10.1
51.0
-6.3
3.0
0.7
9.8
58.0
11.4
0.3
5.7
20.1
0.6
6.5
55.8
28.6 -188.6
Acquires JPA’s 74% stake in 2.1mt grinding unit producing slag cement at Bokaro,
with 30 year supply arrangement for clinker and slag, for EV of USD90/ton and
cash out flow of ~INR6.9b.
Favorable market mix and efficient operations drives superior profitability, with
EBITDA/ton of ~INR1,450/INR985 in FY13/9MFY14.
Good strategic fit for DBEL as it will strengthen its presence in East and drive
synergies in form of a) brand premium of ~INR200/ton for OCL vis-à-vis Jaypee and
b) logistic optimization through cement swap driving estimated savings of
~INR200/ton.
Deal to be PAT accretive from FY16, with EPS contribution of ~INR3.8. However,
DBEL’s gearing increases further with net-debt (on pro-rata basis) estimated to
increase to ~INR42b/INR40b in FY15/FY16, implying net debt:equity of 7x/4.6x.
The stock trades at 9.8x/6.5x FY15/FY16 EV/EBITDA and USD58/56 EV/Ton.
Maintain Buy with TP of ~INR319 (SOTP).
-22.9 -17.8
The deal: 74% stake in 2.1mt grinding unit at Bokaro for ~USD90/ton
Shareholding pattern (%)
Dec-13 Sep-13 Dec-12
Promoter
Domestic Inst
Foreign
Others
63.0
3.1
14.3
19.7
63.0
3.3
14.2
19.6
63.0
3.4
14.4
19.3
Stock Performance (1-year)
Dalmia Bhar.
Sensex - Rebased
260
210
160
110
60
Dalmia Cement Bharat Ltd (DCBL), a 85% owned SPV of DBEL, has entered
into agreement with JPA to acquire its 74% stake in Bokaro Jaypee Cement
Limited (BoJCL), a joint venture between JPA (74% stake) and SAIL, at EV of
~INR11.5b (net debt of ~INR2.2b). This JV has operational 2.1mt grinding unit
at Bokaro, producing slag cement and was set-up with investment of
~INR5.1b.
Implied valuation for the deal is ~USD90/ton. The cash outflow for DBEL will
be ~INR6.9b for acquiring JPA’s 74% stake and would be funded through
debt and cash on books.
It has a 30-year long term clinker supply arrangement with JPA and 30-year
slag supply arrangement with SAIL.
With this acquisition, DBELs current installed cement capacity under control
will reach 20mt (~13.2mt on economic interest basis), and will go to ~24mt
on fully expanded basis by 2HFY15 (~16.5mt on economic interest basis).
Very efficient asset in attractive eastern market…
Bokaro plant produces slag cement, with very low cost of slag from SAIL (at
~INR 450/ton v/s OCL’s cost of ~INR1,300/ton). This plant will continue to
source clinker from JPA’s plant in Satna at a pre-determined price.
Being in supply deficient market of East India, this plant enjoys good market
mix and profitability. It caters to markets of West Bengal, Bihar and
Jharkhand.
This plant earned EBITDA/ton of ~INR1,450/INR985 in FY13/9MFY14.
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.

Dalmia Bharat
In FY13, this plant operated at 59% utilization due to constraint on slag
availability. However, as slag supplies improved Mar-13 exit utilization was
~85% and 9MFY14 utilization has been ~70%.
This acquisition is good strategic fit for DBEL, as it will strengthen its
presence in Eastern market through OCL. It will increase OCLs market share
in East from ~10% to ~18%.
DBEL’s market mix would further improve contribution from East from to
33% to 42%, with South reducing to 48% (from 56%).
While the management is yet to indicate any thing on synergies, we believe
there are multiple synergies which can be explored with OCL in form of a)
migrating to OCL brand from Jaypee brand, which is at price premium of
~INR200/ton and b) optimization of logistics through cement swaps with
potential savings of ~INR200/ton.
Considering superior profitability of this plant and potential synergies, we
expect it to PAT accretive after charging entire interest cost of the
consideration. We estimate EPS contribution from this acquisition at ~INR3.8
in FY16 (~33% contribution).
We estimate consolidated net debt (ex OCL) to increase to ~INR48b (v/s
INR38b pre-deal) in FY15. On pro-rata basis net-debt is estimated to increase
to ~INR42b/INR40b in FY15/FY16, implying net debt:equity of 7x/4.6x.
While this acquisition will make DBEL diversify its market mix and gain scale,
lack of any recovery in demand/ profitability can put constraint on P&L and
Balance Sheet.
Considering superior profitability of this plant and potential synergies, we
expect it to PAT accretive after charging entire interest cost of the
consideration. We estimate EPS contribution from this acquisition at ~INR3.8
in FY16 (~33% contribution).
We estimate consolidated net debt (ex OCL) to increase to ~INR48b (v/s
INR38b pre-deal) in FY15. On pro-rata basis net-debt is estimated to increase
to ~INR42b/INR40b in FY15/FY16, implying net debt:equity of 7x/4.6x.
While this acquisition will make DBEL diversify its market mix and gain scale,
lack of any recovery in demand/ profitability can put constraint on P&L and
Balance Sheet.
…offering synergies with OCL
Deal to be PAT accretive, but gearing increases further
Deal to be PAT accretive, but gearing increases further
Valuation and view
We are factoring in for this acquisition in our estimates, which is having
positive influence in FY16. However, after factoring in for weak pricing
environment in South India, our EPS has seen downgrade of 12% in FY16 to
~INR11.4.
Dalmia Bharat (DBEL) is poised for strong scale-up, driven by sustained focus
on capacity and market expansion through both organic and inorganic
routes.
2
25 March 2014

Dalmia Bharat
We believe stock re-rating hinges upon a) improvement in financial
performance driven by improvement in operations, especially North-East
operations, b) simplification of holding structure, c) consolidation of capacity
addition before next leg of capex, and d) balancing of long term growth
aspirations and medium term financial prudence.
The stock trades at 9.8x/6.5x FY15/FY16 EV/EBITDA and USD58/56 EV/Ton.
Maintain
Buy
with TP of ~INR319 (SOTP).
DBEL: Sum of the Parts valuations
INR m
DCBL
OCL (@ 20% HoldCo discount)
Adhunik
Calcom
Bokaro
Total EV
Less: Pro-rata Net Debt (adj for CWIP)
Total Equity Value
Fair value (INR/share)
Upside (%)
Implied EV/Ton (on pro-rata cap)
Valuation method
EV/EBITDA (x)
EV/EBITDA (x) & 40% hold-co discount
EV/Ton
EV/Ton
EV/EBITDA (x)
FY16E
30,565
9,643
5,833
6,266
11,109
63,416
37,518
25,898
319
39.6
63
Source: MOSL
25 March 2014
3

Dalmia Bharat
BoJCL - Proforma P&L
INR m
Capacity (mt)
Volumes (mt)
Cap. Util (%)
Realizations (INR/Ton)
Net Sales
EBITDA
EBITDA (INR/Ton)
EBITDA Margins (%)
Interest
Depreciation
PBT
Tax
PAT
PAT (DBEL's share)
Less: Int. on funding
PAT accretion to DBEL
FY13
2.1
1.2
59
5,088
6,304
1,799
1,452
28.5
421
195
1,183
-178
1,360
FY14E
2.1
1.5
70
5,045
7,399
1,496
1,020
20.2
320
195
981
294
686
FY15E
FY16E
2.1
2.1
1.6
1.7
75
81
5,395
5,745
8,546
9,828
1,979
2,523
1,249
1,475
23.2
25.7
320
320
195
195
1,463
2,008
439
602
1,024
1,405
768
1,054
770
770
-2
284
Source: Company, MOSL
DBEL's capacity break-up
Capacity (mt)
DCBL
OCL
Adhunik
Calcom
Bokaro
Total Capacity under control
Capacity based on Eco. Interest
DBEL's Stake (%)
85.0
40.3
85.0
64.6
62.9
FY13
9.0
5.4
0.8
0.4
15.5
10.7
FY14E
9.0
5.4
1.5
1.3
2.1
17.1
11.9
FY15E
11.5
6.8
1.5
2.1
2.1
24.0
16.5
FY16E
11.5
6.8
1.5
2.1
2.1
24.0
16.5
Source: Company, MOSL
Market mix to improve post this acquisition (MT)
South
North East
East
2.4
0.8
4.0
3.5
0.8
4.0
Pre
Post
Source: Company, MOSL
25 March 2014
4

Dalmia Bharat
Trend in EBITDA contribution (%)
DCBL
100%
80%
60%
40%
20%
0%
-20%
FY14E
FY15E
FY16E
OCL
Adhunik
Calcom
Bokaro
Source: Company, MOSL
Trend in net debt (pro-rata)
Net Debt (INR b)
8.3
7.0
4.6
3.3
Net Debt: EBITDA (x)
23
FY13
30
FY14E
42
FY15E
40
FY16E
Source: Company, MOSL
25 March 2014
5

Dalmia Bharat
Financials and valuation
Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Min. Int. & Assoc. Share
Adj Cons PAT
2011
17,459
-19.0
3,648
20.9
1,753
1,895
1,724
543
0
714
611
85.5
103
103
-92.1
0
103
2012
23,304
33.5
5,556
23.8
1,817
3,739
1,513
874
395
2,704
1,229
45.4
1,476
1,691
1,538.8
0
1,691
2013
27,906
19.8
6,342
22.7
2,059
4,282
2,314
769
0
2,738
1,336
48.8
1,402
1,971
16.5
0
1,971
2014E
27,855
-0.2
2,904
10.4
2,452
452
3,175
1,704
0
-1,019
700
-68.7
-1,719
-812
-141.2
0
-812
(INR Million)
2015E
41,459
48.8
5,859
14.1
3,381
2,478
4,855
1,655
0
-722
1,124
-155.7
-1,846
-1,043
28.6
0
-1,043
2016E
49,557
19.5
8,996
18.2
3,866
5,130
5,357
1,864
0
1,638
1,553
94.8
84
925
-188.6
0
925
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2011
162
27,615
27,777
18,890
715
51,467
37,765
1,846
35,919
1,167
6,592
10,228
2,976
1,008
4,543
1,700
3,965
3,774
191
6,263
51,467
2012
162
28,743
28,905
19,127
927
53,231
37,987
3,659
34,328
1,165
11,935
12,847
2,615
1,354
664
8,214
3,042
2,726
316
9,805
53,231
2013
162
30,517
30,679
34,300
1,638
71,798
49,979
7,410
42,569
5,503
11,804
20,036
3,520
2,416
999
13,100
8,188
7,530
658
11,848
71,798
2014E
162
29,563
29,725
41,300
1,638
77,145
55,482
9,862
45,620
12,000
11,804
19,793
3,140
1,802
153
14,698
6,547
6,127
420
13,247
77,145
(INR Million)
2015E
2016E
162
162
28,378
29,114
28,540
29,276
55,800
55,800
1,638
1,638
90,475
90,652
77,103
79,103
13,745
17,611
63,358
61,492
2,000
2,500
11,804
11,804
19,983
13,074
3,558
4,185
1,977
2,325
53
984
14,396
5,580
6,745
7,944
6,325
7,440
420
505
13,238
5,129
90,475
90,652
E: MOSL Estimates
25 March 2014
6

Dalmia Bharat
Financials and valuation
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/ton (USD-Cap)
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Debt/Equity (x)
2011
1.3
22.9
342.1
1.3
114.3
2012
20.8
43.2
356.0
1.5
8.4
2013
24.3
49.6
377.8
2.0
9.6
9.4
4.6
0.6
55.8
5.1
0.9
0.5
3.9
0.4
21.1
62.2
99.7
0.7
5.2
7.1
0.4
21.2
41.0
56.1
0.7
4.7
6.9
0.4
31.6
46.0
127.4
1.1
2014E
-10.0
20.2
366.1
1.5
-17.6
-22.9
11.3
0.6
51.0
10.1
0.7
-5.7
0.6
0.4
23.6
41.2
89.6
1.4
2015E
-12.9
28.8
351.5
1.5
-13.6
-17.8
7.9
0.7
58.0
9.8
0.7
-6.3
3.0
0.5
17.4
31.3
64.8
2.0
2016E
11.4
59.0
360.5
2.0
20.4
20.1
3.9
0.6
55.8
6.5
0.9
0.3
5.7
0.5
17.1
30.8
66.9
1.9
Cash flow statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2011
1,895
0
0
543
-2,971
4,454
3,869
-499
656
0
157
8,475
-10,072
-1,724
-118
-3,439
587
2,203
2,790
2012
3,883
0
0
874
-832
-3,419
505
-220
-5,343
0
-5,563
-1,042
237
-1,513
-141
-2,459
-7,517
4,543
-2,974
2013
4,496
0
0
769
-700
-1,707
3,698
-16,330
132
0
-16,198
-242
15,173
-2,314
-189
12,429
-71
664
593
2014E
271
0
0
1,704
-700
3,355
5,212
-12,000
0
0
-12,000
150
7,000
-3,175
-143
3,832
-2,955
999
-1,956
(INR Million)
2015E
2016E
2,373
5,292
0
0
0
0
1,655
1,864
-1,124
-1,553
-92
-612
2,859
4,637
-11,621
-2,500
0
0
0
0
-11,621
-2,500
1,028
3,259
14,500
0
-4,855
-5,357
-142
-189
10,531
-2,286
1,769
-149
153
53
1,923
-96
E: MOSL Estimates
25 March 2014
7

Disclosures
This report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or
inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution
and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees
to hold MOSt 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.
The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or
its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its
affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any
of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of
merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
Dalmia Bharat
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision
based on this report or for any necessary explanation of its contents.
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt 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.
Disclosure of Interest Statement
1. Analyst ownership of the stock
2. Group/Directors ownership of the stock
3. Broking relationship with company covered
4. Investment Banking relationship with company covered
DALMIA BHARAT LTD
No
No
No
No
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. The research analysts, strategists, or research associates principally
responsible for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.
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 MOSt & its group companies to registration or licensing requirements within such jurisdictions.
Regional Disclosures (outside India)
This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity
to which this document relates is only available to investment professionals and will be engaged in only with such persons.
For U.K.
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 U.S.
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:
Anosh Koppikar
Kadambari Balachandran
Email:anosh.Koppikar@motilaloswal.com
Email : kadambari.balachandran@motilaloswal.com
Contact(+65)68189232
Contact: (+65) 68189233 / 65249115
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
For Singapore
Motilal Oswal Securities Ltd
25 March 2014
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
8